The effectiveness of word of mouth in offline and online social networks

Social networks connect users to share thoughts and build friendships. The high degree of intimacy among users has made it a good venue for word-of-mouth (WoM) marketing. Admittedly there are some basic differences, but this study focuses on the effectiveness of WoM marketing in offline and online social networks. A system was developed to simulate offline and online networks using small-world (SW) and scale-free (SF) networks, respectively. An offline network was found to be more effective in promoting a product with a fixed advertising budget and in selling higher margin products than an online network. However, if customers have diversified backgrounds and are strongly opinionated, an online network is a better venue. These findings can be used as guidelines to determine the appropriateness of moving WoM marketing from offline to online networks.