Word of Mouth Marketing
Something actually worth investing in
Bob was one of those entertaining individuals that you are lucky to have in a research group. Energetic. Clear, strong opinions. He pushed the group into revealing discussions.
Bob: “You mentioned that AA loan. Now I would listen to you. That’s only because you are an expert.” (pointing to another member of the research group that he just met). “I wouldn’t take it from the so called experts.” (as he waved around a mailing) It’s word of mouth. Word of mouth is much better.”
These research groups were designed to help us understand how word of mouth (WOM) impacts the purchase of financial services products.
Over the course of the sessions we probed how influencers and followers consumed communications, how they made decisions and how they spoke with others about their decisions.
What we found was an eye opener.
Influencers are confident. They consider a wider range of products and they enjoy digging for information about products and services - online and offline. They tend to pass along privately consumed media (e.g. internet) more than publicly consumed media (e.g. outdoor poster). “What’s the point of passing on what’s already in the public domain?” They were able to sift through product news quickly, deconstructing offers in communications immediately. And they viewed the financial landscape in a more abstract way. Stuff happens. You make the best judgement on the information you can find.
Influencer psycho-drawing re: Financial Picture
“Technically, it’s just like a road and it all seemed pretty straightforward. You just went out and life went on. You earned money and then stuff got thrown in like mortgages. Then there were different kinds of mortgages. Then you got married and there are children. Then there’s the costs involved with them that you hadn’t thought about. There’s education and the marriages and all these other bloody things that you never think about. Nobody tells you at school that it all goes crap!” (Influencer)
On the other hand, followers are overwhelmed with the decision making process and worried about their financial future. Asking questions is stressful because it makes them look stupid. They consider a much smaller range of products. They don’t think about financial services until they are in active buying mode which is often brought on by a deadline. They collect information because they see it as the grown up thing to do. Can’t settle on the right criteria. Get put off. Collect some more information. Don’t look at that either. Get some advice. Feel the pressure of a deadline. Get sold something that’s not really what they want…and feel quite relieved that it’s all over (phew!), not because they feel that they made the right decision. Critically, they turn to influencers to help them with decisions.
Follower psycho-drawing re: Financial Picture
“I think if I don’t find out some information then something will happen probably. It looks like a near miss at the moment.” (Follower)
Key finding: If you want to amplify your messages, then you need to work with influencers. Give them information that they find interesting, then they will become a medium carrying your message to people at the moment they are seeking advice to make a decision.
So, why do we turn to influencers?
And how should we evolve our marketing to take advantage of this?
Let’s start with some numbers.
You receive over 3,000 messages a day - from advertisement you watch on TV through to subtler messaging such as the logo on a shirt. A weekday issue of the New York Times has as much information in it as a man from 17th century England would come across in his entire lifetime. Even deciding a toothbrush can be difficult. There are 71 different types of toothbrushes to choose from at Boots. We are not wired to cognitively process all that information. It leaves us in a state of information anxiety. So, we turn to a friend or colleague and ask simply: “What do you recommend?”
In fact, we turn to friends and colleagues 5 times more often than advertising for information about new products and services.
We do this because when we are presented with complex tasks we look for shortcuts. Also known as heuristics.
It is these very basic behavioural forces that marketers have leveraged for decades with techniques such as Member Get Member programmes.
In the 1960’s, the Meredith Book Club offered existing members ‘free books’ if they provided the names of friend and family who would then receive an offer of free books to join the Club. The ‘Member Get Member’ offer was the second most profitable source of new members after direct response print advertising for the Meredith Book Club.
American Express offered a case of wine to their Members for any referrals who made it through the credit approval process and received an American Express card. This was often promoted as a separate offer (i.e. billing stuffer) within the customer’s monthly statement.
More recently, a large German bank gave customers cash for referring new customers. What is particularly striking about this campaign is that referred customers were 18% more likely to stay with the bank and generate 16% more profits. According to the Harvard Business Review paper on this programme, “…customers who make referrals are essentially matchmakers, and good ones: They bring in people who like the bank’s products, services, location, hours and fees. Because these new customers are good matches, they quickly find features they want and are willing to pay for. They require fewer marketing efforts than non referred new customers, so they generate more revenue at a lower cost.”
Perhaps the most elegant aspect of marketing - with recommendation at its heart - is how it provides a benefit for every party involved.
The influencer is viewed as more valuable because she has provided information that is useful to the follower. She earns ‘social status’ points. Often more valuable than any cash incentive.
The Follower benefits from finding a shortcut to save time and energy. Plus, he can feel more confident trusting the recommendation because an Influencer will only recommend something if he is prepared to put his reputation on the line.
And the brand benefits because they receive a qualified prospect who is delivered directly to them with an impressive return on their marketing investment.
The business advantages are striking:
- The Influencer who made the initial recommendation is less like to move to another brand, reducing churn. To do so would create cognitive dissonance
- A new customer acquired via recommendation is more profitable than via any other acquisition method
- New acquired customers engage in more WOM, particularly just after the switching decision. Creating a positive cycle of acquisition, referral, acquisition (repeat)
How does social media fit into all of this?
You might think that word of mouth is all being done on the internet, today. But it’s not. When it comes to seeking advice, we still like it person-to-person (Keller Fay Group).
Where WOM happens:
- Face to face 81%
- Phone 11%
- Online 7%
This is probably because a Follower can take in all of the valuable non-verbal cues associated with a personal conversation - which are meant to be as much as 90% of communication. It may also be because the Influencer gains more ‘social points’ from a person-to-person interaction.
Importantly, this does not detract from the importance of sharing on the internet. Quite the opposite. It is an exciting prospect to think that the internet is accelerating the distribution of information so that more relevant and useful information can be passed along, more often. The internet is in effect creating an amplification effect.
How big is that amplification effect?
Walter Carl looked at the relay effect of word of mouth in his landmark paper, “Measuring the Ripple: Creating the G2X Relay Rate and an Industry Standard Methodology to Measure the Spread of Word-of-Mouth Conversation and Marketing Relevant Outcomes.” He found that, on average, participants in WOM would have a conversation with 10 people (G1) and each of these 10 people would, in turn, have an additional 4 conversations (G2). There will be additional generations of conversations after that but tracking those (offline) conversations becomes difficult. What we do know is that one recommendation can lead to 63 conversations. A 630% amplification rate!
All of that ‘amplified’ information fuels conversations between people - offline - where the valuable recommendations happen. If we want to influence what is being discussed, then we need to provide the sorts of information (online) that are likely to be talked about (offline).
But does it deliver a better return on a marketer’s investment? Proper ROI. Not Facebook “likes.”
In short, yes.
And it is being done profitably, today, on an industrial scale.
P&G set up two panels in the US to generate engagement and promote conversation: Tremor (2001), a panel of over 200,000+ teens and Vocalpoint (2006), a panel of over 600,000 moms. Participants received exclusive information about products, coupons/discounts, and product samples. They are encouraged to engage with surveys and tasks such as naming a new product. And they go on to generate valuable conversations about the products they interact with. The two groups merged into one (called Tremor) claiming an influencer network of nearly 2 million. Tremor now runs separately from P&G so they can take on non P&G clients.
BzzAgent, a similar brand advocate medium to Tremor, was acquired by Dunnhumby in May of 2011 for $60m.
Tripadvisor.com is the world’s largest travel platform that aggregates reviews and opinions about hotels, airlines, etc., reaching over 350m unique visitors every month across 48 countries…with 255 new contributions posted every minute (!) Visitors pay nothing to view the information. Reviewers are paid nothing to provide their opinions. They make their money off of clicks on advertising and sales. In the past year (ending June 2016), they generated revenue of over $1.47 billion. Tripadvisor.com is also a compelling example of the growing acceptance of people trusting recommendations from knowledgeable strangers, e.g. 32% of online consumers trust a stranger’s opinion more than they trust branded advertisements.
An area to watch is SAAS based referral marketing solutions - companies such as Influitive, Talkable, and Amplifinity. They provide software that can be plugged into your IT system within minutes to help you to implement, scale and optimise a referral programme. How does it work? After buying an item on a website the customer is prompted to post a comment about my experience on social media, or email it to a group of friends. Interestingly, these companies are now making the connection between offline retail experiences and online sharing. The future of word of mouth marketing? Definitely an area that the venture capitalists believe in. Influitive has raised 49.79m in funding.
In sum, there is no more efficient media than customers finding customers. It takes the inefficiency out of traditional media targeting and works with customer momentum rather than trying hard to catch up with her.
Today, we can use word of mouth marketing techniques to help people filter and share information. Maybe even win a social grooming point or two. Get it right and you’ll enjoy an amplification of people talking about/recommending your business rather than the cold comfort of a reach & frequency estimate for your traditional media spend.
Generating positive WOM is big business. Are you looking at how your business could be investing in communications with recommendation at their heart?
Or are you like the ‘follower’, getting sold something that’s not really what you want/need…and feeling quite relieved that a marketing plan that looks a lot like last year’s marketing plan is finally put to bed (phew!)…not because you made the right decision?
