THE DIGITAL MARKETPLACENOTES IN PSYCHOLOGY

THE DIGITAL MARKETPLACE

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INTRODUCTIONSocial interactions and the sociological dynamics of social networks have many contributions that lead to many developments to our daily lives, it shaped the ways we interact, share and achieve. This article explores the basic principles of sociology and utilises conclusions in previous social studies to explain and bridge the existing gap in the literature of social networks, economics and sociology. The article associates the terminology and the theoretical framework of sociology with research findings in business and economy.

Demonstrating the applications of social conformity “the process in which an individual’s behaviours, attitudes or beliefs either unconsciously or consciously is adjusted to meet the ones of the group’s”. Compliance “the process in which individuals conform to the group’s identity and characteristics intrinsically ‘private acceptance’ or extrinsically ‘public compliance’ to adjust to group productivity and performance”. Group pressure “the influence excreted by a peer group, encouraging individuals to change their attitudes, values and behaviours in order to conform to group norms”. Imitation “is a form of social learning where individuals observe and replicate other people’s behaviours”, imitation is a type of observational learning whereby individuals tend to imitate acceptable and rewarding behaviours to increase the eligibility of group acceptance which results in realising the benefits sought by that particular group. Social facilitation “Whereby individuals tend to perform better when being observed by others” which suggests that social evaluations have impacts on individual performances. Suggestion “the process by which individual’s behaviours are encouraged or discouraged through direct or indirect proposals of other individuals or groups of individuals” and vicarious conditioning “the process by which individuals learn various attitudes, feelings, beliefs and emotions not explicitly through direct exposure to stimulus, but implicitly through observing others reactions to it”.

INTRODUCTIONThe article explains the advantages and the disadvantages of social networks and determines the importance of such factors in today’s economic studies in commercial settings. “Social network analysis has already taught us a great deal and it holds tremendous potential for future application, especially in economics.” (Matthew, 2010). The article elucidates the nature of individuals and groups, the necessity for socialisation, conformity and obedience. The elements governing social networks in reference to individual and group identity, societies and the underlying principles of stratification and its impact on conformity and obedience. The types of group influences and social intelligence, group emotions and cultural natures of individualism and collectivism.

The organizational awareness of social networks and the present nature of social impacts on economic outcomes “Almost $8 trillion a year is spent through e-commerce both business-to-business and business to consumer” (Bughin and Manyika, 2012). Organisations are becoming aware of the rapidly changing socially driven environments as “Customers who engage with companies over social media spend 20% to 40% more money with those companies than other customers.” (Barry, 2011), “Product and social community credited with increasing Nike running shoe market share from 48% to 61%” (Barry, 2011) which justifies the significance of economically understanding social networks and the rate of contribution of such networks to today’s economy. The White House Office of Consumer Affairs mentioned in one of its market reports, “A dis-satisfied customer will tell between 9 and 15 people about their experience. About 13% of dis-satisfied customers tell more than 20 people” where such experiences are shared through social networks “24% of consumers who had unsatisfactory service interactions shared their experiences through social networks in 2010, a 50% increase over 2009.” (Forrester Report, 2010).

INTRODUCTION

The increasing awareness of societal integrations and the rapid expose to social intelligence and reference groups is a determining factor in economical social networks, failure of an individual’s membership channel unambiguously lead to a chain reaction of other channel failures belonging to a group of individuals, especially where such failures are related to dominating or reference groups. Chain of reactions are hypothetically endless (Jackson, Rogers, 2006), failing channels estimate loses in billions of dollars “$289 is the average annual value of each customer relationship lost to a competitor or abandoned” (Genesis Report, 2009). The costs of re-establishing such social channels are quite difficult to sustain “It takes 12 positive service experiences to make up for one negative experience.” (Ruby, “Understanding Customers”), social networks enlarge the quantity of the recipients of shared experiences and generalise such experiences as economic beliefs.

The literature emphasised on the significance of social networks “a connected network of individual and group relations, whereby the chain reaction is primarily evident. Hypothetically, we assume that the connectedness or the cohesiveness among individuals in a group chained in a mesh topology, whereby each individual completely connected to each other individual in the group ‘Public Compliance’. And each and every individual in the group has a recursive relationship to him or herself ‘Private Acceptance’, and since groups act as a unique identity, they also act as individuals where individuals are connected to other individuals as well”. The exponential growth of social networking users grew rapidly in the past couple of years (Chui, 2012) a measurement of the social networking impact in Europe found that “The central estimate of gross revenue enabled by the activities of Facebook is �32billion.

INTRODUCTION

This revenue converts into an economic impact of �15.3 billion and supports 232,000 jobs.” (Deloitte, 2012). Where the number of the Internet users grew rapidly in the past couple of years reaching to 2.27 billion users as of 2011 where “1.5 billion is the number of social networking users globally” (Chui, 2012). The fact that social networks are becoming increasingly important to both society and economy, where “80% proportion of total online users interact with social networks regularly” (Chui, 2012). Which reflects the basic underlying behavior of humans to communicate, collaborate and socialise, and “70% proportion of companies using social technologies” (Chui, 2012) as a consequence of the significance sought in understanding socially driven societies with regards to the economy, such that “90% proportion of companies using social technologies report business benefit from them” (Chui, 2012) .

Towards fulfilling the basic needs of socialisation and the impacts on decisions and buying behaviours that are effected by the social culture, organisations are concentrating on how to manipulate such global societies for their own advantage “72% of companies surveyed reported using social technologies in their businesses, and 90% of those users reported that they are seeing benefits” (Chui, 2012). Neglecting the fact of conformity and group homogeneity where individuals of a group act as a single entity and that a single failure of a link to a group may disconnect other links implicitly, and other groups influenced by the other group’s decisions, norms and beliefs. Based on the need for socialisation we assume complete dependence relations among the elements in the network, therefore the chain reaction plays an important role in determining the effects of social and economic behaviours.

INTRODUCTION“Social networks affect the flow and quality of Information, much information is subtle, nuanced and difficult to verify, so actors do not believe impersonal sources and instead rely on people they know” (Granovetter, 2005), (Deutsch & Gérard, 1995). While social networks exhibit stronger link formations whereby relations are rapidly experiencing growth, the underlying mechanics of such networks highly affects the growth of information and the rate of globalisation and economic awareness. “Clustering coefficients. Which measure the tendency of linked nodes to have common neighbours, are larger in social networks compared to networks where links are generated by an independent random process.” (Jackson, Rogers, 2006). Rapid formations results in stronger chain reactions, whereby the elements of such networks exhibit stronger susceptibility to changes and economical dynamics. A recent research lead by IBM established that “78–84% of consumers now rely on their social networks when researching new products or services” (IBM, 2011). Social interactions and the power of peer effects increasingly energised by the existence of social networks.

Peers and groups, whereby others effect the behavior of individuals, more likely influence consumer’s choices. the evolution of the communication industries, the ease of information access, and the rapid exposure to social channels and reference groups, where reference groups are used in order to evaluate and determine the nature of a given individual or other group’s characteristics and sociological attributes. “Economists are being increasingly aware of the importance and ubiquity of social networks” (Bramoullé, 2009). The individual relates or aspires to relate him or herself psychologically to the group. It becomes the individual’s frame of reference and source for ordering his or her experiences, perceptions, cognition, and ideas of self. It is apparent that members of groups or members of reference groups will neglect their own personal inclinations in order to sustain group membership “When status is sufficiently important relative to intrinsic utility, many individuals conform to a single, homogeneous standard of behavior, despite heterogeneous underlying preferences” (Bernheim, 1994).

INTRODUCTION

The significance of group dynamics and relations impose critical economic impacts on the consumer’s behavior, steering their individualistic preferences towards socially and agree upon group preferences “They are willing to suppress their individuality and conform to the social norm because they recognise that even small departures from the norm will seriously impair their popularity” (Bernheim, 1994). The evolution of the communication industries was as a consequence of the driving force of the human nature, the nature of socialising, “It is fundamental human behavior to seek identity and connectedness through affiliations with other individuals and groups that share their characteristics, interests or beliefs” (Chui, 2012) , the more connections are established the more intelligent markets and consumers become. “Many social scientists agree that individual behavior is motivated in large part by social factors, such as the desire for prestige, esteem, popularity or acceptance” (Bernheim, 1994).

Alternatively, a research lead by Forrester Report sheds light on the importance of social networks “Customer power has grown, as 73% of firms trust recommendations from friends and family, while only 19% trust direct mail”. It illustrates the social network’s impacts on the consumer behavior and the decision making of individual and group purchasers. The emergence of social networks ensures positive contributions to society, business and politics “Social technologies can empower individuals to form communities of interest around specific issues or causes, providing societal benefits” (Chui, 2012). Where social intelligence emerges, offering advancements in cultural and societal behaviours towards globalisation and internationalisation.

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The spread and the flexibility of social networks offers a unified global society of thoughts and behavior despite heterogeneous origins, contributing significant improvements in society, economy and policy. “Social technologies allow people to connect at a different scale and create a unified, powerful voice, as consumer groups or entire societies. That can have significant impact on the ways in which dialogues are shaped and policy is made” (Chui, 2012). The significance of understanding social networks exhibit advantageous outcomes “Social technologies can increase margins as much as %60 by connecting with customers and generating sharper consumer insights and by improving productivity and knowledge” (Chui, 2012).

Where economic returns on investments are notably beneficial “$900 billion — $1.3 trillion annual value that could be unlocked by social technologies in four sectors” (Chui, 2012). Information dissemination through social networks is economically significant “Word of Mouth, both positive and negative, is indeed a force that can influence the attitudes and predicted purchase behavior of consumers” (Charlett, 1995). It justifies the significance of social conformity in the form of informational influence and normative peer effects influence through social networks (Deutsch & Gérard, 1995), the premise is that negative dissemination of experiences results in significant economic consequences “Negative word of mouth is more influential than positive word of mouth” (Charlett, 1995).

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It is increasingly evident that the psychological elements of human behaviours establish many contributions in economics “Word of mouth recommendations cannot only improve the prior expectation of users, who receive the recommendations on the recommended items, but also raise their posterior evaluation” (Huang, 2012). The study of the human nature and their characteristics and behaviours in groups revealed the conscious and the unconscious cohesiveness of individuals among groups and societies to secure membership and status, and the continuous search for a group identity and individuals exhibit intrinsic and extrinsic influences. Intrinsically the everlasting force of social bonding, and extrinsically the force to maintain group bonds and relations, intrinsic influences were notably showed by the increasingly growing quantity of social networking consumers worldwide (Chui, 2012).

Which justifies the fundamental nature of the human race (Chui, 2012), and extrinsic influences were shown by the social intelligence and the resulting impacts on society and economy. In business, supply chain and operations management strive to reduce the amount of implied demand uncertainty by collaborating with prospective or existing customers to project or forecast the supply and demand patterns. The less informed the supply chain about the customer buying and demand behaviours the higher the uncertainty and therefore the less efficient and responsive the chain becomes, the better the supply chain is informed about the consumer behavioral dynamics the better the operational manageability of the supply chain processes.

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Therefore, in order to be able to achieve a strategic fit of the supply chain and the operational processes that govern the supply chain, the first requirement is to understand the customer and the supply chain uncertainty. Where business entities inspect and recognise the customer’s necessities and potentials, if the customer’s demands not understood or observed properly by the supply chain’s operations, responsiveness and efficiency suffers tremendously, which results in poor business decisions, capital investments and market competitiveness.

Since consumer necessities exhibit a dynamic and a challenging nature where the range of quantity, responsiveness and lead times, variety of products, product acquisition channels, rate of innovation and required service levels increase the more challenging it becomes for businesses to forecast the eligibility of the supply chain operations. Since the higher the implied demand uncertainty the greater the forecasting errors, the higher the increase in stock out rates the probability of business financial and operational failures. For businesses to design and implement efficient and responsive supply chains, implied demand uncertainty reduction is necessary, and for that to be true, the supply chain has to mutate around the customer and to investigate and appreciate the consumer’s anticipations.

INTRODUCTION

The Seven Eleven Japan, established in 1973 is utilising information technologies to capture and produce accurate measurements of demand and supply patterns, interacting with the consumers buying and intellectual behaviours reduced the amount of demand uncertainty. Utilising brand awareness and advertising effectiveness procedures and processes through social networks and social media, increased the levels of financial and market profitability, relational and business scalability, operational and strategic flexibility and logistical and cross functional effectiveness in servicing the market. The article suggests the importance and the advantageous outcomes of social networks in the economy, social networks have lead many business and economic improvements and supported in the increase of profit margins, employment levels and gross domestic products in national (Deloitte, 2012) and international settings (Chui, 2012).

FURTHER READING

The Mindset of Groups

A light will be shed on the characteristics of group formations, peer effects, obedience, “People will obey a figure of authority, even if it means hurting another person” (Milgram, 1963) and “When individuals perceive another person as having authority over them, they no longer feel responsible for their actions” (Milgram, 1963).

The Theory of Motivation

The etymology of the word ‘motivate’ descends from Old French motif, from late Latin motivus, from movere ‘to move’ in the 1800’s. Motivation is a reason or reasons for acting or behaving in a particular way.

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