Peer Endorsement: A New Trend in Modern Advertising

A couple of years back I was browsing through my Facebook feed when I came across an ad from a brand selling high-end watches, promoting one of their new products. At first, I barely glanced at the ad, I didn’t care, it was just another ad.

Here’s when it became interesting.

A few days later- as I was sluggishly reading my Facebook feed- I came across this same ad. With the same copy, offer and image. There was not a slight change in the ad and yet my response was very different.

What had changed? The difference was that I realized two friends I look up to had liked the ad. Therefore, I decided to give it a chance.

To make a long story short. I ended up reading the ad, watching the 25-second video, reacted to the ad (I’m sure I gave it a heart), and finally clicking on the ad.

So what happened? Simple: We like the things that are liked by the people we know. Keep on reading to discover the psychology that lies beneath this interesting phenomenon.

Social Advertising in a Digitalized Economy

We define social advertising as the placement of social cues (liking something) or endorsements in ads shown to the friends of those who have engaged with a brand or product.

The reason is to encourage ad engagement through the power of social proof.

For example, Facebook’s social advertising places the images and names of Facebook friends who have liked a brand in their ads. Google’s Shared Endorsement ads do the same thing; placing the names, images, and product ratings of others in product search results.

These social ads rely on the power of social influence in product adoption and the value of social cues for social media engagement to encourage a lift in ad effectiveness.

Social influence - which is the effect of our behavior and opinions on our peers - is critical to the effectiveness of social ads and is one of the most important behavioral mechanisms driving the spread of products and behaviors through society.

A recently published study measured, the effectiveness of social influence and social advertising by the degree to which social cues (i.e., friends’ likes) -representing friends’ endorsements of products- affect users’ engagement with social advertising (i.e., click-through).

Spending on social advertising is increasing dramatically, reflecting the high expectations advertisers place on this new form of advertising. However, can we rely on social ads alone when the products fall into different categories? For example, are social ads more effective for electronics products or fashion accessories? Are we more likely to be swayed by the opinions of our friends when shopping for status goods or when we are seeking trusted information about a product? What are the rules and limits that accompany social advertising?

Social Advertising Works Especially Well for These Products

Understanding how the effects of social ads vary across status and non-status goods will provide deeper insights into why social advertising operates differently across products. Therefore, a comparison is made on the effects of social influence and social advertising for experience versus search goods and status versus non-status goods.

Experience vs Search Goods

Experience goods are goods that must be experienced to be truly evaluated. Examples of experience goods include clothes, food, and video games.

Search goods, on the other hand, can be evaluated with only published information and do not necessarily need to be experienced to be evaluated. Examples of search goods include laptops, cell phones, and credit card services.

The distinction between search goods and experience goods is based on consumers’ ability to evaluate product attributes before deciding to purchase. The social influence process for experience goods may involve more information transfer between friends than search goods because the quality of search goods can be evaluated before purchase, whereas the quality of experience goods can be evaluated only by experiencing them or being exposed to the experience of others.

Status vs Non-Status Goods

Consumers tend to purchase goods and services for gaining and displaying social status or prestige. A consumer may seek to purchase or consume goods and services, which exhibit or serve as status symbols, for the status they confer, regardless of the consumer’s objective income or social class level. Examples of status goods include status-conferring clothing, cars, wines, restaurants, and hotels. Examples of non-status goods include toothpaste, beverages, and website services.

Consumers are motivated to identify themselves with individuals in their status group, or those with superior status, to maintain or improve their social standing. Status symbols facilitate the identification process, in which consumers identify themselves with others of a desired social status by consuming the same status goods.

Consuming status goods that higher status individuals consume can also establish common ground for communication and thus stronger relationships. For these reasons, friends’ endorsements, in the form of social cues, are likely to have a greater effect on ad engagement for status goods than non-status goods.

Key Findings:

Food, clothes, and cars proved to be the three best-performing categories. Displaying a friend’s like on an ad for food is 1.64 times more likely to increase click-through rate than doing so for mobile games, 1.57 times more clicks than doing so for electrical appliances, and 1.55 times more clicks than doing so for financial services.

The study also showed that consumers seem to be more affected by peer influence through their consideration of social status than their desire to seek an endorsement of a product experience.

Lastly, showing friends with greater social status in ads led to larger social influence and significantly increased social ad effectiveness. Friends exerted 4.14% more influence for status goods, 2.75% more influence for non-status goods, 3.72% more influence for experience goods, and 2.06% more influence for search goods on ad engagement.  These results prove that when the peer shown in the ad is more involved with the product than the ad viewer, informational social influence is more pronounced, and social ads are more effective.

Take-Home Points

• Displaying a friend’s like in an ad can cause an increase up to 270% in the click-through rate for a social advertisement.

• Status and experience goods exhibit strong social ad effectiveness.

• Food, clothes, and cars proved to be the three best-performing categories.

• Showing friends with greater social status in ads can boost social ad effectiveness.