Case study: Using homophily for social network marketing

One of the most common observations when analysing social networks is that people who are connected with each other tend to be similar. This is both because those who are similar connect with each other (like people with an interest in a particular sport) and because those who are connected become similar (like couples or friends). The homophily principle can be used in social networks and in item-to-item networks where similar items are purchased or used together (e.g. books on Amazon). Depending on the types of data that companies have access to, the homophily principle can be used for marketing purposes in a variety of ways:

  • Mobile phone carriers typically have very detailed data on the social networks of their user base, they have much less knowledge of the item–item network of what users are consuming in conjunction. One of the ways this type of information can be used for marketing is by targeting customers based on information that companies have about their friends.
  • Online retailers, such as Amazon, or traditional retailers with sophisticated loyalty or till receipt analysis know what products customers buy together at the same time (till receipt analysis) or over time (loyalty programme) and can use this information to recommend products to their customers.
  • Online social networks, such as Facebook or Google+, are able to combine information from both types of sources, as they have both detailed knowledge on product and social networks. These data can be used as social cues to inform peers of each other’s brand and product preferences, thereby providing information and exerting peer pressure.

Using homophily for social network (Case-related questions & problems for use in class room discussions can be found at the end of the case study.)