Impact of Social Networks on Diffusion of Products

Abstract

In light of the rapid growth of social networks around the world, this study analyses the impact of social networks on the diffusion of products and demonstrates the effective way to diffuse products in the society where social networks play an important role. We construct a consumer behaviour model by multi-agent simulation taking the movie market as an example. After validating it by using data from 13 US movies, we conduct simulations. Our simulation results show that the impact of social networks on the diffusion differs according to the customers’ expectations and evaluation for a movie. We also demonstrate the effective weekly advertising budget allocations corresponding to the types of movies. We find that the difference of weekly advertising budget allocations gives greater impact on the diffusion with the growth of social networks. This paper provides firm’s managers with important suggestions for diffusion strategy considering the impact of social networks.