The Power of Peer Influence

The Power of Peer Influence

Chances are you haven’t eaten at a restaurant without first checking it out on Yelp, haven’t bought a product without reading the customer reviews on Amazon and haven’t booked a vacation in a new location without asking your family and friends for input and then obsessively reading reviews on a bunch of websites.

Recommendations and peer influence are extremely powerful despite the fact that they are often unsubstantiated. Is it really relevant to me that John from Atlanta liked the bike he bought for his 4-year-old and that Caitlin from Duluth enjoyed a particular cruise? After all, I don’t know John and Caitlin, so how important can their opinion be?

Survey after survey shows, that their opinion matters and that humans heavily rely on peer recommendations, e.g. 82% of consumers proactively seek referrals from peers before making a purchase and 92% of consumers trust referrals from people they know. A consumer survey from 2018 found that 86% of consumers read an average of 10 reviews for a local business (91% of 18 -35 year olds) before making a decision. And these are local businesses which would be relatively easy to check oneself.

The flip side isn’t encouraging for sales and marketing professionals: a Hubspot study showed that only 3% of people consider sales people and marketers trustworthy. A dismal number compared to doctors (49%), firefighters (48%) and teachers (38%) but still better than politicians, car salesmen and lobbyists (all at 1%).

Surely, you might think, things are different in the B2B world. Companies don’t just buy manufacturing equipment or software packages because somebody else did. Options are analyzed, features and benefits are compared and dispassionate decisions are made. In the remainder of this blog we’ll take a look at whether that is true and – Spoiler Alert – finding that it isn’t, take a deeper look at the power of peer influence.

Peer recommendations in the B2B World

A number of studies conducted over the last few years show the increasing importance of peer recommendations in B2B. Here are some examples:

  • A 2017 report by DemandGen finds that 84% of B2B buyers said they seek input from peers/existing users, and 57% do so within the first three months of the buying process.
  • The same report states that reliance on peer recommendations has increased over the last 5 years (2017 compared to 2012) and states that “(…) 67% of B2B buyers agreed that they relied more on peer recommendations when making a final purchasing decision.”
  • Another study points out the increasing importance of word-of-mouth (and with that peer recommendations) at both ends of the funnel, that is lead generation and deal closure.
  • Another report reveals that up to 80% of B2B buyers’ purchasing decisions are based on “direct or indirect customer experience,” while only 20% are based on the price or the actual product or service
  • Yet another study found that 86% of B2B buyer found word-of-mouth from peers a valuable source of information.

The trend towards increasing importance of peer recommendations in B2B is driven by a number of factors. For one, B2B purchase decisions are made by people who rely on peer recommendations for their personal shopping and who don’t behave completely differently when they make purchase decisions for their company. Add to that the fact that more and more purchases are made by millennials, a generation who is used to researching everything online and tends to buy nothing without reading recommendations first. Finally, increased availability of recommendations online makes it ever more convenient and easier to find out what your peers are thinking about a product or service, whether that’s lab equipment, an accounting software package or a kid’s bike.

The Power of Peer Influence

That leaves us with the question of why peer recommendations, increasingly from a peer we don’t even know, are able to sway us so effectively and whether we truly appreciate the power of peer influence even in light of the numbers quoted above.

We’ll tackle that last question first by looking at an experiment Griskevicius et al describe in a 2008 paper published in the MIT Sloan Management Review. In their experiment the authors observed a street musician over a period of time and established a baseline of how many passersby dropped money in the tip jar. Then they changed one variable: as a person approached the musician one of their colleagues would start rummaging through their pockets as if in search of spare change.

Would it surprise you to learn that people were more likely to leave money for the musician if they saw somebody else do it? Probably not, but the effect was huge: seeing somebody else ready to give money made people eight times more likely to give themselves. And that’s not all: they didn’t realize that they were “under peer influence”. When approached afterwards and asked why they decided to tip the musician people gave any number of reasons ranging from feeling charitable to having some spare change, but nobody attributed their behavior to observing somebody else doing it and following suit.

Just because it is so much fun, we’ll summarize another experiment from this paper. In this study the researchers drafted four different appeals to conserve energy that were distributed to a mid-size California community with each household receiving one of the appeals. The reasons given to conserve energy were it 1) helps the environment, 2) benefits society, 3) saves them money and 4) is common in their neighborhood.

By now it won’t come as a surprise that energy savings where biggest for households that received appeal 4, the peer influence appeal. Interestingly, however, the unwitting study participants when asked, selected peer influence as the least likely factor to make them change their behavior.

While peer influence and recommendations are increasingly recognized as important factors shaping our behavior, these experiments show how seriously we tend to underestimate the true power of peer influence.

Drivers Underlying Peer Influence

Decades of research have gone into better understanding social influence and with that what motivates people to go along with what somebody else says or does. While buying a bike or a particular printer for the office because somebody else has bought the same bike or printer are harmless examples, social influence obviously has much broader implications from finding ways to defraud people to manipulating individuals and crowds.

Research by Cialdini and others 1 highlights three central motivations that make people susceptible to social influence: the need to be accurate, to affiliate, and to maintain a positive self-concept. With the first arguably being the most relevant in this context.

  • An accurate perception of reality is required for an individual to achieve their goals. Misperception might result in bad outcomes, e.g. buying an inadequate product while accurate perception leads to a desired outcome, e.g. buying a product that is worth the investment. Therefore, any influence that informs our decision making and points us towards a good solution is considered valuable. In short, the need for accuracy is a social motive because it prompts us to look to others to determine the correct way to act 2
  • Affiliation, the sense of belonging to a social group, is an extremely strong motivator of human behavior. Affiliation general refers to building meaningful, close and long-term relationships which humans achieve in many different ways, among them showing approval and liking. However, Burger et al argue that “because we so often rely on the heuristic rule that the more we like someone with whom we have an existing relationship, the greater should be our willingness to comply with the request, we tend to use the rule automatically and unwittingly when the request comes from strangers, as well.’’ This explanation shows how the need for affiliation can unconsciously bias us towards behaving the way others, even strangers, behave.
  • Maintaining a positive self-concept in our context seems correlated with the need for accuracy and the desire to make the right decision. Making the right decision, e.g. buying a powerful, user-friendly accounting software, improves our social standing and with that creates a positive self-concept. Following the recommendations of others is a way of de-risking these decisions, if many people endorse a product and it turns out to be inadequate, then the blame for the bad decision rests at least partially with the others sparing our sense of self-worth a major blow.

Summing it all up

Recommendations and peer behavior have long been known to strongly influence our decisions. Research shows just how much peer recommendations don’t just influence our personal behavior but are a critical driver for business decisions as well. Cultivating positive long-term relationships with customers is therefore crucial for every business, because as peers, they can sway somebody else’s purchase decision your way – or not.

  1. Robert B. Cialdini and Noah J. Goldstein (2004), SOCIAL INFLUENCE: Compliance and Conformity, Department of Psychology, Arizona State University, Tempe, Arizona ↩︎

  2. Noshir S. Contractor and Leslie A. DeChurch (2014), Integrating social networks and human social motives to achieve social influence at scale, University of Wisconsin–Madison, Madison, WI, PNAS ↩︎

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