Targeting Revenue Leaders for a New Product

Historically, when targeting potential adopters of a new product, firms have tended to focus first on people with disproportional effect on others, often labeled "opinion leaders." The authors highlight the benefit of targeting customers with high lifetime value (CLV), or "revenue leaders." The authors argue that targeting revenue leaders can create high value both by accelerating adoption among these customers and because of the higher-than-average value that revenue leaders generate by affecting other customers with similarly high CLV. The latter phenomenon is driven by network assortativity, whereby people's social networks tend to be composed of others who are similar to themselves. Analyzing an agent-based model of a seeding program for a new product, the authors contrast revenue leader seeding with opinion leader seeding and compare the factors that influence the effectiveness of each. They show that the distribution of CLV in the population and the seed size play a major role in determining which seeding approach is preferable, and they discuss the managerial implications of these findings.