advocates in a given marketplace and winning their loyalty, Pfeffer says, companies can improve the return on their marketing investments by an order of magnitude.
Don’t worry, Pursway isn’t reading your blog or Twitter posts or sorting through your credit card bills or your confidential e-mail to figure out whether you’re an influencer. In fact, the company doesn’t need your name or the names of your friends and family members in order to figure out where you fit in what might be called the “social graph of the marketplace.” Rather, the raw input for Pursway’s technology is simple transaction data: the millions of individual records that a chain of department stores or hotels might collect about what customers purchased, and when and where. Using data mining algorithms originally developed for military intelligence applications, the company can discover connections in the data that reveal who each customer influences, or who they are influenced by, Pfeffer says.
To take a simple example: Say you have a fabulous weekend at a fancy resort, and the day after you get back, five people who live in your town make reservations at the same resort. Pursway will find the pattern and will conclude that you’ve probably been raving about the resort to all your friends. Congratulations—you’ve just been branded as an influencer, at least when it comes to vacation destinations. That means any money the resort can devote to making you even happier in the future will be well spent, since the benefits are likely to be magnified many times over.
It all works, Pfeffer says, because some people really do have an uncanny influence on others. “If you take an everyday customer and convince him to buy a product, that customer is going to convince around 0.3 to 0.5 other people to buy the product, on average,” says Pfeffer. “But our raw data shows that about 10 percent of the population are opinion leaders. They can convince 3.5 other people. That’s 10 times the influence of a normal customer.”
The same logic applies in reverse. If an airline gets you to your destination 18 hours behind schedule and loses your bag, you’re probably going to be offered a bland apology and a restaurant voucher like every other person on the flight. But if the airline happens to know from its historical data that you’re an influencer, they’d be smart to
