New technique could boost online word-of-mouth marketing

New technique could boost online word-of-mouth marketing. Researchers from North Carolina State University and the Open University of Catalonia have developed a technique for creating complex predictive tools that can be used to make effective decisions about word-of-mouth marketing for online products and services. "We were initially approached by an online game provider that used a 'freemium' model -- players could play for free, but could receive upgrades by paying a fee to become premium users," says William Rand, an assistant professor of business management at NC State and co-author of a paper on the work. A preliminary assessment indicated that access to new content was not the primary driver in convincing players to pay a user fee. The computer model allowed them to assess the role that social connections may have played in getting players to pay user fees. "We found that the best model for accurately predicting the overall rate of players becoming premium users was the so-called 'Bass model,' which holds that the larger the fraction of direct connections you have who use a product, the more likely you are to use the product," Rand says. However, the researchers found that the best model for predicting the behavior of any specific individual was the complex contagion model. For example, being able to predict how many players would become premium users could help a company make sustainable business decisions; whereas being able to predict the behavior of an individual player may help a company target players who are near the threshold of becoming premium users. "By merging these two modeling approaches, we created a tool that would allow a company to predict how many additional premium users it would gain, depending on various degrees of investment in marketing to individual players who are the threshold of becoming premium users," Rand says. The paper, "Building Agent-Based Decision Support Systems for Word-Of-Mouth Programs.

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Researchers from North Carolina State University and the Open
University of Catalonia have developed a technique for creating
complex predictive tools that can be used to make effective
decisions about word-of-mouth marketing for online products and
services.

“We were initially approached by an online game provider that
used a ‘freemium’ model — players could play for free, but could
receive upgrades by paying a fee to become premium users,” says
William Rand, an assistant professor of business management at NC
State and co-author of a paper on the work. “The company wanted to
know what incentives would be most likely to convince players to
become premium users. That was the impetus for the work, but what
we found is actually relevant for any company or developer
interested in incentivizing user investment in apps or online
services.”

A preliminary assessment indicated that access to new content
was not the primary driver in convincing players to pay a user fee.
Instead, player investment seemed to be connected to a player’s
social networks.

To learn more, the researchers evaluated three months’ worth of
data on 1.4 million users of the online game, including when each
player began playing the game; each player’s in-game connections
with other players; and whether a player became a premium user.

Using that data, the researchers created a computer model using
agent-based modeling, a method that creates a computational agent
to represent a…

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