The Network Effect - Do People Buy What They REALLY Want? »

I’ve heard it a time or two… “In the end, the best product will win out every time“.

Hmmm… while this sounds all warm and fuzzy… and when looking it at completely logically it SHOULD be true…

Does the best product REALLY win out in the end??

In a perfect world where everyone gets the same chances, all variables are the same, you can predict successes and failures of products, and people only take into account their own personal beliefs and needs when deciding to buy a product or to do something… I think that the best product would win out pretty darn near every time.

But…

What happens when it’s not a perfect world?

• What happens if people not only listen to their own beliefs… but they listen to the beliefs and actions of others too?
• What happens when variables are different and even the slightest change in variables can have huge effects on entire markets, product successes, and the direction of an entire culture?
• What happens when a product/person/ or company somehow gets an edge (because of a variable) even though their competitors have a superior (or even identical) product to offer?
• What happens when the exact same product (or very similar) is a huge success today… and the company uses the same criteria and formula to launch another product… and it’s a complete failure?

What happens is that the superior products don’t always rise to the top… and often we can’t predict with a whole lot of certainty that something will be successful or not.

Now, I know… I’m going to have some critics reading this saying “when I launch a product, I know pretty darn well that it will be a success“. Okay, some products and markets can be launched with a degree of certainty; however, let’s look at mass markets and huge successes that generate millions of customers (i.e. - Record albums, social media websites, the next “clapper”, real estate, software, etc.).

Where’s the certainty now?

Do People Really Buy What They Want… or What Is Best For Them?

In marketing we’ve all heard that “the consumer doesn’t really know what they want… we have to tell them what they want and why they need it to solve their problems”.

When you really look at that statement, it’s pretty damn true.

Do you think that millions of people thought that they needed Facebook, while at the same time Myspace had tens (maybe hundreds) of millions of users already?

I’m thinking not. So, why did Facebook become a hit? Really there’s no real solid and quantifiable reason why Facebook has done so well and the hundreds of other social networking sites have absolutely flopped.

Yes, Facebook has some unique features and it’s much different than Myspace… but so are a bunch of other social networking sites that have failed miserably (some that are just as good or better than Facebook).

Many people joined Facebook because it was a great way for them to solve some of THEIR problems with staying in touch with their friends…

… but, the vast majority of people have joined Facebook not necessarily because it is truly the single best use of their time… but because they saw the craze about this “Facebook thing” (myself included) and thought… “Facebook must be the best social networking site for me because ALL OF THESE PEOPLE have already joined, therefore… it’s gotta be the best“.

Enter… The Network Effect

First of all, I didn’t coin the term “Network Effect”. It’s been written about many times and is a pretty well known philosophy in the marketing and sociology world.

In essence, the Network Effect is simply:

“The phenomenon whereby a service becomes more valuable as more people use it, thereby encouraging ever-increasing numbers of adopters. “

In simpler terms that even I can understand, people like to do things that a bunch of other people have already done (the majority of us think this way anyhow).

Your brain reasons that if something is used by more people than something else… it must be the best… therefore it is a prudent to go with that service.

The Network Effect On Products/Services/Brands

Today’s world is a complex and ever changing world. It’s pretty damn tough keeping up with everything and having the time to fully research every buying decision we make.

Can you imagine the time and effort it would take to do OUR OWN full research based ONLY off of OUR OWN personal experience and opinion about whether or not that product is really best for us? I would go insane.

So, to help streamline things for us, our brains have developed a clever little thought process that makes us feel safe when we are confronted with decisions.

Here is the thought process according to my brain:

1. First, find out what I “think” I want or need
2. Find products/services that look like they might fit the bill
3. See if anyone else has used this product and what they think about it
4. Usually go w/ the highest rated and most popular
5. Find the best place to buy it for the best overall offer (price and everything else that goes with it)

That’s it for me anyway.

Notice #3 in my thought process? “See if anyone else has used it and what they think“(the Network Effect at work).

General intuition should say that the more people using something, the better the product must be. Right? I mean, when I go to download a song or piece of freeware software… if there’s a “download” counter on the page for each product… I’ll usually pick the one with the most downloads. I’d be willing to venture a guess that most people act this way.

I know, you’re way ahead of me here... but that statement isn’t always right. Let’s think of a few very popular products right off the top of my head that challenge this statement:

• Microsoft Windows (is it REALLY the best operating system in the world? Hmmm…)
• Is Justin Timberlake really the best singer and entertainer out there? Not likely. Or, even better… Britney Spears?
• McAfee Anti-Virus… please, do I need to go into this one?

All of these products have huge followings… but are they really the best at what they do? So, why did the crowd say it is?

The Network Effect and First Adopters or Promoters

Yes, we’ve already determined that people like to make it easier on themselves when making decisions… and a lot of the time will place trust in the crowd that the crowd has picked the best product.

But, also as we’ve determined… the crowd isn’t always technically correct on judging the “best”… and this still often leads to inferior products/services ending up on top.

The reason for this is simple (or so it seems

If people like to trust the “crowd” this means that people are at the whym of the crowd… and the person or people who started the crowd in the first place.

So, if the person that “started the crowd” is absolutely correct on which product is truly the best (the best for them anyway), the people joining the crowd with similar likes and dislikes will also be correct in choosing that product.

However, if the person who “started the crowd”:

• Chose randomly and made the wrong choice
• Has unique likes/dislikes and is actually part of the minority
• Is an influencer and helps the product/service/brand along in the early stages (this one is important)

… the crowd may not necessarily be choosing the truly best product to fit their needs. But, they are choosing a product based off of the likes/needs of the early adopters/influencers and the crowd of people before them who have also followed that initial jump start.

Okay… where am I going with this?

How does this directly relate to marketing and the success of a product/service/brand?

After you finish this article, head over to read this great article on the subject. It goes in-depth on actual scientific studies on the Network Effect and shows mind-blowing results that are extremely simple when you really drill down to the core of the Network Effect.

In essence, the article goes to show that in mass market products (software, music, movies, Web 2.0 websites (social media), etc.)… the success of these products are really at the whim of the Network Effect and how well the products/services grab hold with a core of influential users. Even though some products may not be the best… they are still a huge success because “their number was called” and the market happened to go their way.

If we were to replay the past over again, a completely different set of companies, people, and products would dominate our culture depending on how the Network Effect took hold in the beginning stages of the product.

Here’s a great passage from that article:

“…while in some sense these markets do reflect what people want, that is true only of what they want right now. If markets not only reveal our preferences but also modify them, then the relation between what we want now and what we wanted before — or what we will want in the future — becomes deeply ambiguous.“

So, long story short (way longer than I was planning ;-), we can’t always predict the success of a product/service/brand when you look at the past… or even when you look at the quality of the product.

We as marketers need to utilize the tools available to us including:

• Advertising
• PR (huge one)
• Social Media and Web 2.0 (and beyond)
• The blogosphere
• and on and on…

… to give our products and brands the best chance of capitalizing on the Network Effect to propel its success.

Yes, quality is hugely important and will play a big factor in the success of the Network Effect. However, if we don’t do a good job of getting our products to the influential early adopters in our markets (and across other markets), someone else will and our companies will be the one that was lost in history as a result of the Network Effect at work.

How Do We Do This?

There is no real formula for ensuring the Network Effect goes your way. However, with the tools we now have… it’s important that we do a few things:

• Build a community around your brand/product/service
• Enable your users to be evangelists for your product and spread the word to everyone else
• Create a solid offering that speaks to the core of the user… from your own core… basically, be who/what you are… don’t try to be something you’re not
• Make it easy for users to share their experiences and questions with you and the rest of the world (online communities, company blogs, community outreach, etc.)
• Find the influential early adopters in your market and make them a user of your product/service… then promote the hell out of that
• Whenever you can, use social proof and social proof by numbers during the marketing and sales processes

And more than anything… create your own luck and just make sure you utilize every tool you can to get your message, product, and offer to the people who can benefit from it the MOST.

Finally, Think About This…

Next time you go out and buy a CD (download on Itunes), sign up for a new social media website, or even go to a movie… think about how the Network Effect has affected the product… and how you can apply that to your business.

Question:

Have you been able to capitalize on the Network Effect? If so, how much easier was it for you to spread your brand once it took hold? My guess is waaaaayyyy easier.

Let me know.

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