Social Contagion and Customer Adoption of New Sales Channels

We develop and test hypotheses regarding the role of social contagion in customer adoption of new sales channels. We examine two aspects of social contagion (local contagion and homophily) and two channels (Internet and bricks-and-mortar store). Drawing on diffusion theory, we propose a conceptual framework that identifies the factors associated with new channel adoption. Using longitudinal data from a major catalog company and a discrete-time hazard model, we find that (1) social contagion plays a major role in the adoption of new sales channels, (2) both local contagion and homophily influence channel adoption, (3) longer-tenured customers are less influenced by social contagion, and (4) adoption of the Internet channel is more influenced by social contagion than adoption of the bricks-and-mortar store. Managerially, our results suggest that marketing programs that encourage social contagion, for example, word-of-mouth campaigns, be targeted based on both physical and socio-economic proximity, and that such campaigns will play a bigger role in the adoption of new-to-the-world channels.

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