Start-up of the Week / In Marketing, It's All Who You Know

Amitai Ziv
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Amitai Ziv

Marketing, as we know it, is changing, and it's the people you know, not the ads you see, that now make a difference in what you buy.

Studies show that over the last half-century, consumer behavior has shifted dramatically. People no longer blindly accept the advertising messages thrown at them by corporations. They put up spam filters to keep marketing emails out of their inbox and they block pesky pop-ups on their Web browsers. Even that once impenetrable domain of the 30-second television commercial has been relegated to a fast-forward blur as viewers switch to digital video recorders, like the ever-popular TiVo.

But without the guiding hand of advertising, how do customers decide when to purchase and when to pass? Easy: They ask their friends.

According to research conducted by Nielsen, a leading global provider of information and insights into what consumers watch and buy, 90% of consumers rely on the good word of their friends and neighbors when it comes to making a purchase. In addition, 70 percent of respondents put their stock in the opinions and surveys they find on social media.

These facts are further supported by new research from global consulting group McKinsey & Company, which lists consumer-driven marketing activities, such as Internet reviews and word-of-mouth recommendations as twice as important as company-driven marketing for consumers mulling a purchase.

McKinsey's results were based on surveys that examined the purchasing decisions of almost 20,000 customers across the globe in five different industries.

This brave new world of marketing is uncharted and unpredictable, but the Israeli start-up Pursway offers nervous businesses a solution. The key, Pursway says, is locating the folks now known as "influencers."

"The market is moving toward finding the demographic groups that, if targeted properly, will influence the rest of society," says Ran Shaul, Pursway's co-founder and executive vice president of marketing. "We call this the Influencer Marketing Revolution."

Using a unique algorithm, Pursway mines data from businesses' customer relationship management software, pinpointing those believed to be influencers, as well as who they influence in social contexts. Pursway also scans open source data on social media networks to find influencers, allowing companies to better track specific customers.

Among a company's clients, Shaul says, there are natural VIPS – customers who generate a lot of revenue for the company. These can be well-known customers as well as journalists. There are also, Shaul says, "everyday influencers," the ordinary people that others seek advice from before making a purchase.

Everyday influencers, Shaul says, comprise between 7 and 15 percent of a given company's customer base. But their buying decisions can influence between three and 10 followers, friends, relatives and co-workers.

If they abandon a product, they can drag an average of 4.1 individuals with them, opposed to 0.3 individuals for customers who aren't influencers.

That means that these ordinary folks are extraordinary influential.

Pursway, established in 2005, runs on math. It employs 50 workers, most of them working in R&D, with offices in Herzliya, Boston and London.

During the first few years of its existence the company operated solely on bootstrap financing without seeking any external capital. In 2010, however, they raised $6 million from venture capital fund Battery Ventures and expanded its operations into Europe.

Its client roster is diverse, spanning retail, tourism, finance and telecommunications. Among the company's clients are "four of the five largest banks in the United States," says Shaul, a large credit card company and a handful of telecoms.

Credit: Bloomberg