Welcome to another in our One on One series of conversations with some of the most thought-provoking entrepreneurs, authors and experts in business today. Michael Wu, Principal Scientist of Analytics at Lithium Technologies, spoke with Brent Leary in this interview. Wu’s job is to “dig into the complex dynamics of social interaction and group behavior in online communities and social networks.” This article has been edited for publication. To hear audio of the full interview, page down to the gray/black loudspeaker icon at the end of the post (look right above the “About the Author” section).
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Small Business Trends: With a PhD in biophysics from the University of California, Berkley, how did you end up doing what you do at Lithium?
Michael Wu: In some sense it is a natural progression. What I have been doing with my PhD career is using mathematics and statics to model how the brain works, and right now I am using the same type of mathematics and statistics to model how a social system works. There are a lot of similarities because a social system is essentially a group of people connected by conversation, communication and interaction. A neurosystem is a group of neurons connected by synapses.
Small Business Trends: Could you talk a little bit about what influence is, particularly online influence, and why it is so important to businesspeople?
Michael Wu: My high-level definition is that influence is the ability to change someone’s thought or actions. You either change someone’s sentiment or opinion or feelings about something, or you change their actions. A purchase, the referral of a friend, staying loyal – all of these are behavior changes.
It matters how you do it too, because you can’t do it by force. You can’t do it by trickery or frustration. You are not influencing them then. The target should be fully aware and willing to change their action or their mind. That’s influence at a high level.
How is this important to business? The easiest way to explain it is to think of the purchase funnel. Most people in business know this concept. The levels of the funnel are AIDA – Awareness, Interest, Desire and Action. Action is the final level.
Anytime you move someone from being unaware of your product into awareness, you change their mind. If you move them from awareness to being interested in your product, you change their mind. As you move along the top three layers of the purchase funnel, you are changing their mind–until the last level, when you change their action also.
Small Business Trends: What impact do influencers have?
Michael Wu: At Lithium Technologies, we have about 10 years of data from over 200 communities. We have been able to quantify the effects of influencers as opposed to some random person in the community.
Typically, people start trying to trigger some message from some seed – we call it the seeding population. Choosing the seeding population is very important because if you choose a random user versus an influencer as a seeding population, the result is quite different. If you seed your word-of-mouth with influencers, you gain almost 50 percent [better results].
Small Business Trends: So [influencers are] extremely important. But how do you find influencers?
Michael Wu: Most people are concerned with influencers only. But in reality, influence involves two parties: the influencer and the target. You can’t find the influencer without considering the target, because what the target wants influences what type of influencer you need to find.
We found six different factors that affect how influence propagates from the influencer to the target. The first one is domain credibility. Domain credibility means the influencer has a specific expertise or knowledge in a certain domain. There is no such thing as universal influencers.
The second factor is high bandwidth. Bandwidth is the influencer’s ability to transmit expertise in a particular social media channel. [It includes factors such as] the number of followers, the number of time they tweet a day or how frequently they post a blog. Those are all tangible, measurable things.
Next, the content you share has to be relevant to a target. If the target wants to buy a camera and the influencer is an expert in gardening, that’s not going to work.
One factor most people overlook is timing. People’s interests and credibility change over time. A camera expert this year may become a sports car expert next year.
Next comes channel alignment. That means where your influencer is, and where your targets are, had better be in the same place. If your target is a certain age group and they use Twitter, then it’s useless to find an influencer on LinkedIn or on YouTube. The same thing goes for [geographical] location. If your target [customer is] in New York, it’s useless to find an influencer in L.A.
Finally, the last factor is target confidence, or trust. Whether the influencer has credibility, bandwidth or relevance doesn’t matter if the target doesn’t trust him or her. To propagate influence, you need all six of these factors.
Small Business Trends: What is the best way to get onboard with an influencer and build relationships?
Michael Wu: In a community where you have a group of like-minded people, influencers arise naturally. How do you reward those influencers so they will work with you to co-create value for everyone? The traditional belief is you don’t give them money because money corrupts everything.
There is some truth to that. People who are there to help, if you pay them, may feel that the little money you pay is not worth their time. And people who want money [to help] are not [truly] there to help, which creates a negative user experience and usually leads to the downfall of the community.
But financial motives aren’t always bad. We have a case study, GiffGaff, which is a U.K. based mobile network. They advertise themselves as “a business run by you,” so they keep their overhead really low.
The community helps them provide customer service, marketing and even R&D. They reward the member two ways. One is the kudos, a token of appreciation, but they also give them free minutes off of their monthly bill. That is a financial reward and seems to work.
It turns out the main difference is whether the reward is transferable or non-transferable. Money is transferable, but the free minutes are only applicable to the member. The fact that the reward is non-transferable means it’s unique and special. That is what makes this type of reward work.
Small Business Trends: Where can people learn more about you and read more from you?
Michael Wu: I have a blog at Lithosphere.
This is part of the One-on-One Interview series with thought leaders. The transcript has been edited for publication. If it's an audio or video interview, click on the embedded player above, or subscribe via iTunes or via Stitcher.