Consumers and Social Media: What Drives Buying Decisions?

September 01, 2016 • By Connie Clark

“Popularity or Proximity: Characterizing the Nature of Social Influence in an Online Music Community” examines peer influence in the online music community to determine if it is popularity influence (demand across a broad social community) or proximity influence (music choices of a smaller circle of social network friends) that drives music buying decisions.

The answers aren’t just important for music creators and distributors, says Sanjeev Dewan, professor of Information Systems at the UC Irvine Paul Merage School Business. “In any ‘long tail’ market, where niche content can be as important as best selling content, users benefit from both popularity and proximity influence in deciding what content to consume—even when, where and how to consume it.”

Dewan and his team searched for answers by studying an MP3 blog aggregator site known as The Hype Machine. They pinpointed a particular feature that allows users to observe other users’ music preferences. Songs are tagged as “favorites” (similar to Facebook “like” behavior) and users can view aggregate music favorites (popularity) as well as friends’ favorites (proximity).

“Our analysis finds robust influence of both popularity and proximity influence,” Dewan says. But, he notes that it’s not always that simple. “Popularity influence is more important for narrow-appeal music than mainstream music. And the two types of influences can be substitutes for each other.”

Dewan also notes that proximity influence, when it’s available, dominates the effect of popularity influence. “Basically, popularity cues drive consumption decisions, until a friend has listened to a song—at which point proximity influence takes over. But, there is a time and place for each type of influence, especially as an exploding variety of music content is available online for downloading or streaming.”

The research underscores the need for music websites and online retailers to be aware of how these nuanced influences affect buyer decisions, so they can create the right types of marketing programs in response.

Dewan suggests that online communities be more proactive in leveraging both popular and proximity resources to increase engagement. For example, he advises that website creators prominently display regular “most popular” lists. This is especially important for niche or narrow-appeal music he says.  “To leverage proximity influence, users should be encouraged and incentivized to increase their social ties and be rewarded for their social engagement with friends.”

According to the report authors, the online music community is an ideal context to study consumer social influences. For one thing, they say, music is an “experience good,” and consumers depend on the opinions and actions of others as signals that determine whether they will like a particular song. They also point out that music is an “information good,” and that discovery and consumption are online activities that happen at the same time, often on a single website. In addition, the music industry has been dramatically shaped by technology in recent years, so understanding its social influences foreshadows what can be expected for other information and experience goods—like movies, software and other digital media.

Indeed, the study, authored by Dewan, Yi-Jen Ho, Merage School PhD candidate, and Jui Ramaprasad, Merage School PhD ’09 (now associate professor at McGill University), notes that online music communities, like Spotify and Last.FM, should consider these micro and macro social influences. But they say popularity and proximity influences are at play in many types
of online communities, from gaming to travel to fitness and
even to broader social networks. Which means that sites from to Facebook and Twitter need to pay close attention too.