Word-of-Mouth Communication Study

I've Moved!

2010-04-03T09:00:00.002-04:00

Thanks for visiting! To read my most recent thoughts on word of mouth communication research and measurement please visit my new blog home at ChatThreads Chatterbox. Existing content will remain here as an archive but comments have been disabled.

Update: Free PDF of Admap article

2009-04-06T10:58:00.002-04:00

As an update to an earlier post here's a link to a free PDF version of the Admap article: "Is Talking Getting You Anywhere? Measuring WOM Marketing." (Get it now because the link is only good for 30 days. Tick tock, tick tock...).

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Tags: WOM word of mouth Word-of-Mouth Marketing marketing communication

WOMMA Webinar: Measuring the Value of WOM, Come Rain or Come Shine

2009-04-05T20:34:00.003-04:00

What are you doing at noon EST on Thursday, April 9th?

You should be calling in to the free webinar I am doing (courtesy of the Word of Mouth Marketing Association) on how to measure the value of consumer conversations. It's free whether you are a WOMMA member or not. Here's the official blurb:

Whether the days are cloudy or sunny, or your brand is in or out of the money, measuring the value of word of mouth (WOM) has become a strategic imperative. This webinar will guide participants through five ways that consumer conversations impact a brand’s bottom line and offers specific tips and techniques to assess the value of WOM to your brand.

Hope to see you on the call!

Register Here

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Tags: WOM word of mouth Word-of-Mouth Marketing marketing communication

Where is talking getting you? Measuring WOM

2009-04-01T23:52:00.000-04:00

Be sure to check out the current issue (April 2009) of Admap which has a series of articles on word of mouth. Articles include:

Where is talking getting you? Measuring WOM
Comparing new models for measuring word-of-mouth ROI, such as Conversation Value, Momentum Effect and Net Promoter Economics.  Dr Walter Carl, ChatThreads

Influencers are essential in driving WOM
As demand for word-of-mouth marketing has grown, so has the need for insight into how influencers stimulate demand.  Ed Keller and Brad Fay, Keller Fay Group

Empower consumers to shape the brand
Getting word-of-mouth right is not about telling people what to think, and may require a change in corporate culture.  Ivan Palmer, Wildfire

Paying lip service is not enough
Word-of-mouth needs to be integrated into the whole brand development process, not tacked on as an afterthought.  Geoff Gray, Naked Communications

Tap into passions of brand advocates
To ensure productive and long-term conversations with consumers, a brand must first identify its discursive matrix.  Molly Flatt, 1000heads

The Anatomy of Buzz Revisited

2009-02-16T08:40:00.003-05:00

If you haven't heard yet be sure to check out Emanuel Rosen's newly revised book The Anatomy of Buzz Revisited. I have long advocated the original version of the book and have used it in teaching my classes on word of mouth and social media. I would tell people that if they could only read one book on WOM marketing to read this one. But after talking with Emanuel about his plans to rewrite the original and being interviewed for it I am now recommending that people read the new version. Here's the marketing blurb I wrote for it:

"I'm sorry to say I can't recommend The Anatomy of Buzz as my top pick anymore. There's something better out there and it's called The Anatomy of Buzz Revisited. Like its predecessor, it's accessible, compelling, and is based on solid principles of how word of mouth works, but this book has been completely revamped to include fresh material, new topics, and the latest research."

You might also be interested in Guy Kawasaki's interview of Emanuel Rosen. Be sure to check out question 13 in this interview: "How can a company effectively measure the buzz it's generating?"

The book is officially available February 24th.

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Tags: WOM word of mouth Word-of-Mouth Marketing marketing communication

What Does Facebook Do?

2008-10-11T20:02:00.002-04:00

Facebook has a new way of describing itself.

It used to be: "Facebook is a social utility that connects you to the people around you."

Now it's: "Facebook helps you connect and share with the people in your life."

Rather than describing what it is AND what it does, it now just describes what it does. In this case, I think it's a better move because most people never really understood what a "social utility" is. Plus, it shifts the locus of agency from Facebook to you, the user.

If anyone knows of any other self-descriptions Facebook had throughout its history please mention in the comments.

Mapping the Social Networks of a Small Town

2008-10-09T22:58:00.003-04:00

There's a fascinating article in the New York Times about how Unilver is attempting to map the spread of conversations about their Vaseline lotion, Clinical Therapy, in an Alaskan town.

Through mapping the conversations Unilever was able to identify a network hub, Petal Ruch, who was apparently the most well-connected town resident. Unilever's advertising agency and production company then built a marketing campaign around her story.

The network map is supposed to make its way onto a branded website called Prescribe the Nation.

Given my research on mapping the conversational geography of word of mouth and my work with ChatThreads I'm especially interested in this endeavor and will watch with interest how this develops.

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Tags: WOM word of mouth Word-of-Mouth Marketing marketing communication

Why iPhone Didn't Get Me (Yet)

2008-08-14T09:32:00.002-04:00

(Cross-posted from ChatterBox blog)

I have used a Palm for a number of years: Palm IIIe, Zire 71, Treo 600, Treo 650, and currently my Treo 700p -- and love smartphones.

But I have used Apple computers for even longer -- Apple IIe, IIGS, Mac Powerbook G3 and most recently my 24" iMac -- so I was naturally intrigued by the iPhone.

Three factors made this a relevant time for me to consider switching to the iPhone: 1) the new iPhone 3G release, 2) my wife's mobile phone was falling slowly towards its demise and my Treo 700p is on the older side, and 3) we have both fulfilled our contract so there's no penalty fee for switching.

And if you know your research on word of mouth you know that conditions of higher risk and uncertainty are fertile grounds for WOM and information-seeking behavior. This was true for me. Everyone I see who has an iPhone I've talked to and I've asked about their experiences with it. I watched the Steve Jobs keynote when the new iPhone was released, and have read a number of online ratings and reviews from lay and professional reviewers.

So, why haven't I switched?

First of all, let's pause for a second because most research on persuasion and influence focuses on change, not maintenance, of existing behaviors.(A point I learned especially well in grad school with my advisor, Dr. Steve Duck, who often noted that research on personal relationship tended to focus more on relationship change rather than sustaining or maintaining relationships).

But there's a lot of insight we can learn by focusing on why things DON'T change, just as much as why things DO change (and perhaps more so).

Why I'm tempted to switch to the iPhone:

1) Sleek interface

2) The promise (but not necessarily reality) of a seamless experience with my Mac via MobileMe

3) App Store

4) Larger screen

5) Better music, video, and photo experience

But why didn't I switch?

1) Mobile phone network. I don't like being forced to switch from Verizon to AT&T.

2) I have a lot of money invested in software and peripherals for my Treo. Dictionaries, eReader Pro, Agendus, Clock Wireless, Docs to Go, PDA Net, Volume Care, Missing Sync, and games like Scrabble and Monopoly, expansion cards, sync cables, chargers, extra battery, etc.

3) Replaceable battery. It bothers me that you can't replace the battery in the iPhone.

4) I can use my Treo to tether to my laptop to get an internet connection (using PDA Net).

5) Developers are still programming for Treo, such as the TypePad and Facebook apps, so I feel I'm still current.

6) I use iTunes but I don't like being bound to it. I like that I can load my own MP3s (I still buy old school CDs so I can rip them and use them in both iTunes and on my Treo).

7) Identity reasons. I like to think I make autonomous decisions (though I know this is often a pleasant fiction I tell myself) and am not interested in switching just because something is shiny and new. Plus, my Treo 700p still works great and there's some pride in using it until it dies (though note this is near last on my list and didn't stop me in anyway from switching from the 600 and 650, both of which I sold on eBay in order to upgrade).

8) It seemed a lot of money for both me and my wife to switch to new iPhones. We save money being on the same network so our decision is going to be a mutual one.

So my wife and I decided to stay put -- for relational reasons having to do with the fact that we are in it together, functional reasons, identity, and financial reasons. And she just ended up buying a Palm Centro.

More reason to stay put, for now!

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Tags: WOM word of mouth Word-of-Mouth Marketing marketing communication

It's Not How Much You Know, It's What You Do: Reflections on the Habit of Continuous Curiosity

2008-08-03T00:33:00.010-04:00

This post is about a topic I've been thinking about a lot recently, and have throughout my life, especially in a professional context. It's about continuous curiosity and the dangers of expertise and thinking that how much you know about a topic is what's most important.

One of the things I love to do is go to a bookstore, like a Barnes & Noble or Borders, and just browse books in various sections. I typically go to books on communication and other social sciences, followed by business books, then on to history, and then wherever else my interest takes me.

But I'm often confronted with two sets of strong feelings when I do this.

On the one hand is a rush of wonder, interest, and curiosity. You realize there's so much you can learn and you get to take a lot of it in in a short amount of time.

On the other hand is a feeling of anxiety, being overwhelmed, and inundated. You realize there's so much to learn and you feel like you have to take it all in in a short amount of time.

Generally I experience the first set of positive feelings when I go on these visits. But there are times when I feel the second set and I get anxious. The worst is when you come across something new in an area that you thought you knew a lot about. Where did that come from? Who is this person writing about this? How could I have missed it all this time? (Well, probably what's even worse is that you thought you had a truly original idea that was "yours" and then you find somebody else who has just written a whole book on it).

I think these sets of feelings are especially prevalent in academics, researchers, analysts or any category where a person is seen as an "expert" of some kind in an area. You are judged on how much you know and how well you can articulate that to others. When you come across something you don't know it's easy to see it as a threat to an identity others have constructed and that you perform.

Thinking that to be an expert you have to know everything about a topic is dangerous. Why? Because it leads people to get myopic in their thinking. In order to sustain the belief that they know everything they focus on a smaller, more narrow set of topics. It works to the extent that at some point you do end up knowing everything about the area. It's just that the area is so small that much of the meaning and relevance to the rest of the world is lost.

What's the antidote to all of this? How do you maintain the more pleasurable set of feelings -- the wonder, the interest, the curiosity (but still thrive in a professional context that requires you to be on top of it all)?

First, recognize that nobody knows it all and that if they do, it's probably about a pretty narrow set of topics (and take comfort in the fact that they're probably boring at parties).

Second, recognize that the anxiety doesn't have to be perceived as negative. Redirect and channel that energy into something more productive, such as...

Third, what's more important than how much you know are your habits towards new information and ideas. Develop a habit of inquiry that leads you to always look for new ideas and discuss them with others (talking with others forces you to stay relevant and meaningful). You know you can never know everything but what you can do is take actions in the present that keep you knowledgeable and informed.

By following these three steps you can liberate yourself from feeling like you have to know everything and you can embrace the practice of continuous curiosity. It still keeps you at the top of your game and you can have fun playing it!

(By the way, all of this applies to reading blogs just as much to visiting bookstores).

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WOM and Academic Textbooks

2008-07-20T18:00:00.005-04:00

Just as there has been a resurgence of interest in WOM over the past few years by those in industry circles and popular press books we can also see a similar effect for academic textbooks. In the past few months I've received a number of inquiries from faculty at other universities who are interested in syllabi and textbooks for classes on WOM and social media. I also just formally reviewed a book for a publishing company who was attempting to determine if they should work with the authors on publishing their manuscript.

Even more recently a co-authored book on consumer behavior from a colleauge (Robert East at Kingston University in the UK) has been released. It's called Consumer Behaviour: Applications in Marketing and is published by Sage (here's the link at Amazon). As you can surmise by the title it's broader than just WOM, but Chapter 11 is exclusively devoted to the topic, and it is sprinkled throughout the rest of the text as well (most other academic textbooks have sections of specific chapters about WOM, rather than a full chapter, so this is worth remarking on).

Below is a list of the learning objectives in the chapter and then a few specific things I think people will be interested in knowing about. The learning objectives are phrased, like in most textbooks, as "When you have completed this chapter, you should be able to:"

Discuss the difficulty of conducting research on WOM;
Describe how product decisions in different categories are affected by WOM;
Report on the relative occurence and impact of positive and negative WOM in familiar categories;
Describe variations in WOM that affect its impact: solicited or volunteered; strongly or mildly expressed; from people who are close or distant from the receiver;
Report how WOm relates to the current and past usage of brands and to market share;
Suggest how marketers might apply knowledge about WOM.

And I think people will be especially interested that the authors present evidence that clears up some popular misconceptions about WOM. The authors contend the following:

It is not true that negative WOM is more common or more powerful than positive WOM;
It is not true that most WOM is driven primarily by satisfaction or dissatisfaction (though these are often involved);
It is not true that long-term customers usually recommend more than short-term customers.

To see the evidence for these and other insights you'll have to read the chapter... I definitely recommend it!

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Tags: WOM word of mouth Word-of-Mouth Marketing marketing communication

NPR and the Bryant Park Project

2008-07-02T22:21:00.005-04:00

If you like WOM and public radio then tune into the Bryant Park Project Thursday morning. I've been invited to speak about word of mouth marketing, measurement, and ethics.

It will be a live show and I'll be interviewed by, er, I mean, have a conversation with, Mike Pesca (my last interview on NPR was taped so it should be fun to do a live show).

The show promotes "conversations" rather than "interviews" as part of its more edgy style (interestingly, it's the only NPR show that I know of that is supported by PBR!). Not familiar with the program, learn more here.

I'm told the segment will air about 8:20 am ET or so, so tune in on your morning commute, or catch it online after it airs.

UPDATE (7/3/2008): Here's the link to the podcast!

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Tags: WOM word of mouth Word-of-Mouth Marketing marketing communication

What's The Difference Between Conversation Cost and Conversation Value?

2008-07-01T12:48:00.003-04:00

What's the difference between the cost of a conversation and the value of a conversation? And why do you need to know?

Find out in my latest post on the ChatterBox blog ...

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Tags: WOM word of mouth Word-of-Mouth Marketing marketing communication

Catch Me If You Can! Sneak Peek at ARF Presentation

2008-06-22T18:24:00.003-04:00

The Advertising Research Foundation is hosting its Audience Measurement 3.0 conference this week in New York City. The theme they are using to promote the conference is "Catch Me If You Can."

The tagline reminds me of a toy we have for our 9-month old baby called the "Move and Crawl Ball" by vtech. You set it down on the floor and it rolls around while the baby tries to catch it, almost taunting the unsuspecting infant with "Wee! Catch me if you can!". Allyn got it as a gift from her great-grandparents and she loves it.

It's an apt parallel to how increasingly active and agile audiences go about their lives while advertisers try to "catch" their attention with their advertising initiatives.

Given this "Catch Me If You Can!" dynamic it's not a coincidence that I'll be speaking on a panel on consumer-to-consumer conversations at a conference devoted to advertising. The title of the panel is "Putting a Ruler on Buzz."

If you want to download the paper I'll be presenting you can do so from the ChatThreads ChatterBox blog.

Catch me in New York... if you can! :-)

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Tags: WOM word of mouth Word-of-Mouth Marketing marketing communication

New Blog and Book Review of Satisfied Customers Tell Three Friends, Angry Customers Tell 3,000: Running a Business in Today's Consumer-Driven World

2008-06-03T06:17:00.002-04:00

I'm contributing to a new blog as part of my work with ChatThreads. It's called the ChatThreads ChatterBox and my first post there reviews Pete Blackshaw's new book titled Satisfied Customers Tell Three Friends, Angry Customers Tell 3,000: Running a Business in Today's Consumer-Driven World. Readers of my blog will definitely be interested in the review and will also want to check out Pete's new book.

To help raise awareness of the ChatterBox blog I'll be pointing people there from this blog when I think there's a relevant post. If you want to subscribe to the ChatterBox feed directly you can do so here.

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Tags: WOM word of mouth Word-of-Mouth Marketing marketing communication

New Academic Research on WOM: The Role of Disclosure in Organized Word-of-Mouth Marketing Programs

2008-05-19T21:54:00.008-04:00

As a follow-up to my earlier post, I am excited to announce the release of my latest journal publication on word-of-mouth marketing communication. This piece was published in the Journal of Marketing Communications titled "The Role of Disclosure in Organized Word-of-Mouth Marketing Programs". If this title sounds like a familiar topic for me you'd be right as it is the the academic version of my industry research report "To Tell Or Not To Tell?: Assessing the Practical Benefits of Disclosure for Word-of-Mouth Marketing Agents and Their Conversational Partners”" published in January 2006. At the time the research received a lot of attention in mainstream and social media being cited in Advertising Age, The Atlantic Monthly, The Boston Globe, and Business Week, among others.

The publication of the academic journal article also comes out at a fortuitous time and venue. By timing, I'm speaking of the latest legal and public policies coming out of the UK concerning the issues of transparency and disclosure in advertising and marketing practices By venue, I mean that the editorial board of the journal has a heavy contingent of UK and European-based scholars.

(By the way, see the Word of Mouth Marketing Association's position on this important topic. It turns out this new UK legislation was not targeted at organized word of mouth marketing programs in particular but it cast a much wider net in terms of unfair marketing and advertising practices in an effort to protect consumers from deception and other unethical practices).

OK, so to the content of the article. Here's the abstract:

Prevailing views of organized word-of-mouth (WOM) marketing programs suggest that disclosing corporate affiliation reduces perceived credibility and hampers campaign effectiveness. To test this view we surveyed WOM marketing agents and their conversational partners (CP) after a WOM marketing episode. Results indicate that when disclosure occurred – defined as when the CP was aware they were talking with a person participating in an organized WOM marketing program – agents were rated as more credible, CPs had fewer negative feelings about the agent’s corporate affiliation, and CPs told more people about the brand being discussed. These counter-intuitive results can be explained in part by the existing personal relationship between the agent and CP and invite us to consider how personal relationships may moderate the impact and potential business advantages of disclosure in organized WOM marketing programs.

If you read the To Tell or Not To Tell? report I STRONGLY encourage you to read the academic version of the article because it goes into a lot more detail and nuance about the research, the results, and the limitations.

The main difference is that the academic venue afforded more of an opportunity to underscore the importance that the underlying relationship plays in explaining the counter-intuitive results of the research. In fact the results that support the business case for disclosure -- higher perception of source credibility, higher relay rates when disclosure occurs (meaning more people were subsequently told about the product), and minimizing the potential for "backlash" if a person doesn't disclose but then the person they're talking with later finds out they were part of an organized marketing program) -- can be explained in large part by the pre-existing relationship between the people talking. The act of disclosure played a role in explaining the phenomena but not as much as the type of relationship between the people talking.

This implies that the same results may not be as salient when you're talking with someone you don't know very well, or at all, and disclose that you're participating in a marketing program. In these situations, because people may not know anything else about you as a person and your motives, then this disclosure may indeed diminish the program participant's credibility and diminish the perceived sincerity and effectiveness of the recommendation. And this is precisely the reason why there are consumer protections in place, and that's because non-disclosure may indeed make a difference in how people perceive the brand-related communication, even if there aren't any spurious motives (as in many things, perception is the reality).

But if you have an existing relationship (for example, friend, family member, co-worker) the act of disclosure is welcomed or a non-issue because this bit of information is contextualized by the history of all the other interactions the people have shared.

I believe there are a lot of significant implications to this research and underscores the importance of understanding the many contextual features that affect how people interpret each others' communication.

If you think you'd find this article interesting you can download it from the publisher's website here or a pre-press version from my download page (but if you're going to cite the paper be sure to cite the published version).

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Tags: WOM word of mouth Word-of-Mouth Marketing marketing communication

New Academic Research on WOM: The Conversational Geography of Word-of-Mouth Communication and Marketing Practices

2008-05-19T10:11:00.013-04:00

We've all heard about the tortoise and the hare and how the tortoise eventually, slowly but surely, arrives at the finish line, before the speedy hare. Well, two tortoises have finally crossed the finish line representing academic publication for some of my research on word of mouth marketing communication practices. It was a long journey but they have finally arrived.

These two pieces represent a significant milestone in my academic publication record because they are the first two pieces where I did not use a colon in the title. :-)

Actually they are important for other reasons which I'll explain briefly below. Actually, I'm going to split these into two posts and discuss each article separately.

The first piece that was just published appears in Communication Quarterly and is titled "The Conversational Geography of Word-of-Mouth Communication and Marketing Practices". Here's the abstract:

This study was a test of the utility of a diary-based methodology for revealing how word-of-mouth (WOM) marketing agents perceive their campaign and non-campaign-related WOM communication episodes. A modified version of the Iowa Communication Record, originally designed for presenting the “geography of everyday conversation,” was the base for the collection of 2,088 self-reports of the agents' WOM episodes. Data were subjected to a principal components factor analysis. The resulting factors—communication quality, value, impact, relational change, and conversational control—served to gauge differences attributable to the institutional nature of the WOM, sex of respondent and conversational partner, relationship type, and day of week.

This piece is actually "Part 2" of my "What's All the Buzz About?" research published in Management Communication Quarterly. There are (at least) three really interesting results in this article.

The first interesting result was that agents perceived a higher amount of change in their relationship after a campaign-related word of mouth conversation when compared to their non-campaign conversation. Subsequent analysis revealed that the direction of this relational change was positive; that is, participants in the agent-based programs reported feeling closer to their conversational partner after the conversation where they were discussing a campaign-related product. Since agents generally perceived the WOM episodes to be of high quality and of some value to their life it is not surprising to see some levels of greater relational closeness occurring after the brand-related conversation. But another possible explanation is that agents felt like they were helping their conversational partner by providing them with relevant information which led them to feel closer to the other person. But more research needs to be done to explain this finding.

The second interesting result was how participants in the agent-based marketing program perceived that they were more likely than their conversational partners to initiate interaction, to decide topics, and to end the conversation for products that they were talking about as part of the organized program when compared to brand discussions that weren't part of a marketing campaign. This makes a lot of sense since it's the program participant who has access to information about the latest and greatest products, but it could also be problematic because a hallmark of everyday conversation is a sense of "mutual conversational control"; that is, where the parties perceive they are contributing equally to the conversation. I have unpublished research (an even slower tortoise!) that shows that their conversational partners also perceive that the program participants exercise more "conversational control" during campaign-based conversations, but the jury is still out the implications of this (for example, if their partners perceive the agents exercise more "conversational control" during the interaction does this negatively affect perceptions of credibility or is this an understood norm in relationships when one person may have greater knowledge or experience about a topic than the other).

The third finding I wanted to highlight concerned the relationship between the program participant and their conversational partner(s). In comparison to weak-tie or acquaintance relationships, program participants perceived their WOM conversations with strong-tie relationships (best friends, romantic partners/spouses, and relatives) to have higher conversational quality, more value to their present and future life, and more of an impact on their attitudes, feelings, and/or behavior. This is important for two reasons: 1) the higher perceptions of quality, value, and impact might partially explain existing findings showing that people are more likely to engage in WOM conversations with strong-tie relationships. Second, the results pose a challenge for organized attempts to stimulate WOM in social networks. Existing research by Dr. David Godes and Dr. Dina Mayzlin has shown how firms need to stimulate WOM in weak-tie relationships to generate incremental WOM that spreads beyond the WOM that has already occurred within a social network. But it is these weak-tie interactions that agents perceive as having less communication quality and value, which as stated above, may be one reason why they occur less frequently. If one goal of a WOM campaign is to get the word out about a brand, product, or service to as many people as possible (or at least as many people who will find it relevant), and if weak-tie relationships are important to that process, then it will be necessary to create opportunities where people find the interactions with weak-ties more rewarding.

If you think you'd find this article interesting you can download it from the publisher's website here or a pre-press version from my download page (but if you're going to cite the paper be sure to cite the published version).

And stay tuned for my other article that was just published!

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Tags: WOM word of mouth Word-of-Mouth Marketing marketing communication

Introducing the Conversation Value™ Model and Preview of WOMM-U Sessions

2008-05-08T05:30:00.002-04:00

As mentioned in an earlier post I'm speaking at WOMM-U today and tomorrow about WOM measurement and how to scale WOM programs. On the WOMM-U website WOMMA bills my session as "Your CMO says: 'If I gave you X dollars more for WOM, what would I get?'"*

The purpose of this post is to give a preview of how I plan to address this topic and it coincides with some exciting news with ChatThreads regarding the announcement of a new WOM ROI metric. We call it "Conversation Value™" and it's a measure of the revenue impact of consumer conversations.

I've been working on this model with Dr. Barak Libai, who has been a visiting professor of marketing at MIT and a professor at Tel Aviv's Faculty of Mangement (and also a fellow member of WOMMA's Academic Advisory Board).

The Conversation Value™ Model incorporates consumers' WOM behavior into a life-time value (LTV) model, which allows companies to quantify the bottom-line value of each conversation about a brand.

The two categories of inputs are LTV-related and WOM-related. (We feel that if you calculate the value of a customer just based on a LTV model that you actually underestimate the value a customer brings to the firm because it doesn't take into account their WOM.)

For LTV inputs we calculate the average value a customer brings to the firm through their own purchase behavior, adjusted based on a discount rate that takes into account the time value of money (money now is worth more than money later).

The WOM inputs are collected via ChatThreads' analytics platform. The inputs include generational relay rates (the number of people told from Generation 0 to Generation 1, Generation 1 to Generation 2, etc.), which is a measure of reach, as well as generational purchase rates (the percentage of people who report purchasing the product or service at each generation).

The value of each conversation, or "conversation value", is calculated by combining the life time value and WOM referral value and dividing this by the number of conversations with unique people. The "net present conversation value" is computed by subtracting the costs for the marketing initiative from the conversation value figure.

You end up with a dollar amount, like $1.20, for example, and this number means that each time a person had a conversation with a new person as part of a marketing initiative (whether it's an advocacy or influencer WOM program, or a more traditional event marketing or sampling program) the company made $1.20. The value could be a negative number as well which means the initiative failed to generate a positive ROI. Companies can track this number over time and work to optimize their initiatives in order to increase their conversation value.

Interestingly, conversation values can range dramatically by cateogry and by each of the inputs to the model, such as the profitability of each unit sold and generational relay and purchase rates.

Something else that's really cool is how you can run simulations to understand what happens if, for example, each program participant reached just one more person at each generation, or purchased X% more. Or what happens if you decided to scale the program larger (for example, by engaging additional program participants). Additionally, you can use the model to look at cost per conversion so that you can compare an initiative designed to generate WOM to other media channels. This will give media planners, buyers, and marketers a clearer sense of how to allocate their resources.

We are developing Conversation Value™ Models for ChatThreads' clients and will be releasing some research reports and white papers in the near future. For the time being you can come to my interactive sessions in Miami. Hope to see you here!

* BTW, the hypothetical CMO's statement above may make it seem like you can just buy WOM or have a successful WOM program by just throwing around some additional money. I don't think this is what the conference organizers intended when they wrote their short blurb, but I'll certainly dispel this notion when I discuss it today. What they were getting at, I think, is understanding the impact of resource allocation and how to go about it in thoughtful and strategic ways (or, this is how CMOs probably should be talking about it anyway!).

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Tags: WOM word of mouth Word-of-Mouth Marketing marketing communication Conversation Value

What I've Learned from Being Mr. Mom: E.A.S.Y. Does It

2008-04-30T14:57:00.007-04:00

I work from home two days each week while taking care of our baby (who is now 7 months young)! It's truly a privilege to have the flexibility to do this, even though it means a lot of late nights and working on the weekend to try keep up with everything.

A couple things I learned in the process are 1) E.A.S.Y. does it when it comes to baby care, and 2) care for your baby like the little *person* that they are. Incidentally, both of these points can be aptly applied to an organizational context.

First, E.A.S.Y. is an acronym that I got from the book Secrets of the Baby Whisperer. The letters stand for Eating, Activity, Sleeping, and You and it refers to the four segments of a structured, yet flexible, routine for you and your baby. Feed the baby (an obvious one, I know), then you do an Activity like changing the diaper, a walk outside, reading, tummy or blanket time, etc. Then the baby goes to Sleep, and then while they are sleeping You get some time for yourself (typically these are conference calls for me or writing). Each of the four-segment cycle lasts about 3 hours (or at least it did when Allyn was younger).

I'm a structured person so it definitely helps me out, but Allyn has responded really well to it as well as it provides the structure and predictability that little babies seem to thrive on.

Second, interacting with the baby respectfully as a person. I know this sounds really obvious and probably makes you wonder how else you should treat a baby, but Tracy Hogg, the author of Secrets of the Baby Whisperer, uses the example of how it would be pretty shocking if someone came up to you and all of the sudden, put you on your back and threw your legs up in the air (a reference to what many do when changing a baby's diaper). Instead she suggests to talk with your baby about what you're going to do before you do it, as you would with another person to show respect for their space and autonomy.

I've noticed a huge difference in how Allyn responds when I do this versus when I don't. She is much more receptive to changing her clothes or her diapers, for example. Feeding times also got a lot more smoothly. By taking the time to talk with her about things that impact her I notice I focus on her own space and autonomy, and as a result I notice that I listen much better to her cues and know what types of activities are appropriate and when.

The applications to the organizational setting are easy to see as well. For example, respect and take care of your customers' (or other stakeholders) needs first and then your needs. Doing the former can actually make the latter much easier to achieve over the long-term, as a result of all the positive word of mouth and customer-driven feedback and innovations you'll receive. You'll also be much more nimble in how you adapt to marketplace changes because you are really focused on the needs of your most valuable assets.

Sounds like it's time to move from the "Y" to the "E" and start the cycle again!

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Tags: WOM word of mouth Word-of-Mouth Marketing marketing communication

WOMM-U: Bienvenidos a Miami!

2008-04-24T13:04:00.004-04:00

With all due respect to Will Smith, I am looking forward to receiving this greeting while at WOMMA's WOMM-U event.

I'll be a faculty member (a tough stretch for me, I know) facilitating one of the highly interactive sessions on "How Does WOM Scale?" where we'll discuss issues of scalability, measurement, and optimization for WOM initiatives.

These are small group discussions of 10-12 people and will be driven by questions and comments from the group members. I will bring some talking points, however, based on exciting new research I've been doing with ChatThreads as it relates to these issues.

Dr. Kate Niederhoffer, VP of Measurement Science at Nielsen Online, will be the other faculty member/facilitator on the same topic.

It all goes down May 8-9, 2008.

Hope to see you there!

PS -- Don't worry. There won't be any grades and I won't bring my red pen with me. :-)

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Tags: WOM word of mouth Word-of-Mouth Marketing marketing communication

Calling all advanced Twitter users: Can one Twitter account mirror "tweets" that includes a reference to another account?

2008-04-06T09:20:00.004-04:00

Still working on my @openwom experiment with Twitter and I need some help.

Here's what I want to do: when people pass-along or receive some type of word-of-mouth communication about an organization, brand, product, or service (especially those communication episodes that are not otherwise digitally trackable) I want them to be able to tweet about it by including "@openWOM" in their tweet (see my last blog post for details). This would be a way to make their offline and non-publicly available online WOM easily trackable by using a tool like Tweet Scan.

Tweet Scan allows people to create an RSS feed of a search query that would include @openWOM in it (like this). But the problem for Twitter users is that people using Twitter can't follow an RSS feed (to my knowledge); they can only follow other Twitter user accounts.

I was hoping that people could just "follow" @openWOM and get all the tweets from people who have included "@openWOM" in the tweet they made.

So, my question is, can one Twitter account (i.e., @openWOM) "mirror" tweets made by other Twitter users if the other user includes "@openWOM" in their Tweet?

Any help would be greatly appreciated!

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Tags: WOM word of mouth Word-of-Mouth Marketing marketing communication

@OpenWOM -- Join Me In Experimenting with Twitter for WOM Research

2008-03-25T23:21:00.008-04:00

I love to try new things to better understand how people talk, form relationships, organize, make sense of their lives, engage in WOM... pretty much all things related to communication. And part of what I get to do at Northeastern and for ChatThreads is experimenting with new ways of research (literally, searching or looking again in a new way).

Off and on since last October (more off than on, I have to admit) I've been experimenting with using Twitter as a way of keeping a publicly-available diary of my WOM communication practices. When I have a WOM communication episode (either I'm receiving a recommendation, giving one, or just talking about an interesting organization, brand, product, or service) I post ("tweet") to an account set up at Twitter: @OpenWOM

I called it "OpenWOM" to highlight that it would be an open resource to anyone who wants to use it as another means to find out what people are talking about especially for communication that would otherwise not have a public record (for example, if it's one-to-one or few-to-few communication like face-to-face, phone, IM, e-mail, etc., where there currently isn't a publicly available record).

Here's an example of what I've done with it so far (you only have 140 characters with Twitter so you have to be brief and I've developed some codes which I've explained below).

The following WOM episode took place with four colleagues after a recent trip I had through the Orlando airport. I was telling them about Clear, which is a new security system where you pay an annual fee, get a fingerprint and retina scan, and then can breeze through all the long security lines. We discussed the pros and cons of it, and it was mostly cons. Here's how I represented it to OpenWOM:

@openwom Clear ** 4 cow talked abt new security system I saw at ORD airport - fingerprint and retina scan to breeze thru security

Right now all my tweets to OpenWOM have had six components:

1) The OpenWOM twitter code ("@openwom"): this just needs to appear somewhere in the post so that it gets associated with the OpenWOM project.

2) OBPS ("Clear"): this is the organization, brand, product, or service that is being discussed

3) Valence or Polarity ("**"): this is a measure of valence, whether it was positive, negative, or mixed. It's a five-point scale with "*" meaning it was really negative, "***" mixed, and "*****" really positive

4) Number of people present ("4"): this is simply the number of people, including yourself, that were participating in the conversation

5) Relationship Type of Others Present ("cow"): this stands for coworkers, colleagues, or business associates. There are seven relationship-type codes so far: str (stranger), acq (acquaintance), fri (friend), bfr (best friend), rps (romantic partner or spouse or significant other), rel (relative/family member), and cow (co-worker, business colleague, boss, etc.).

6) Brief Summary of Conversation: i just try to give enough detail for people to get the gist, or for something that I want to remember about it and retrieve later.

At this point I'd like to open it up to others in the spirit of seeing what people do with it. You can check out new tweets by typing "track openwom" in your Twitter account.

I use it for research. Others may use it to show others what they're talking about or to learn what others are talking about. You can also use it as a memory device in case someone gives you a good recommendation.

So, if you are so inclined, send a tweet to @openwom and start sharing your conversations. (You need a Twitter account if you don't have one yet.) Discover new uses for it, propose new codes, offer suggestions for improving it, trash it (constructively, please), etc. You can leave feedback as comments to this post.

Reminder: if you want to track what other people are posting to OpenWOM then type "track openwom" in your Twitter window. Or you can use Tweetscan and enter "@openwom"

Enjoy!

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Tags: WOM word of mouth Word-of-Mouth Marketing marketing communication openwom

WOM as Empowered Involvement

2008-03-03T22:40:00.006-05:00

There's an interesting line of research out of the European School of Management (Berlin) about WOM. Researchers Dr Frank Jacob and doctoral candidate Martin Oetting are working with the notion of "empowered involvement" as a way to explain managed word of mouth.

They start with the research on involvement and WOM, which dates back to at least the 1960s. Research has documented the important role of ongoing involvement in a category to explain opinion leadership and also elevated levels of WOM behavior. Other research has shown how involvement levels can be raised by providing opportunities for customers to be actively participating in the marketing process.

This research leads them to the notion of "empowered involvement." Can deliberately yielding control of the marketing process to consumers stimulate WOM by creating greater levels of involvement?

The idea of empowerment has historically been studied in human resources management. Thus, these researchers look at how empowerment works with employees as a way to see how it may apply to consumer behavior.

Specifically they cite work by Spreitzer, who defined psychological empowerment as intrinsic motivation. In order to achieve this sense of intrinsic motivation, Spreitzer's research suggests, workers need to feel meaning, competence, self-determination and impact.

This leads the research to define their theory of Empowered Involvement: "When companies allow consumers to experience meaning, self-determination, impact and a sense of personal competence through certain aspects of a marketing process, they can increase these consumers’ situational involvement" [situational involvement is a temporary state of involvement as distinct from enduring involvement, which other research suggests is integral to opinion leadership].

Through two stages of empirical research, the researchers find preliminary support for their model. The results suggest the importance of better understanding how to build relationships with consumers and also how to provide them with sufficient levels of decision-making powers so they feel the four components of empowered involvement: meaning, competence, self-determination and impact.

I'd like to see this research explore, qualitatively, how people come to feel meaning, competence, self-determination and impact in marketing contexts. How is it similar or different to empowerment in the employment context?

Also, how important are the notions of trust and authenticity (that is, it seems reasonable to think that a pre-condition for empowered involvement is that people trust that the company is being sincere and authentic in their desire to listen and involve the consumers)?

Finally, I would also encourage those interested to read the chapter "Loyalty Myths Regarding Employees" in the book Loyalty Myths. The parallels between the empowerment-loyalty relationship and the empowerment-WOM relationship might be instructive.

To learn more about this research on empowered involvement you can visit http://www.empoweredinvolvement.com/ At the site you can download the full working paper.

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Tags: WOM word of mouth Word-of-Mouth Marketing marketing communication

Why I Don't Do Karaoke

2008-02-04T21:47:00.000-05:00

Tonight I spoke in Dr. Felicia Lassk's MBA-level Marketing Research class at Northeastern. Dr. Lassk is a colleague in the business school and I've had the chance to speak in a few of her classes over the past couple years and I'm honored she keeps inviting me back :-)

The topic tonight was how to measure WOM online and offline. The students, who were very receptive and participatory (especially for a night class when the day after a disappointing loss by the Patriots in the SuperBowl), will be reading the Harvard Business Review case study on Intelliseek next week, so I was sure to talk about some of the work their company does (now part of Nielsen BuzzMetrics/Nielsen Online). I also discussed the diary-based syndicated research from the Keller Fay Group. And she also asked me to talk about my own research on the generational spread of WOM and the new company ChatThreads. All of which I was happy to do.

Owing to the fact that it was a night class I wanted to provide a little bit of relevant entertainment early on and so I showed the "A Comcast Technician Sleeping On My Couch" YouTube video as a segue into discussions about social media monitoring and analysis. Unfortunately, though, the audio in the room wasn't working. The Brian Finkelstein video is set to "I Need Some Sleep" by the Eels, and missing the audio is a bit of a bummer. I tried to sing it, but after the first few notes I employed my well-honed skills in audience adaptation and decided I should stop abruptly (the look of horror on their faces was the give-away).

So, I told them I'd pass along the links to Dr. Lassk so they can watch the video, and one of my favorite spin-offs ("Cancelling Comcast") that illustrates a humorous take on how companies are training their call center employees in the age of social media.

Thanks to Dr. Lassk and her class for a great evening!

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Tags: WOM word of mouth Word-of-Mouth Marketing buzz marketing viral marketing marketing communication

Yikes! How To Write A Pay-Per-Post Blog!?!

2008-02-04T07:39:00.000-05:00

While I was doing some research online yesterday I came across a "How To" website (eHow.com) about how to write a Pay Per Post blog post.

As background, Pay Per Post's business model is to match bloggers and advertisers together: advertisers who want people to write about their products on their blog with bloggers who want to make money doing so. The blogger's deliverable is the post with a brand mention that conforms to any guidelines that the advertiser sets up.

This has been quite a controversial practice since its inception, as it represents a form of shilling. Further, Pay Per Post's initial policy was not to require, or even encourage, disclosure that the person was getting paid to write about the product. Pay Per Post's policy has since changed, coincidentally timed, it seems, with discussions by the FTC and disclosure.

Anyhow, the author sets up the article by saying "This article will help you learn how to rise above the competition and produce higher quality paid posts that your sponsors and readers will love."

Point #1 is to think long term and write a quality post since the advertiser will rate the quality of the post behind-the-scenes: "So while it may be easy to write a quick post for $5, it's better to invest a bit of extra time to understand what your advertiser wants out of the deal." This is concerning because then your endorsement is more for the advertiser than for the other people you are talking with (though the author suggests that you can still write a post your readers will enjoy).

Point #2 is to "Be Honest" about your opinion with the product ("If you lie, they are paying for a false testimonial. This can hurt their company, ruin your reputation as a writer and can get you banned."). OK, fine, honesty of opinion (which is WOMMA's second point in their Honesty ROI guidelines). But nothing about honesty being the ethical thing to do. The author adds the point about being relevant: "Instead, think about reasons why you might use their service or product. How would it help you? How can it help your visitors?"

But then the really strange part is point #3. The blogger says that writing a Pay Per Post blog is "secret" and that "If you want future work, don't tell your readers that you are writing paid posts. This includes filtering the posts into a "paid post" category, or tagging them as such. You are basically telling your sponsor that you are embarrassed to write about them."

I was shocked to read this. I'm not sure if my surprise has more to do with the logical inconsistency between point #2 (be honest) and #3 (don't tell people you are getting paid), or because just point #3 on its own being unethical.

I thought maybe this post was written a few years ago because people don't still think that hiding their identity is the way to go. But no, the post date is January 14, 2008.

Anyhow, folks if you are thinking about participating in the Pay Per Post or similar programs please check out the WOMMA Ethics Code as part of your decision to participate. And if writing a post about how to do it, please consider this.

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Tags: Pay Per Post shilling Stealth Marketing

Journal of Advertising Research -- Special Issue on WOM

2008-01-27T21:59:00.000-05:00

JAR, or the Journal of Advertising Research, has put out a special issue exclusively devoted to word of mouth, social media, and social networks. It's actually from the December 2007 issue so I'm still a little behind, but I hope to review some of these articles in upcoming posts, especially since not everyone may have easy access to the journal without a subscription (a benefit of having access to a university library).

People familiar with WOMMA will recognize some of the names, including Ed Keller (Keller Fay Group), Jim Nail (TNS/Cymfony), and Kate Niederhoffer (Nielsen Online).

The opening segment is written by Joseph Plummer, co-editor of the journal. He sets up the special issue by broaching whether or not WOM represents a new advertising discipline or if it's just a fad -- it may be neither -- but leaves it up for the reader to decide.

He also ends with a call for folks to consider JAR as a publication venue for the latest and greatest (and they have a history for publishing WOM-related research, including an excellent piece in 2004 titled "Quantifying the Ripple: Word-of-Mouth and Advertising Effectiveness", JAR, 44: 271-280 by John Hogan, Katherine Lemon, and Barak Libai).

Be sure to give it a look and stay tuned for more!

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Tags: WOM word of mouth Word-of-Mouth Marketing

Missing In Action, But Wouldn't Have Changed A Thing!

2008-01-10T23:38:00.000-05:00

Trying to get tenure and blog. No problem. Trying to get tenure, starting a new company, and blogging. Difficult, but manageable. Trying to get tenure, starting a new company, AND having a baby... yeah, well, that's why my last blog post was November 5, 2007, a full 66 days ago!

And I wouldn't, er, couldn't, have done it differently (except maybe announce that I wouldn't be posting for a while). But I needed a break to enjoy some of life's finer moments.

Our baby is the best (especially now that her smiles mean more than just gas and she's sleeping through the night; and as if it wasn't clear, Allyn Marie is pictured above in what I call her "peek-a-boo" photo), the company is off the ground with repeat clients (always a good thing in business), and tenure, well, the tenure process is decidedly not one of the finer things in life -- it's about as much fun as watching late-night talk shows without any writers (long, drawn out, and no fun for anyone).

First, I want to apologize to all the people who wrote me with questions about WOM research, especially the undergraduate and graduate students from universities around the globe. I'm going back through my inbox now and plan to reply to everyone (there's a lot of interest from students in WOM research and it's a privilege to have the chance to talk with some of them in the formative stages of their research).

Second, I missed commenting on a lot of important events in the WOM space over the past two-plus months, namely the release of the WOM Marketing Industry forecast by PQ Media. It's well worth a read if you can get your hands on a copy.

Third, I want to provide an update about the full audio recording for the Net Promoter Discussion at the Word of Mouth Marketing Association's Research & Metrics Symposium in November. It will be posted on the WOMMA website, but I'm told there have been some challenges getting this up. I had the pleasure of facilitating this discussion between some key players and I appreciate everyone's patience while WOMMA gets this posted, which should be soon.

Finally, I'll provide a preview of what 2008 holds for this blog:

- coverage of the G2X WOM Tracking Methodology and ChatThreads: I've received a lot of inquiries from different companies in the U.S. and internationally who want to measure the effectiveness of their marketing initiatives using this industry-standard methodology and how ChatThreads is leading the way in this effort. So one of my goals is to post entries that respond to some of the most frequently asked questions. Here's a brief article about the methodology and the new company in Research magazine.

- coverage of my current academic and industry research projects and social experiments involving WOM, as well as others' research that I come across or gets sent to me;

- commentary on the state of the WOM industry, both from a research practitioner's and educator's perspective;

- commentary on returning to a Macintosh: I grew up on an Apple IIe, IIGS, and a Mac PowerBook through college and most of grad school, but had to use a PC for part of my doctoral dissertation and for some other work and so I've been away for 7 years -- now I have an iMac running Leopard and VMWare Fusion virtualization, and it's like coming "home" again!;

- perhaps a switch off the Blogger platform?;

- and probably some scattered posts about the joys (and challenges) of being a new dad.

If you stayed subscribed to my feed during my long absence, and it looks like most of you have, I appreciate your patience and look forward to your attention and any comments and discussions in this new year. It's good to be back!

How Likely Would You Be To Recommend Net Promoter for WOM Research?

2007-11-05T09:36:00.000-05:00

This is the question we are posing at the WOMMA Research Symposium in Las Vegas on 13 November. I wanted to plug this event at the Symposium in particular on my blog given all the discussions and controversy surrounding the net promoter score and discipline.

For example, over on the Attentio blog Bert Van Wassenhove commented that it was hard to know whose research to trust on this matter and asked: "Can somebody set up a debate between the two opponents so they can discuss at length. Make it a (video)Podcast so there is no time limit at all.”

I am a co-chair on the Research & Metrics Council for the Word of Mouth Marketing Association and we have set up a panel for precisely this kind of discussion. Rather than a debate between two opponents we broadened the panel to include some other voices. You can view the agenda here.

Confirmed speakers are Deborah Eastman from Satmetrix; Tim Keiningham from Ipsos-Loyalty; and Matt McGlinn at BzzAgent. We’ll also be having a speaker who has used the net promoter approach in their company.

Given the interest in this topic I’ve asked WOMMA to make the audio recording available on their website after the event, which they agreed to do.

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Tags: WOM word of mouth Word-of-Mouth Marketing Net Promoter Score

My Presentation at UGA Connect 2007

2007-11-05T09:08:00.000-05:00

| View | Upload your own

The good people at UGA have uploaded my presentation at the Connect conference to Slide Share. Be sure to check out the other presentations from the PR and social media conference, including Kevin Dugan's keynote on the opening night and Dr. Robert Sprague's talk on the legal issues surrounding WOM and social media.

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Tags: WOM word of mouth Word-of-Mouth Marketing UGA Connect 2007

Is Twitter Better for Live Blogging of an Event?

2007-10-20T09:26:00.000-04:00

Compare the Connect blog to the Flicker tweets feed. Which gives better live coverage of the event?

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Tags: UGA Connect 2007 Conference

Constantin Basturea on Social Media

2007-10-20T09:05:00.000-04:00

Constantin contends that many companies are still in the "I Want" stage. They see a story about blogging and say "I want blogging."

Constantin remarks on the Dell story that recently appears in Business Week and how they have become a success story. One point he raised is that it took a year from when they first realized people were talking about them in the blogosphere to do outreach, get a blog up and running, and start to change their business practices. He feels that companies need to have realistic expectations about what it takes to get to make a change and that it may not happen at the fast-paced speed of the blogosphere, for example.

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Tags: UGA Connect 2007 Conference

KD Paine on Social Media Measurement

2007-10-20T09:00:00.000-04:00

A few quotations from KD's talk:

There is no market for your message. Does it matter that you reached eyeballs? Or does it matter that you engaged people in a conversation?

Spin is dead. Long live transparency. If you want to increase trust, increase your transparency.

ROI doesn't mean what it used to. If you're just measuring hits then you're in trouble (HITS = How Idiots Track Success). Measure what people are doing with the content you provide.

KD is suggestion people look at Forrester's approach to engagement: Involvement, Interaction, Intimacy, and Influence.

KD is also working on a transparency index, which is a combination of what you disclose because you have to, because you want to, and because it's the right thing to do.

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Tags: UGA Connect 2007 Conference

Josh Hallett on Social Media

2007-10-20T08:41:00.000-04:00

A couple quotations from Josh Hallet on Social Media:

"Technology will never replace people. People who use technology will replace people who don't."

"When hiring for their last position at Josh's PR agency the decision to hire the candidate was based on how well they used social media, specifically how the candidate used Facebook to promote events for her sorority."

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Tags: UGA Connect 2007 Conference

Live from Athens! (Georgia, that is)

2007-10-20T08:29:00.000-04:00

In Athens at the University of Georgia for the Connect Public Relations and Social Media Conference.

The conference kicked off last night with Kevin Dugan talking about the new world of social media and the opportunities, and potential dark side, it presents for PR professionals. His talk was titled "We>Me" and did a nice job to set up some of the core issues with social media: transparency, human connection, having clear goals for working with social media technologies rather than just the "shiny tools" themselves. He also asked us to consider "what is content?" -- PR traditionally considers just "text" as content but he feels it's much broader including audio, video, links, comments, etc.

I speak at 10:30 am on "Organizing for Conversation: What Research Needs to Tell Us". I will discuss my four phase model of conversational engagement which focuses on how organizations come to understand what it means to "join in the conversation".

Here are the official social media venues: conference blog, Flickr pics, and Twitter feeds.

Should be fun!

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Tags: WOM word of mouth Word-of-Mouth Marketing buzz marketing viral marketing marketing communication UGA Connect 2007 Conference

Is Ford's "Swap Your Ride" Program an Example of Stealth Marketing?

2007-09-30T23:41:00.000-04:00

I've noticed the Ford commercials where everyday car drivers were able to swap their non-Ford cars with a Ford vehicle for one week so that they could experience what the Ford vehicle was like. In the commercial, and on the Swap Your Ride's website, Ford was very up front that they didn't tell the people whose cars were swapped that the camera crews were from Ford and instead told them they were doing "market research" (if you watch the "Behind the Scenes" video at the website they justify doing this because Ford wanted the drivers' honest opinions). Ford videotaped each person's experience and promoted these stories in the commercial and on the website, again without telling the people the film crews were from Ford.

In order to actually make the commercial or put these people's stories on the website I'm sure Ford had to secure the people's permissions and at that time they must have found out Ford was behind this. So it seems like we have an example of "delayed disclosure" going on here.

This makes a great case study for one of my classes. Here's a question I would pose to my students: Is the Ford "Swap Your Ride" program an example of stealth, or undercover, marketing? And if so, is this unethical? First, a definition. The Word of Mouth Marketing Association (WOMMA) defines stealth marketing as: "Any practice designed to deceive people about the involvement of marketers in a communication."

Second, we need a set of criteria to work with. Let's use WOMMA's Honesty ROI guidelines to briefly work through this case. Why is this an appropriate set of guidelines? Is this a WOM marketing program, and if so, how? I would contend it is because the marketer is using stories or testimonials from everyday people about their product-related experiences in order to engage an audience and promote their brand.

Of the honesty of relationship, opinion, and identity, it seems that this program initially fails on the first but is OK on the second and third. Specifically, Ford didn't have its crew disclose the fact that they were working for Ford and instead said they were market researchers (violates honesty of relationship). The people in the video seemed to be real people (that is, not actors or employees of the company, or otherwise paid or compensated beyond getting the chance to drive a new car around for a week; so honesty of identity seems OK here). And these real people seem to be providing their own unscripted, honest assessments (honesty of opinion; though it's clear the comments were edited and we have no access to any negative comments anyone might have said). Interestingly the video on the website uses the language of "Real people. Real opinions." which supports the analysis so far.

So, according to WOMMA's Honesty ROI ethical framework, this really comes down to an issue of disclosure of the marketer's relationship. There was an intent to deceive but it was justified on the grounds of soliciting people's honest opinion. And Ford came clean about it to the larger audience in their commercial and in the video. (Interestingly, this deceit is also carried out in academic research, as long as the benefits of doing so outweigh the costs, that the disclosure eventually occurs, and that no one gets hurt in the process.)

So, let's think about if anyone got hurt here. The drivers are getting to drive around in a new car for a week and show it off to their friends which juices their sense of being special. There could be a feeling of being "duped" and there may have been some backlash. And this may have had the effect of undermining credibility in marketing activities or making it that much more difficult for real market researchers to do their work (see the Market Research Society's Code of Conduct for interesting thoughts on this; of course the people doing the commercial aren't actually market researchers so they wouldn't be bound by such guidelines).

Ford must have done all their legal due diligence about the deception. It's probably legal since the larger audience in the commercial or video was informed that Ford was deceiving people for the purposes of filming the videos. It seems that it comes down to the following: in what situations is "delayed disclosure" (un)ethical*? Is disclosure a black or white issue or are there shades of gray? And does the WOMMA Honesty ROI or The Ethics 20 Questions give us the tools to make this decision?

What do you think?

* The issue of delayed disclosure is addressed by Justin Foxton in the book Connected Marketing (chapter titled "Live buzz marketing") so interested readers can also turn there.

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Tags: WOM word of mouth Word-of-Mouth Marketing buzz marketing viral marketing marketing communication stealth marketing Swap Your Ride

Executive Preview for "Measuring the Ripple" Now Available!

2007-08-15T20:00:00.000-04:00

I am pleased to announce my latest research on word of mouth marketing communication. This is from research that has been over a year in the making and is the result of an important academic-industry collaboration.

Due to publication restrictions I am unable to release the full report, which will actually be a co-authored piece to appear in the Word of Mouth Marketing Association's Measuring Word of Mouth, Volume 3 research book in November 2007, so I wanted to make available the following executive preview.

You can read the executive preview here in this post, but I recommend that you download the PDF version at my download page as it is more comprehensive. The last academic-industry research report I released on my blog, the "To Tell Or Not To Tell?" report on the role of disclosure in organized word of mouth marketing programs, generated a great deal of commentary from readers so I invite the same level of thoughtful discourse regarding this piece.

Finally, this line of research has been especially important to my work in the word of mouth space, not only for subsequent academic publication on the topic, but also because it has led to the formation of a new company, called ChatThreads, an independent word of mouth research company that derives actionable insights from how word of mouth communication spreads among individuals and social networks (but more on that later).

Without further ado, I give you the...

Executive Preview for “Measuring the Ripple: Creating the G2X Relay Rate and an Industry Standard Methodology to Measure the Spread of Word of Mouth Conversations and Marketing-Relevant Outcomes” [Download this as a PDF]

From the childhood game of telephone, and our personal experience with rumor and gossip, we are all familiar with the idea that word of mouth (WOM) spreads from person to person. We have also heard that WOM spreads in multiples from one generation, or degree of separation, to the next – one person tells two people who tell four who tell eight, and on and on it goes. And then there are those instances where the buzz about a product, service, or idea seems to explode exponentially. When you add in the fact that peer-to-peer conversations and recommendations are among the most trusted forms of communication, it is no surprise that many marketers find word of mouth initiatives a compelling proposition. But childhood games, folk wisdom, and alluring anecdotes aside, how do we really know how far marketing-relevant conversations spread, and the impact of those conversations? And what data exist to help marketers set norms and benchmarks?

To answer these questions, Northeastern University collaborated with a leading word of mouth media platform, BzzAgent, Inc., to develop an industry-standard methodology that reliably tracks the spread and impact of peer-to-peer conversations over time and across both offline and online channels. The methodology has been developed and refined for marketing campaigns across a range of product and service categories – from beverages to books, food to pharmaceuticals, and personal care to paints – allowing for the development of category-specific and third-party validated norms and benchmarks.

In the context of this methodology, a participant in a WOM marketing program will be described as a Generation Zero or “G0” Program Participant. The first set of conversational partners with whom this program participant speaks will be described as a G1 conversational partner. The people with whom they speak will be described as G2 conversational partners and so on, all the way out to GX. Thus, the provisional name for this methodology is the “Generational Relay to X” WOM Tracking Methodology, or “G2X.” See the Glossary for more details.

Key findings from studies using this methodology include:

o Previous research underestimated the relay rate (the number of people told at each generation, or degree of separation, from the initial source) by not taking into account how conversations continue to spread over time. Existing research by Northeastern University established a Generation 2 (or G2) relay rate of 1.65 for the number of new people told after a person had a brand-related conversation with a Program Participant in a marketing campaign. By investigating if people continue to have conversations about the product or service over an additional six weeks, the relay rate for campaigns represented in this research can be revised to 4.14 (that is, a person who talked with someone participating in a WOM marketing program told 4.14 other people about the product, on average, during a six week period of time).

o While a majority of the participants in the study (78%) had at least one additional conversation during the course of the six-week extended period, researchers observed a noticeable decay in the number of people those participants told over time. The decay rate was as follows: in the first two days after the initial conversation with the person participating in the marketing program, the “conversational partner” reported telling 1.43 other people, on average. During the next time period, one week after the initial report, conversational partners reported telling an additional 1.38 people about the brand. Three weeks from the first report, 0.76 new people were told about the brand. Six weeks after the initial report, 0.57 new people were told. Twenty-two percent (22%) of the people reported no additional conversations after the initial conversation with the person participating in the WOM marketing program.

o Researchers discovered that it is possible to reliably measure the reach and impact of WOM marketing initiatives across a range of product and service categories, which is an important first step in creating industry standard norms. Relay rates, and other key performance indicators, like awareness, trial, and purchase intentions and behaviors, can be measured on a campaign-specific basis, as well as across campaigns, so that managers can determine campaign effectiveness relative to benchmark data.

o Similarly, the reach and impact of WOM marketing programs can be independently measured and validated by a third-party. This opens the door for industry-wide third-party measurement that is seen in more mature media industries like radio, TV, and print.

o By using dyadic (two-person) or multi-party measurement designs researchers demonstrated how it is possible to validate each person’s self-report about conversational details and the impact of those conversations, thus overcoming a traditional limitation of self-report data. For example, in the case of a campaign for an electronic personal care product, WOM program participants reported that slightly more people participated in a conversation than their conversational partner peers (i.e., 1.83 versus 1.55 other people, a difference of 0.28). However, this difference was not statistically significant. Since results vary from campaign to campaign, managers can use this methodology to determine if there are statistically significant discrepancies in self-reported data (whether there is over- or under-reporting), and revise relay rates or other key performance indicator values accordingly.

o In addition to quantitative reach, the methodology developed can also provide rich, qualitative insight into how people engage in brand-related conversations. By looking at the locations where conversations occur, the activities in which people are engaged while talking, the medium used (face-to-face, phone, e-mail, IM, blog, message board, etc.), and references to other media forms (like ads, editorials, and in-store promotions), managers can gain actionable insights into developing and refining subsequent marketing campaigns.

Results from the first set of studies are scheduled to appear as a co-authored paper with BzzAgent, Inc. in the Word of Mouth Marketing Association’s Measuring Word of Mouth, Volume 3 research book, to be released in mid-November 2007. The full manuscript will provide detailed information regarding the methodology and demonstrate how it was utilized to independently validate the effectiveness of an actual WOM marketing campaign.

Funding for this research was provided as part of a Sponsored Research Agreement (SRA-0667) between Northeastern University and BzzAgent, Inc.

Download a PDF version of this executive preview.

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Tags: WOM word of mouth Word-of-Mouth Marketing buzz marketing viral marketing marketing communication G2X WOM Tracking Methodology

Continued Discussion on Net Promoter Score

2007-08-13T15:33:00.000-04:00

In my long absence from posting (over a month!) there have been some great discussions about the Net Promoter Score. Be sure to see some of the comments to my last post where Amy Madsen and Deb Eastman from Satmetrix have weighed in, Tim Keiningham from Ipsos-Loyalty (and author of some recent academic articles critiquing the Net Promoter Score), and Justin Kirby, who has blogging and conducting podcast interviews about the debate.

Additionally a new article on the topic, also written by Tim Keiningham and colleagues, has appeared in Managing Service Quality entitled The value of different customer satisfaction and loyalty metrics in predicting customer retention, recommendation, and share-of-wallet. This article is more of a micro-level, or customer-level, analysis and worth reading.

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Tags: WOM word of mouth Word-of-Mouth Marketing buzz marketing viral marketing marketing communication Net Promoter Score

More Trouble for Net Promoter Score? A Longitudinal Examination of 'Net Promoter' on Firm Revenue Growth

2007-06-25T16:06:00.000-04:00

The latest critique of the Net Promoter Score is now available for free download from the Journal of Marketing. The article is titled "A Longitudinal Examination of 'Net Promoter' on Firm Revenue Growth" and written by Timothy L. Keiningham, Bruce Cooil, Tor Wallin Andreassen and Lerzan Aksoy.

I wrote about this article in an earlier post (one of many in a series on the Net Promoter Score topic). Although there are still some differences in methodology (like slightly different wording for the likelihood to recommend question and different time periods used in the analysis) this study is the closest to an apple-to-apples comparison between the net promoter score and satisfaction and loyalty indicators.

Here's the abstract:

Managers have widely embraced and adopted the Net Promoter metric, which noted loyalty consultant Frederick Reichheld advocates as the single most reliable indicator of firm growth compared with other loyalty metrics, such as customer satisfaction and retention. Recently, however, there has been considerable debate about whether this metric is truly superior. This article (1) employs longitudinal data from 21 firms and 15,500-plus interviews from the Norwegian Customer Satisfaction Barometer to replicate the analyses used in Net Promoter research and (2) compares Reichheld and colleagues' findings with the American Customer Satisfaction Index. Using industries Reichheld cites as exemplars of Net Promoter, the research fails to replicate his assertions regarding the “clear superiority” of Net Promoter compared with other measures in those industries.

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Tags: WOM word of mouth Word-of-Mouth Marketing buzz marketing viral marketing marketing communication Net Promoter Score

Bon Nuit Geneve

2007-06-13T22:05:00.000-04:00

I just had a wonderful experience in Geneva, Switzerland where I spoke at the Marketing and Direct Focus Europe 2007 conference hosted by Baptie and Company. I gave the keynote address on the second day which is traditionally reserved for an academic offering her/his view on the state of marketing (thanks to Paul Marsden for the referral). This conference was focused on the B2B sector, and specifically the technology industry. I feel like I contributed a lot to the conference -- I spoke on the implications of Web 2.0 to companies and the four phase model of conversational marketing that I've been developing (oblivious, monitoring, listening and responding, and joining in) -- but ultimately I feel like I took away more than I contributed.

The people there were incredibly smart, representing marketing professionals for many of the large and middle-sized tech firms in Europe, Middle East, and Africa. Attendees included Google, Microsoft, HP, Siemens, Alcatel-Lucent, and Oracle just to name a few of the larger firms.

The Chatham House Rule applied to the workshops and presentations -- which is the UK version of "What happens in Vegas stays in Vegas" -- so I won't go into a lot of the details about what the main themes and take-aways were. However, I will comment on my reflections for how Web 2.0 played out at the conference.

I found that many companies were focusing on Web 2.0 and the implications to their business. This is quite understandable and happens anytime something as powerful as this cultural shift comes along. However, I couldn't help but think that people were focusing too much on how to leverage Web 2.0 technologies, like Second Life, LinkedIn, YouTube, etc., without a clear articulation of WHY they would even want to leverage them. That is, I think it's more productive to START WITH the goals they would like to accomplish, and then think of the range of ways these goals could be accomplished, perhaps including Web 2.0 technologies and perhaps not. It's a subtle, but I think important point.

As I mentioned above, I found this conference extremely valuable for my understanding of the B2B tech sector in Europe and the people extremely pleasant. People were genuine and willing to share their own insights with others. It was a wonderful experience. Thanks to Rod Baptie and crew for their incredible efforts at organizing this conference. I look forward to the opportunity to participate in such an event again!

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Tags: WOM word of mouth Word-of-Mouth Marketing buzz marketing viral marketing marketing communication

New Media Summit 2007 Resources

2007-06-08T18:20:00.000-04:00

Well, the folks at Edelman and PRWeek outdid themselves in putting on an informative and interactive conference on the implications of social media for the communication industry (esp. PR and journalism) and educating current students.

I started blogging during the event (see my last post) but was unable to keep up with all that was going on. Fortunately, the organizers taped everything and posted it on its New Media Summit 2007 website. I understand that summaries and/or transcripts of the sessions will also be available. These will make for great teaching tools as well. (Hopefully Edelman will leave this site up for a while or enable educators to load the videos on to faculty members' course management systems for when we teach classes).

A consistent theme for the conference was the following observation offered initially in the opening panel last night:

People have a tendency to overestimate the short-term consequences of the new social media technologies, and underestimate the long-term consequences.

Clearly, we're still in the early days of these consequences and it's an exciting time to be researching and teaching in this space.

It's hard to say which was the best panel of the day, but if you are going to view just one or two of them, I would pick the "Co-creating Content" panel or the "What's Next for New Media" panel. On the Co-creating Content panel I really enjoyed hearing from the Zagats because they talked about how they were involved in customer reviews and co-creation many years ago when first starting their Zagats guides. Plus, some of the jokes from Bob Mankoff were very, very funny (even more amusing were Jackie Price's attempts to reign him in and keep the panel on topic -- eventually even she had to give in to his wit; by the way, if you want to learn how to do an excellent job of transitioning between speakers as a moderator watch how Jackie did this -- they were seamless!).

Of course, you can watch my panel session as well ("Enabling the Digital Generation"). Having the chance to participate with David Weinberger and Merrill Brown was a pleasure!

Anyhow, enjoy the videos and thanks again to Edelman!

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Tags: WOM word of mouth Word-of-Mouth Marketing buzz marketing viral marketing marketing communication Edelman New Media Summit 2007

Live from New York, It's Friday Morning at the New Media Academic Summit

2007-06-08T10:32:00.000-04:00

Blogging today from the Harvard Club on 44th street in the Big Apple at the Edelman New Media Academic Summit. The first panel was about engaging consumers through social networks. Panelists include Scott Donaton (Publisher of Advertising Age), Babs Rangaiah (Director, Media & Entertainment, Unilever USA), Scott Heiferman (co-founder and CEO of Meetup), and moderated by Pam Talbot (President and CEO, Edelman US).

Babs talked about the Axe, Dove, and Whisk initiatives. For the Whisk laundry detergent campaign he talked about where people were able to upload their own photos of kids being dirty and place them on the cover of Sports Illustrated. Then people had the ability to print this picture as well as forward an e-version to other people. A key take-away for me from what he had to say was the following quotation: "Build the brand in a way that makes customers want to play." This is a key point because it's about providing tools and resources that give people sufficient flexibility to do things that are relevant to their lives.

Scott Donaton from Advertising Age talked about how he sees the challenge as moving from an intrusion model to an invitational model for marketing and advertising. A key point here is figuring out what elicits the invitation. A first answer to this question that he provided was "relevancy". The invitational model forces companies to come up with something useful and relevant to people's lives that make those people want to invite the brand in.

Scott Heiferman from Meetup anticipates a backlash from people living their lives too much in front of screens and feels there is tremendous power of offline networks of people who can use Meetup to help "organize people" (as distinct from Google's motto of "organizing information"). He explained how Meetup groups are locally organized and are built around shared interests. For example, in New York City dog lovers are organized by sections of New York and by dog breeds (for example, doxon lovers on the upper East side). On their own, the organizers of each of these Meetup groups banded together and went to retailers who specialized in dog products and services (like Doggie Day Care) and made a proposal. They basically said that if the retailers would provide a discount for their Meetup members, then the Meetup members would promote those retailers among their social networks. I found this to be an interesting idea of people initiating interactions and inviting companies in based on what was relevant to themselves (and, coincidentally, mutually beneficial to the company as well).

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Tags: WOM word of mouth Word-of-Mouth Marketing buzz marketing viral marketing marketing communication Edelman New Media Academic Summit

New Media Acadmic Summit 2007

2007-06-02T16:38:00.000-04:00

I'm very excited to announce that I will be participating on a panel at the New Media Academic Summit 2007 in New York City next week. It's hosted by Edelman and PRWeek is the media partner.

As stated on the summit website, the summit will...

...convene business leaders, academics, journalists, bloggers and communications professionals to discuss the challenges facing universities in preparing the next generation of graduates.

The agenda is terrific and includes such topics as:

The Changing Media Landscape
Engaging Consumers Through Social Networks
Co-Creating Content
Building Corporate Reputation from the Inside Out
Advocacy and Grassroots Engagement
The Era of Citizen Journalism
Ethics and Rules of Engagement in New Media
Enabling the Digital Generation
What's Next for New Media

I'll be on the "Enabling the Digital Generation" panel which is billed as a "brainstorming session [that] looks at the digital Q of college graduates and expectations employers have of a college graduate’s digital knowledge." My co-panelists are David Weinberger from Harvard's Berkman Center for Internet & Society and John Edelman, Managing Director of Global Human Resources at Edelman.

There look to be about 80 participants from a number of leading academic programs across the country. I'm told they will be webcasting each session so be sure to check it out!

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Tags: WOM word of mouth Word-of-Mouth Marketing buzz marketing viral marketing marketing communication New Media Academic Summit 2007

Viral Marketing for the Real World and The Theory of Big Seed Marketing -- A Critique

2007-05-22T11:30:00.000-04:00

Ok, I've been away for a while but I thought a good post to resume with would be to review a recent article on the theory of "big seed marketing" written by Professor Duncan Watts, Jonah Peretti, and Michael Frumin. A version of this appeared in the Harvard Business Review, but my critique will focus on the version available at the Columbia University web site (which provides more detailed results and is referenced in the HBR article).

First, let me provide a quick summary of the article's main points, and then I'll discuss what the "news" is here, why this article could be helpful to organizations wanting to better understand marketing communication, and three limitations of the article.

Let's start with the summary:

The authors start by pointing out that viral marketing is seductive and often presented as a panacea: you just need to pick a small number of people to seed an idea and watch it go "viral"; oh, and by the way, all of this can be done on a small budget.

But, the authors caution, for as many viral marketing successes out there, there are just as many, if not more, failures. It's just plain hard to consistently create media that will "take off".

The alternative, the authors contend, is Big Seed Marketing (which I'll abbreviate as BSM). BSM "combines viral marketing tools with old-fashioned mass media in a new and creative way." Its purported benefits are risk-reduction and greater predictability than just viral approaches.

To explain BSM they start with a distinction between mass marketing and viral marketing. Mass marketing can be summarized by the formula n = pN, where n is the number of conversions (positive behaviors or attitude formation, such as purchasing product or forming a favorable impression), p is the probability that exposure to a the ad will result in a conversion, and N = the number of people exposed to the ad. To get more conversions, a company either increases the number of people to which they expose the message, or increase the probability of conversion (for example, by making a better -- more informative, interesting, memorable, etc. -- message).

In contrast, viral marketing starts with a small number of seeds who will then share the message with their friends, who will then share with their friends, etc. (I'll discuss below how this definition actually conflates "influencer marketing" and "viral marketing", but we'll work with this definition for now). Expressed as a formula, viral marketing is R=Bz. R is the "reproduction rate," or the rate at which new converts are generated from existing ones. B is the probability that a WOM transmission occurs (which can be based on a number of factors, including the number of times a person needs to hear a message before passing it on, memory, etc.) and z is the number of people told.

The whole theory of viral marketing is based on epidemiology, or the study of how diseases spread (or don't spread) throughout a population. If the reproduction rate of a disease is greater than one (R > 1), more and more people are infected at each generation, or degree, removed from the initial person infected, and the disease spreads. If less than one, the disease eventually peters out over time because fewer than one person at each degree is infected. Applied to marketing, a reproduction rate greater that one means that more than one other person, on average, is told (R > 1). If that reproduction rate continues at each subsequent generation, then an idea will go "viral" because one person tells more than one person who tells more than one person, etc.. If R < 1, then the message will decay, over time. R = 1 is the threshold; anything above 1 and the message will spread over time, while anything below 1 and the message will decay over time.

But the authors point out a "fundamental flaw" when applying the viral analogy to marketing -- specifically, diseases, unlike many large organizations, don't have have the resources to use the mass media as a way of seeding the message to large numbers of people.

So, the idea of BSM is to start the message with a large number of people and provide tools for people to share the message with others. Even if the reproduction rate is less than 1 (again, meaning that the person who experiences the message passes it on to less than one person on average), a large number of people will still be reached as the message will take a while to decay).

The authors present examples from different campaigns (for a gun control initiative, the Katrina Benefit, P&G's Tide Coldwater Challenge, and an advertising campaign that built in pass-along functionality). Each campaign reached more people than it would have by providing some type of technology platform that allowed people who initially experienced the message to share it with others.

OK, there's my summary. So, what's the news here as it applies to marketing communication?

First, the article is helpful to the extent that it reveals the limitations of viral marketing as an analogy -- companies and diseases are different. Companies can start their story with a lot of people, or a small group of people, while diseases typically start with one person and then spread to others.

Second, the article offers a metric -- the reproduction rate -- that can be used when quantifying and reporting the reach of a marketing program.

Third, the article presents interesting examples of companies using technology platforms that helps to amplify the spread of a message. One of these, which I would encourage people to learn more about, is ForwardTrack. This platform augments tell-a-friend functionality by incorporating geographic and social network tracking. The platform tracks the spread of messages from one person to the next and maps it, with the idea being that if a person can see the impact they are having on the spread of the campaign they will be more likely to increase their involvement. There are some important limitations to be aware of with ForwardTrack (for example, it tracks forwarding of messages only in an online environment, and not the content of what's said or other potentially rich details about the WOM episode), but it has a number of promising applications. I'll likely discuss more about this in a future post.

Why would this article or theory be helpful to organizations wanting to better understand marketing communication?

First, it shows how organizations can combine older and newer media to maximize the reach of their marketing initiatives. This is important because organizations shouldn't feel like they have to through the proverbial baby out with the bathwater.

Second, it provides one way for companies to measure the relative value of their marketing initiatives using quantitatively.

Third, it offers solid evidence that organizations, especially large companies with considerable resources, can limit their risk associated with a marketing initiative by starting with a large number of initial seeds.

What are some of the limitations of this article or theory?

First, the article seems to conflate two types of WOM marketing strategies: influencer marketing (starting with a small, select group of individuals with certain characteristics) and viral marketing (creating informative, entertaining, or otherwise engaging messages or experiences designed to be passed along to others, often via online means). See definitions provided by the Word of Mouth Marketing Association. According to these definitions, there's no reason why you can't use a viral marketing strategy and start with a lot of seeds. In fact, this is one way companies who want to use viral marketing strategies can reduce their risk -- seed the experience with more people. Further, the authors don't present evidence, at least in this paper, that starting with certain people who may be more well connected or have other characteristics (popularly known as "influencers"), might generate higher reproduction rates (though see Watts' work on "accidental influentials").

Second, I worry about the "uptake" of this article and theory by companies. Here's what I mean: depending on your philosophy of WOM marketing, "big seed marketing" could be considered a relatively "conservative" approach. That is, it seems to assume the best way to engage people is through a consistent message sent to large audiences. It would be an unfortunate result if companies came away thinking, "Phew, thank goodness! Now that I see these numbers I realize we can just proceed with business as usual but with a little twist: we'll keep creating advertisements, add some cool new tell-a-friend functionality, and we're set. We've now figured out this whole web 2.0, empowered consumer, networked world idea." Now, please don't misunderstand. I'm not implying that the authors of this article think this way or intended this. My point is that I think this is one prominent way this article will LIKELY be taken up and discussed in MANY companies. And if so, it would be a shame, because it misses out on the importance of more interactive ways of engagement between companies and their stakeholders: dialogue, listening, co-innovation, etc.

Third, and this is a more technical point, I question the value of reporting the reproduction rate as a final, or total value, rather than at each degree (see Table 1 and Table 2 in the article). Remember, the reproduction rate (R) is the number of new people converted based on existing people. So, rather than saying the reproduction rate for the whole campaign was x, I think it's more valuable to say the reproduction rate between the first degree seed to the second degree person was x. The better value to report as a total value is the "gain," or the multiple of new people reached (so, a "gain" of 2.0 means that if you started with 10,000 people, you reached 20,000). The authors do report the gain as a final value, but the confusing part is why the R is computed as a final value.

I corresponded with Professor Watts via e-mail about this point and learned the reason R was computed as a final value, rather than at each degree or generation, is due to the simplifying assumptions made in the paper (which, to their credit, the authors explicitly point out). One of the simplifying assumptions was that they assume the reproduction rate is constant across each degree of separation from the initial source (though, to their credit, they point out ways to make this more realistic). Further, they knew they were dealing with cases where the reproduction rate was under 1 at each generation anyway. But where this became confusing is that it makes it appear as though the formula for computing R is as follows:

Final R Value = "Bonus" Number of New People Reached/Total Reached (whereas a different formula for computing R [R = Bz ] was used earlier in the manuscript).

That is, the number of additional people reached due to the pass-along/viral effect divided by the total number reached. When computing it this way the final R will always be less than 1 (because you can never reach an additional amount more than the total amount since the total amount is computed by adding the initial number of seeds and the number of new people gained). I would suggest that further research computes the reproduction rate at each distinct degree of separation from the source, and not as a final value. I'll have more to say on this point in a future post.

OK, in sum,I definitely recommend that people read this article, but hopefully keeping in mind what I see as some of the limitations. I'd love to hear what anyone else's thoughts are about the article and their theory.

Also, as a teaser, I'll be reporting some really interesting research soon that will be even more interesting when considered in light of the Watts et al. article. More to come!

Thanks to Professor Watts for his generosity in responding to my inquiries!

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Tags: WOM word of mouth Word-of-Mouth Marketing buzz marketing viral marketing marketing communication big seed marketing

Reflecting on Your Own Word of Mouth Communication Practices

2007-05-01T07:43:00.000-04:00

I'd like to draw attention to some of the work my undergraduate students have been doing here at Northeastern.

As part of a class assignment I asked students to record, via a web-based survey, three conversations they had about an organization, brand, product, or service. They then wrote a 500-word essay about any patterns they noticed in their own WOM communication practices.

I have received permission from each of the students to post their brief essays (in alphabetical order):

Kait Falconer
Andrea Manners
Anne McGrath
Holly Jackson
Taslim Sidi

Feel free to comment on their essays!

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Tags: WOM word of mouth Word-of-Mouth Marketing buzz marketing viral marketing marketing communication

Interview with Publicity Club of New England

2007-04-29T13:40:00.000-04:00

A few weeks ago, myself, Dave Balter (BzzAgent), Lois Kelly (Foghound), and Jim Nail (Cymfony) participated on a panel about word of mouth, buzz, and viral marketing for the Publicity Club of New England (moderated by Laura Tomasetti of 360 Public Relations). As a follow-up to that panel I was interviewed for their newsletter, the Bellringer, by Lindsay Flaherty of Solomon McCown & Company, Inc.

Here's the link to the article in their newsletter. Due to space constraints Lindsay had to shorten some of my responses so I've included my full responses below:

***
How has WOM marketing changed the way we communicate?

It's probably easiest to start with a definition of WOM marketing as communication about organizations, brands, products, and services shared between consumers. So, I assume by "we" you are referring not to consumers but to companies. I think many smaller businesses have known about WOM marketing for a very long time because that is what they have had to rely on almost exclusively. I think some larger companies have changed the most because they have created distance between themselves and their customers and have relied on advertising to do the communication work for them, and have not prioritized listening and feedback. So I think companies who have lost sight of the importance of paying attention to their customers or clients (or other stakeholders) will have to change the most. Many of them have moved from being "oblivious" about WOM to paying some attention to it, perhaps by "monitoring" WOM. The smarter companies are the ones who will see that they need to do more than just be aware of the WOM about their products and services and monitor it, but that they need to actively listen to it, be responsive, and proactively seek to engage their customers in dialogue about the company's offerings. But if by "we" you meant consumers then I think we feel more powerful (whether we really are or not is a matter of debate) because we can amplify our opinions and thoughts due to various communication technologies (but don't give all the credit to the technologies because our communication practices are all still motivated by our desire to be recognized by others and have them confirm our view of the world and our place in it).

How did you come to be interested in WOM marketing and build your career in that area?

I started with an interest in how people talk, carry on conversations, and establish, maintain, and sometimes destroy, our personal identities and relationships. I began to notice that brand-related topics came up very frequently in people's everyday, mundane conversations, or chit chat. So I wanted to understand this form of "everyday" WOM. I then learned about companies who were seeking to actively organize and harness consumer WOM. One such company was BzzAgent, based here in Boston, and I wanted to see how this more "institutional" or organized form of WOM compared to the everyday WOM that seemed to happen randomly and without direct or conscious intervention from companies. Through comparing these two broad kinds of WOM I wanted to see what principles organizations could learn to leverage the power of WOM to the mutual benefit of companies and their stakeholders. I then became involved with the Word of Mouth Marketing Association and have conducted a number of studies in the area, publishing both academic articles and industry white papers.

How do you think the WOM marketing field is going to grow from here?

I think more companies are going to move through the phases of being oblivious, to monitoring, to listening, and to a stage I call "joining in" (playing the role of an interesting conversational partner). I see more firms seeking to tie key performance indicators to customer WOM. I see them attempting to engage their "ambassadors" or "evangelists" when they realize what these customers can do for the organization. Unfortunately I predict the majority of firms will screw up the opportunity they have now by not really wanting to invest the resources in making better products and services that meet their customers needs, not really listening to customer feedback, and doing silly stunts to try and generate short-term buzz as a replacement for long-term advocacy.

What is a typical day like for you?

I wake up, stretch, listen to NPR, take the T into my office at Northeastern, read some blog entries from others in the WOM industry or trade publications, respond to student emails, teach class, have office hours with students (though more and more this is done via e-mail exchanges), work on some research projects, more e-mail, more research, take care of some service responsibilities for my academic department, and head back home.

What are two ways that we could all communicate better?

How about three? Mindfulness, dual perspective, and balancing creativity and constraint. These are three principles of human communication. Mindfulness is about being more aware and being centered in the present moment (very Zen). Accomplishing dual perspective is taking the other person's perspective and then your own. And balancing creativity and constraint is a principle of both human and organizational communication. Individuals and groups are in continuous tension between balancing needs for control with creative expression. Understanding the need for both of these to co-exist and dance together at each moment is how individuals and organizations can become successful. Kind of abstract but in class I illustrate it with concrete examples :-)

What do you teach your students about communication that everyone should know?

When designing initiatives to leverage WOM, focus on relational networks of people rather than individuals or demographics. Demographics don't communicate and individuals only communicate in the context of their social and relationship networks.

Identify "structural holes" in organizational networks. These are places where there is no channel of communication between two people or two groups. Understand why these exist and what you can do to facilitate communication across these holes.

Act in ways that are relevant to others. Provide people with opportunities that make them look good in the eyes of others. These are two tips for generating exponential WOM communication.

What is your greatest achievement?

Professionally speaking, I was very proud when I completed my dissertation, or maybe I confused pride with just relief. Either way if felt good to finish it :-) Otherwise I consider it a great achievement everytime I remember to trust my instincts and follow my passions, because I think people often forget to do the former and never fully realize the latter.

Is there something in your career that you would change?

Having to grade. I love giving students feedback but I hate grading.

What is the WOM Marketing Association and who should be/can be a member of it?

WOMMA is an industry association dedicated to advancing the field of WOM in its many forms. I think anyone who wants to learn more about WOM and be around interesting, passionate people who love to do the same should join. Plus, you'll look smart to your boss. :-)

Give me a three sentence description of your latest research on word-of-mouth marketing.

Let me tell you about three different projects, each in one sentence: I am refining a methodology that measures the conversational reach and outcomes of marketing initiatives designed to generate "talk value." I am also working with a colleague on measuring the value of customer WOM to the firm. And I am studying conversational trajectories of WOM episodes (that is, how people sequentially and inferentially move in and out of brand-related topics in the course of their everyday conversations).

How are universities teaching about WOM marketing today?

By saying that WOM is the most powerful form of marketing there is, and then devoting less than half a percent of the time talking about it. I actually calculated this one day to win a bet. My colleague though it was 1% of the time and I wagered that it was actually less. I took the most popular marketing textbook, counted the number of pages devoted to WOM and then divided by the number of total pages. But not every university is like this as there are some notable exceptions, such as Robert French at Auburn University who is doing some very neat things with WOM and social media. And there is more attention to WOM research now at the graduate level (see the WOMMA Academic Advisory Board members). I get about an inquiry a week from international students who want to study WOM so I think they're on top of it more than the US students. When I presented in Turkey last month there were two doctoral students who drove 7 hours to Istanbul to attend the first WOM marketing conference in that country.
***

Thanks for the opportunity to share my thoughts Lindsay!

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Tags: WOM word of mouth Word-of-Mouth Marketing buzz marketing viral marketing marketing communication

WOM Marketing for Higher Education and Studying Overseas -- Call for Resources

2007-04-16T20:13:00.000-04:00

Another request for resources, this time from a postgraduate student at Edith Cowan University in Perth, Australia. She is doing her thesis about WOM as a factor in persuading students to study overseas (specifically, for higher education).

If anyone knows of any research or information regarding this topic please include them in the comments or let me know and I'll put you in contact with the student!

By the way, folks interested in WOM, Social Media, and Higher Education should check out the HigherEdBlogCon website.

Thanks!

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Tags: WOM word of mouth Word-of-Mouth Marketing buzz marketing viral marketing marketing communication

WOM Marketing for Visual and Performing Arts -- Call for Resources

2007-04-16T19:22:00.000-04:00

If you're reading this and you know about examples of WOM marketing initiatives for the visual and performing arts please let me know.

I've been contacted by a graduate student at the Wisconsin School of Business, UW-Madison, Jennifer Post Tyler. She is with the Bolz Center for Arts Administration and is doing research on WOM marketing and the arts. She is especially interested in case study data for nonprofit or governmental arts organizations who have implemented programs to understand and harness WOM.

We've discussed a few resources, but if you know of any in this area please reply as a comment to this post or contact me via e-mail and I can put you in touch with Jennifer.

By the way, there is also a student at Lumsa University in Italy who is working on WOM initiatives with museums, so if you're also studying in this area I can make introductions so everyone can collaborate and share resources.

Thanks for your help!

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Tags: WOM word of mouth Word-of-Mouth Marketing buzz marketing viral marketing marketing communication

What's The Score -- More Coverage of NPS in UK-Based Research.

2007-04-10T07:59:00.000-04:00

I was interviewed some time ago for an interesting article about the Net Promoter Score that appears in the March 2007 edition of Research, a UK-based trade publication serving the market research industry. The thrust of the article is that NPS is becoming an industry-standard in many companies but its academic grounding is hotly contested.

There's a neat timeline of events on page 36, which I'll summarize as follows (since I have commented on a number of these before I'll include links to my blog posts where the events intersect):

2003 -- Fred Reichheld's "One Number You Need To Grow" article in Harvard Business Review was published (hadn't started my blog yet!)

2004 -- Researchers Neil Morgan and Ron Rego offer early criticisms of NPS in a letter to the editor (this wasn't mentioned in the Research article but it should have been; I summarized their critiques here)

2005 -- Study by Paul Marsden and others at the London School of Economics (LSE) reporting results that seem to validate NPS as predictor of growth

2006 -- Reichheld's best-selling book The Ultimate Question was published in March.

Study by Alain Samson at LSE introduced the Net Advocacy Score arguing researchers need to better account for negative WOM and actual behavior (not just intentions). Robert East from Kingston University has also offered developments about actual WOM behavior rather than just intentions (details to come about that)

Interesting article in AdAge about NPS becoming an industry-standard metric (July 2006 -- not mentioned in the Research article). There was also an article done in Business Week in January 2006 about this too.

In September, the Morgan & Rego article in Marketing Science was published arguing NPS had little to no predictive power.

But later Morgan & Rego was criticized, on my blog and in academic publication (Keiningham et al.), for not making an "apples-to-apples comparison"

Riechheld responds to critics on his blog with an entry entitled "NPS does not work" -- the intersting point here is that there is a shift away from the statistical correlation between revenue growth and the NPS and towards linking revenue growth to individual behaviors

Article in Australia's Business Review Weekly cautioning those who adopt NPS to be aware of the limitations of reporting just one number (there have been a number of blog posts offering similar criticisms for a number of years before this). For this and other articles about the Net Promoter you can visit the "What They're Saying" section of Net Promoter site hosted by Satmetrix.

2007 -- Article to be published in Journal of Marketing that criticizes the predictive ability of NPS, but this time making a much better apples-to-apples comparison. There was also an important story published in the Wall Street Journal about this forthcoming article and mentioning other researchers who are seeking to advance the study of the role of word of mouth, loyalty, and the power (or lack thereof) of recommendation intentions and behaviors.

First annual Net Promoter conference held in New York City, sponsored by Satmetrix (one of the companies associated with the development of the Net Promoter metric)

Stay tuned for much more in 2007, on both the academic and industry fronts!

The final thing I'll note about this article is that it does a good job of raising the issue of whether or not the Net Promoter Score is good for the research industry or not. One the pro-side, Paul Marsden is quoted as saying that it allows researchers to have the ear of those high up in the executive food chain and that it "speaks the language" of key decision-makers in companies. On the con-side, there's a sense that executives and clients will get used to simplistic measures and forcing metrics to do what they are not designed to, or can't do.

A further criticism is that it could reduce the credibility of researchers. That is, if a metric doesn't do something its proponents said it could do, then how much faith will key decision-makers have when the next new metric comes along? Will it limit adoption of that new metric?

From my conversations with folks in the industry and readings, it seems the value of the NPS is not the score itself, but the institutionalization of a customer feedback system across organizational units that people actually pay attention to. To accomplish this it seems you need something that is relatively easy to communicate and that people at various levels have the time and patience to get their heads around. Time will tell if NPS becomes that metric, or part of a package of key performance indicators, for the long-term.

Ultimately, the gold standard for any metric is how well it allows people to make timely and responsive decisions that allow an organization to achieve its goals, and there are many innovative researchers in industry and academia seeking to answer that "ultimate question."

ADDED: Here's a post by Alain Samson about the same article, and his thoughts on the pros and cons of using the Net Promoter Score.

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Tags: WOM word of mouth Word-of-Mouth Marketing buzz marketing viral marketing marketing communication

Beyond Buzz: The Next Generation of Word-of-Mouth Marketing

2007-04-02T16:06:00.000-04:00

What's all the buzz about? According to Lois Kelly, this isn't the most important question to ask.

Lois has written a new book called Beyond Buzz: The Next Generation of Word-of-Mouth Marketing. In her book she writes that companies need to focus more on making meaning with their customers (or other stakeholders) than in generating buzz.

"Making meaning" can sound awfully abstract but she provides a practical, how-to guide for marketing professionals so they can figure out the best way to navigate this new world of conversational marketing.

We hear a lot these days about how companies need to "get into the conversation" but her book makes this very concrete and tangible, peppered with examples from actual companies who have done so successfully (or not so successfully).

My favorite chapter is "Building a 'talk' Culture" (Chapter 8) which goes into how companies need to rethink how they organize themselves. The table on page 167 "New Functions, New Competencies" is especially interesting. It lists eight functions that are needed to do conversational marketing, what the traditional roles were, and what the new competencies are.

Most of all, she shows how communication and conversations are central to the lifeblood of organizations, and that it's essential to develop the requisite skill sets for people throughout the organization.

Lois is on the Industry Advisory Board of my academic department at Northeastern University and we have worked on a number of projects before, including a study about influencer relationships between commercial real estate developers and key environmental, governmental, and community influencers. I love her energy, passion, and engaging style.

Becuase we worked together before I had a chance to read an early draft of the manuscript and write a blurb for the back cover. Here are the four blurbs I wrote for the book (I couldn't decide which one to use so I asked the editor to choose; she picked the first one):

#1: The Cluetrain Manifesto was a call for corporations to wake up to the global conversations about them, and potentially with them. In Beyond Buzz, Lois Kelly gives corporations the practical tools to answer that call.

#2: Many companies mistakenly think that word-of-mouth marketing is only about creating buzz for a product or service. Lois Kelly shows why this view is too narrow and that what's really needed is meaningful dialogue with customers, employees, shareholders, and community members. If you're struggling to get beyond buzz, and want a step-by-step guide for doing so, then read this book.

#3: Lois Kelly offers a lucid, step-by-step guide for companies to not only survive, but thrive, in a world of conversational marketing.

#4: Lois Kelly gets the point that word-of-mouth marketing is not just about creating buzz for a product or service, but that it's about engaging in meaningful dialogue with customers, employees, shareholders, and community members. Read this book so you can get the point too!

On a side note, I love the cover and it reminds me of my recent trip to Istanbul where I learned about "cumbas" (pronounced djoombas). Cumbas are covered balconies, usually very close in proximity to one another, where people (typically women) would talk and share stories with one another. In short, a cultural venue for word of mouth!

Best wishes with your new book Lois!

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Tags: WOM word of mouth Word-of-Mouth Marketing buzz marketing viral marketing marketing communication

From Superman to Super Talk

2007-03-22T08:49:00.000-04:00

Today I'm in Las Vegas at the Bally's Hotel and Casino for the "From Superman to Super Talk" conference hosted by Icosystem, an innovative company based in Cambridge, MA. This day-long conference is poised to advance the art and science of WOM marketing measurement and modeling, especially through the use of complexity science to model complex human processes like consumer behavior.

After some opening remarks by Paolo Gaudiano, Chief Technology Officer at Icosystem, I lead off a series of presentations. My talk is entitled "State-of-the-Art Research Efforts in Word-of-Mouth". I'll be talking about three main topics: 1) how WOM and social media are being tracked and measured, 2) how to measure conversational reach and outcomes from WOM marketing programs (I'll be providing a sneak peek at some research from one of my latest projects -- stay tuned for more), and 3) the opportunities and limitations of using likelihood to recommend measures as an organizational discipline and to tie to key business outcomes.

I'm very excited to hear the other presenters as well. The CEO and Chief Scientific Officer of Icosystem, Eric Bonabeau, will be presenting, as well as folks from GSD&M Advertising, Humana, BzzAgent, and The Monitor Group. The final session is a panel discussion on existing solutions for WOM marketing, facilitated by Ken Nicholson, the former CEO of Veridiem. Definitely check out the agenda for details.

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Tags: WOM word of mouth Word-of-Mouth Marketing buzz marketing viral marketing marketing communication

WOMBP: March 2007 Update

2007-03-12T11:36:00.000-04:00

The latest version of the WOM Marketing Communication Bibliography Project (WOMBP) is now uploaded. You can access it at my download page.

Here's the background of the project and details of the contributors.

Below are new entries in this version (these aren't necessarily new studies, they just weren't included in the last update):

Barber, B. M., C. Heath, et al. (2003). "Good Reasons Sell: Reason-Based Choice Among Group and Individual Investors in the Stock Market." Management Science 49(12): 1636-1652.

Heath, C. and D. Heath (2006). "The curse of knowledge." Harvard Business Review 84(12): 20-23.

Heath, C. and D. Heath (2007). "Finding just enough of that sticky stuff (Book Excerpt)." Brandweek 48(1): 21-25.

Weiner, M. and D. Bartholomew (2006). "Dispelling the Myth of PR Multipliers and Other Inflationary Audience Measures." Institute for Public Relations.

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Tags: WOM word of mouth Word-of-Mouth Marketing buzz marketing viral marketing marketing communication

First WOMM Conference Turkey (& My Presentation Slides)

2007-03-06T11:18:00.000-05:00

Kudos to the MediaCat team for hosting the First Word-of-Mouth Marketing Conference in Turkey. It was truly impressive. The conference was well organized and the meeting room was impressively designed and branded (per the picture above). The lobby outside was chock full of vendors, even with a booth giving away free cigarettes (very odd to see this being from the States).

The room was packed full, with some people standing in the back of the room (though later someone pointed out there were a few seats available so they could sit down). I don't have the final count but 400-500 were expected and given the room was full I would assume the numbers were somewhere in the range.

Representatives from a number of the major brands in Turkey were present and at various levels of the corporate food chain. There were also two invited bloggers chronicling the event -- I'll try to find links to their pages***. And, there were even a couple of PhD students who drove 7 1/2 hours just to see the presentations.

A PDF file of my slides are posted at my download page (after the registration screen navigate to "Presentations").

If this conference is any indication, Turkey is definitely ready for WOM!

Download My Presentation

*** Here are the links to the Turkish bloggers at the event: Alemsah Ozturk and Alper Akcan Here's their presentation. Thanks to Hilal Betin for providing these links!

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Tags: WOM word of mouth Word-of-Mouth Marketing buzz marketing viral marketing marketing communication

Merhaba from Istanbul!

2007-03-05T09:47:00.000-05:00

Hello from Istanbul, Turkey! I am here for the First Word of Mouth Marketing Conference in this country's rich history. The conference is taking place at the swanky Swissotel Istanbul European banks of the Bosphorus and hosted by MediaCat.

The conference starts tomorrow and will feature three speakers from the U.S. (Dave Balter, George Silverman, and myself) and then two people from Turkey (Dr. Yanki Yazgan and Renan Tavukcuoglu). My speech will focus on WOM measurement (the three key points will be social media analysis, tracking conversational reach and outcomes, and the pros and cons of using likelihood to recommend scores to measure advocacy and ROI). Speaker bios are here. The organizers are expecting 400-500 [[UPDATE: 500-600!]] people and it's received quite a bit of press coverage here.

For example, this morning (Monday) I was interviewed for a business show that airs on CNN Turk called "Business Lunch." I was asked to explain what WOM marketing was, how it can be measured, and what companies in Turkey need to know about it. I hope to get the video as it was my first live TV interview (the last TV interview I did was for the Chronicle and I had the opportunity to ask "Can we try that one more time?" -- live TV is much more of a rush).

Here's what I have learned about WOM and social media in Turkey thus far, mainly from a representative from the UnitePR agency who made arrangements for the CNN interview:

- Traditional hotbeds of word-of-mouth activity are the marketplaces, such as the grand bazaar, and across the streets from balcony (cumba) to the next.

- Turkish people pride themselves on their rich historical traditions of being passionate storytellers (think Homer and Herodotus).

- On the social media front, blogs are around though they seem to be used much for discussing news items and politics. WOM seems to be most amplified via e-mail chains and groups. (Spam apparently used to be a problem here but due to the companies responsible realizing it really wasn't that effective, and better filtering technology, it's not such a big deal anymore.) Apparently there are some discussion forums that are popular discussing the issues of moms and kids. There don't seem to be any firms currently analyzing social media in Turkey now, at least to my knowledge (Nathan Gilliat hasn't identified any here yet). But I think it's only a matter of time.

- Rumors about certain companies seem to be especially prevalent, and most often spread through e-mail chains.

I hope to learn more especially from the Dr. Yazgan and Ms. Tavukcuoglu. Looking forward to tomorrow!

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Tags: WOM word of mouth Word-of-Mouth Marketing buzz marketing viral marketing marketing communication

Responding to the Contributions of Citizen Marketers

2007-02-25T23:52:00.000-05:00

In my class on Word of Mouth, Buzz, and Viral Marketing Communication I was fortunate to have Jackie Huba visit. Jackie and Ben McConnell, her co-author, are on tour discussing their new book Citizen Marketers: When People Are the Message. A fascinating part of our discussion during her visit was about the role of social media and how companies should respond to citizen marketers (those who generate their own content and advocacy for and about companies).

Jackie believes the true power in social media lies in its ability to foster long-term loyalty and advocacy between companies and customers. While shorter-term campaigns that accomplish strategically important goals have their place in the mix, she feels that ultimately social media and the contributions of citizen marketers is a long-term process of engagement and dialogue. This is what lies behind, at least in part, the following statement in their book: "Social media is the antidote to campaign-based thinking" (p. 172).

Another fascinating part of our discussion was how companies should respond to the contributions of citizen marketers. I set the context for the question by giving the example of how McDonald's has responded to the contributions of McChronicles (a blog that was discussed in the Citizen Marketers book). I then asked Jackie if there were any guidelines she could offer companies about if and how to respond. She said that each case comes with its own set of opportunities and constraints but that there were at least two principles that could be generalized.

First, find out if you have citizen marketers and what they are saying and doing (most companies are surprised to learn of their advocates and detractors actively working for or against their brands).

Second, if you do (and most companies do!), consider reaching out to them, say that you saw their contributions (for example, it may be a blog or podcast), thank them for their contributions, and ask them if there's anything the company can do to help them with their efforts (or, to address concerns if there are detracting comments). Sometimes the company may not be able to help the citizen marketers in the way they might want (for example, certain legal matters might restrict them), but some times they can. And sometimes the citizen marketer expects nothing.

For example, according to my brief e-mail interview with the author of the McChronicles blog at the end of January 2007, the author responds to my question of what type of response he is looking for from McDonald's, if any. He writes:

I expect nothing. I hope only that the voice of the faceless, average fast-food consumer is heard. I feel that what we want is simple - delivery on the promise. We don't go to McDonald's for tire balancing or for exceptional table service. They have never promised either. What we want is Quality (in the realm of fast-food), Service (in the realm of fast-food), Cleanliness (in the realm of known and standard sanitary practices), and Value (when compared to all the competition). Why? Becasue QSCV is McDonald's mantra - they taught us to expect this.

I think this is precisely Jackie's point about social media. Any social media efforts have to be part of a broader effort of long-term loyalty and advocacy which is fundamentally about a social contract between companies and consumers (and other stakeholders I might add, such as community members affected by what the company does).

The two points Jackie raises about different ways of engaging in customer conversations fit very nicely into an informal model I've been developing, with the help of others, about different levels of engagement and involvement with social media. I invited those interested to read and comment on that post as well.

This post is derived from a post on my teaching blog.

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Tags: WOM word of mouth Word-of-Mouth Marketing buzz marketing viral marketing marketing communication citizen marketers engagement

WOM Program Planner: A Tool for Organizations to Align WOM Initiatives with Objectives

2007-02-13T22:33:00.000-05:00

In addition to my academic research and teaching I really enjoy working with organizations of various kinds in a consultative role. In one particular engagement where I was presenting about the WOM and social media industry I learned that someone wanted to develop a guide or check-list that could be distributed throughout the company to aid the planning of word of mouth initiatives (kind of like a "if you want to accomplish x, then do y" guide).

My first thought, though I didn't mention this to the person at the time, was that anything like that would ultimately be too much like a recipe and "cookie-cutter," resulting in uninspired use of the various WOM techniques available to companies. I still think this is a danger, but I also liked what this person was saying: that people, especially those trying to get a handle on WOM (and especially in a large, global company), could use a helpful framework to get people up-to-speed quickly. The Word of Mouth Marketing Association (disclosure: advisory board member) has done a good job with their WOM101 guide, but I'd like to take up the challenge of providing a quick primer that could be used as a planning tool that matches objectives with techniques to accomplish those objectives.

(By the way, another reason I did this was because a common myth about WOM marketing is that it's only used for promotion or for the launch of a new product; I wanted to provide a range of objectives for which WOM techniques can be used).

I offer the following as a work in progress. I'm sure there will be some disagreement about what I've done here, and I've probably erred on the side of making this too simplistic, but it's a start and I would appreciate people's feedback. Here's what I did:

Download WOM Program Planner (PDF)

I placed the more common objectives of WOM programs across the top row, and listed some of the more common techniques down the left column, resulting in a grid. These aren't exhaustive, but I could only fit so many on a PowerPoint slide!

Common Objectives for WOM Programs:

- Customer insight and innovation
- Generating awareness and pass-along
- Crafting favorable brand perceptions
- Engendering purchase intentions and driving sales
- Diminishing impact of negative WOM

Common Techniques or Initiatives for WOM Programs (see WOM101 for more details):

- Conversation Tracking (monitoring and tracking brand-related conversations in online and offline venues)

- Community Creation and Management (providing people with like-minded interests a platform for dialogue and belonging with one another and the company)

- Brand Advocacy or Evangelist Programs (mobilizing loyal, passionate customers to advocate on behalf of the brand)

- Managing Service Experience (providing superior customer service and service recovery)

- Blog Marketing (managing a company or product/service-related blog and/or engaging others in the blogosphere or other online venues)

- Influencer Marketing (identifying people who are especially influential within social networks and engaging them)

- Viral Marketing (making it easy for people to spread the word on behalf of a brand, especially in an online environment, and especially using content this humorous, provocative, or otherwise entertaining)

Then, I can match and rank the relative value of each technique for each objective. I used "Low" (not particularly useful or not commonly used to achieve that objective), "Medium" (a pretty good fit), and "High" (optimal fit).

So, let's run through a couple of easy examples (view WOM Program Planner):

- Viral marketing tends to be really useful for creating awareness and stimulating pass-along, but there is a danger of the resulting communication to be about the campaign itself and not about the brand (see WOM creationist for further details). While there may be instances where viral marketing drives sales, this is less frequently the case and often times not the primary goal. Whereas, for example, advocacy programs and influencer programs may be especially well-suited for generating intentions to purchase or use the brand.

- Private, branded communities are especially useful in generating customer insight and innovation. Tracking WOM episodes in online and offline venues can be especially helpful for this, in addition to identify trends and identifying who is particularly influential on a topic.

- Managing the customer service experience and service recovery is an excellent way to manage negative WOM. It's not necessarily designed to stimulate pass-along across many generations of people (even if we're really satisfied with the customer service experience I may tell a friend about it, but what's the impetus for that person to pass that message along as well?).

- Blog marketing and engagement can be especially robust in accomplishing a number of objectives (see Naked Conversations for a helpful overview).

- Identifying and reaching out to influencers (one of the classic WOM techniques for many decades is especially helpful in stimulating pass-along and generating purchase intentions. I ranked it "low" on diminishing negative WOM not because it can't be used for these purposes but because it often isn't (it tends to be more of a promotional activity to stimulate positive WOM and/or as part of a seeding initiative). However, a way that it could be used to diminish negative WOM is in a crisis containment and recovery scenario. For example, when Kryptonite was trying to to damage control after the whole "Bic pen" crisis, a representative from the company's PR department, Donna Tucci, identified a number of influential bloggers and online community members to engage them and explain the company's response (see this interview, for example). This was helpful in curtailing at least some of the negative WOM that was spreading about Kryptonite's response.

A less helpful way to use the WOM Program Planner is as a set of "answers"; a more useful way is to facilitate discussion about possible avenues. For example, what are the pros and cons of using technique X? Or how can technique Y be used to accomplish our objective Z?

As I mentioned above, I'd be interested in constructive criticism from those experienced in the ways of WOM and those trying to get a handle on it, so that this tool can become more useful to individuals and organizations.

Download WOM Program Planner (PDF)

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Tags: WOM word of mouth Word-of-Mouth Marketing buzz marketing viral marketing marketing communication WOM Program Planner

Predicting the Future of Connected Marketing

2007-02-12T11:22:00.000-05:00

Along with a number of other folks, I've been contacted by Justin Kirby, co-editor with Dr. Paul Marsden of Connected Marketing: The Viral, Buzz, and Word of Mouth Revolution, to comment on whether or not the predictions for the future of connected marketing he made at the end of that book were right or wrong or have come true or not. He made the following 10 predictions in 2005 (my thoughts on each below):

1. Connected marketing will become more strategic, with the focus shifting from promotion (creating remarkable campaigns) to innovation (creating remarkable products).

I believe that CM will become more strategic. Some early companies seemed to experiment with WOM initiatives, especially more on the promotion end, because they may have had some extra money around from a media buy that wasn't spent. Other companies had a very intuitive sense of the role of WOM and factored this in to their strategic decision-making but weren't necessarily very formal or explicit about it. Now, however, I see much more thought going into how WOM initiatives are part of an integrated program. I would say that since companies may have experimented with promotional strategies early on that more money will be shifting into the insight and innovation aspects, but I think that smart companies will figure out that insight, innovation, and promotional goals are all important, at various times and to various degrees. Of course, my empirical base of information on this is anecdotal because there isn't yet continuously-tracked industry data about this. I'd love to see the Word of Mouth Marketing Association track the resource allocation of this, perhaps in concert with other industry associations.

2. ROI metrics will be mandatory for viral, buzz and word of mouth campaigns. ‘Advocacy rates’ and ‘sales uplift’ will become important parts of ROI metrics, displacing traditional measures such as campaign reach.

Indeed, that's definitely a take-away message from the second volume of Measuring Word of Mouth (published by WOMMA; disclosure: I edited the volume). There is increasingly more demand for accountability and ROI metrics. I still think campaign reach will be a factor, though, because companies will want ways to compare their WOM initiatives (especially more of the "promotional" variety) with other media and marketing channels and initiatives (and old habits are well ingrained). I think what you'll see is a metric that provides a sense of the relative value of a conversation versus another kind of media impression. I do agree with you that sales uplift will definitely be important and I think increasingly we'll see agent-based models used to help assess the role of WOM relative to other media and marketing channels to assess that. Further, we'll see greater refinement of advocacy metrics, especially those related to intention to recommend and actual recommendation behaviors.

3. Word of mouth tracking will become a key metric in brand tracking market research.

Yep, absolutely. And yep, we're seeing this as companies like Nielsen BuzzMetrics, Cymfony, BrandIntel, Keller Fay, etc. see their client lists grow. See Nathan Gilliat's blog for more details.

4. Buzz, viral and word of mouth marketing will be merged into the wider marketing mix, with online viral marketing adopted and integrated within advertising, word of mouth within promotions and buzz within PR.

Yes and no. I think buzz, viral, and WOM will be merged into the ongoing operations of the firm, across many different areas. Yes, online viral marekting will be integrated within advertising, but I think even more traditional advertising messages will need to take into account the pass-along effects of WOM in order to calculate their true value (there's a great article by Hogan, Lemon, and Libai on quantifying the ripple effect of advertisements and tying it to a customer lifetime value approach). But I wouldn't limit "word of mouth" to just promotions (I guess it depends on definitions here as you use "connected marketing" as the umbrella term and I use "WOM" as an umbrella term). For example, I consider WOM to also be a source of innovation and customer insight. I think PR will take up buzz strategies but equally important is figuring out ways to engage their stakeholders in a variety of environments, such as discussion groups, blogs, online and offline communities, etc.

5. Managing and avoiding negative word of mouth, online and offline, will be an increasingly important area in connected marketing.

Yep, absolutely. And not enough attention has been paid to managing NWOM. A good bit of this can be done in managing the service recovery process but also in tracking and learning from existing WOM, especially regarding innovation.

6. Online branded entertainment (advertainment, advergaming, alternate reality games) will be used more as key brand touch-points for entertainment brands.

I think so, but we're seeing it used beyond entertainment brands as well. Check out some of the case studies on the websites of PodDesign and M80 for example.

7. Techniques developed in connected marketing initiatives will be adopted for change management and internal communication.

Yes, indeed. Internal blogs can be a great knowledge management tool. Enabling and empowering employees (principles of WOM) is important so that they have the tools and skills to create effective relationships with customers and other stakeholders (though see Chapter 6 of the book Loyalty Myths [pp. 153-168] for some important cautions about the relationship between employee performance and customer loyalty and profitability).

8. Techniques developed in viral, buzz and word of mouth will be increasingly adopted in CRM programs as both retention and acquisition (turning buyers into advocates) tools.

It would be great to use CRM programs in this way. It's especially important to think about segmenting customers appropriately and designing CM initiatives that are tailored for them.

9. Cell phones will develop rapidly as an important medium for spreading connected marketing promotions, such as mobile invitations, SMS barcode discounts, etc.

Yes, I think we are starting to see this. I think it will be important to distinguish. though, how much of cell phones, as a medium, are being used in "push" versus "pull" programs.

10. Marketers will eventually be able to locate influencers by zip/post code, by which point they will be all chasing the same chosen few… Prepare for another paradigm shift in marketing?

Of course, influencers differ by product category, not just by zip/post code, but I think your point is that as methods to identify influencers become more "efficient" (from the firm's perspective) they may be overloaded with programs. I think what continues to remain important is providing programs that are strategically in line with the company's goals, relevant to the participants involved, and that leverage motivations for why people spread positive WOM (for example, altruism, status, personal and social expression after a delightful experience, reducing risk and uncertainty, etc.).

Interestingly I noticed that there were no predictions about any of the ethical concerns regarding disclosure, commercialization of chit-chat, and working with minors. These were hugely important issues for the industry, and will continue to be, so I'd add that in as well. I know you have a lot of thoughts on this so I'd encourage you to add it is as part of your assessment.

Good luck with your article. I'm anxious to see what others say and what your own reflections are!

UPDATE (2/13/2007): If readers of this blog would like to contribute their own thoughts on Justin's predictions then feel free to do so at the Connected Marketing site by contributing to this survey.

UPDATE (2/19/2007): My comment about the lack of predictions regarding ethics doesn't imply that Justin doesn't have a position on this important topic. Interested readers should read his final chapter in the Connected Marketing text where he addresses the topic of ethics and connected marketing programs. My comment was only pointing out that ethics wasn't mentioned specifically in the 10 predictions, not that Justin didn't cover the topic of ethics in his chapter.

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Tags: WOM word of mouth Word-of-Mouth Marketing buzz marketing viral marketing marketing communication connected marketing

How To Stay Out of the Limelight of a Marketing Controversy

2007-02-05T19:14:00.000-05:00

I've been invited to speak to the Public Relations Student Society of America group at Emerson College tomorrow night to reflect on the Aqua Teen guerilla marketing program gone wrong and to speak about my work with the Word of Mouth Marketing Association.

The latest development with the Aqua Teen Hunger Force guerilla campaign is that Turner Broadcasting and Interference Inc have accepted full responsibility for the panic caused by the campaign and agreed to pay $2,000,000 for damages (about $1 million) and future emergency preparedness programs (another $1 million). I have to think Turner is gonna cover all of this.

On NPR tonight I also heard that the charges against Peter Berdovsky and Sean Stevens, the two individuals who placed the LED devices in Boston, will be "resolved."

Interference Inc has also put its website back online (it had been offline for a couple days, and then at one point, only included an apology in black lettering on a white background).

One of the charts I'd like to show in our discussion is the graph above from the DIY BlogPulse trend tool. There's a huge spike and then a significant drop off. Based on volume, Aqua Teen Hunger Force has definitely benefited (which should help for the release of the upcoming movie). Turner Broadcasting had much more attention than usual, but interestingly Interference Inc. has still stayed relatively out of a lot of the public discussion on this.

There is a fascinating parallel here to another controversial campaign with which Interference was involved: the Sony Ericsson Fake Tourist campaign (go to Interference's website and click on "case studies" and then "Sony Ericsson"). According to Interference's website, they created the Fake Tourist campaign on behalf of Fathom Communications. However, when you see the CBS 60 Minutes "Undercover Marketing Uncovered" show (2003) where this campaign was brought to the attention of many in the mainstream, Interference (or Fathom Communications) was never mentioned, just Sony Ericsson. However, in the Wall Street Journal article from 2002, Fathom Communications was credited for the campaign.

Both of the campaigns raise concerns about disclosure of the fact that there is a marketing campaign involved. Interested readers may want to check out Sean Carton's ClickZ article on lessons that can be learned from the ill-conceived Aqua Teen campaign. He was kind of enough to mention my research on the role of disclosure in WOM marketing campaigns and I've had people downloading my "To Tell Or Not To Tell?" report all day today.

I look forward to talking with the faculty and students at Emerson tomorrow about these issues and more!

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Tags: WOM word of mouth Word-of-Mouth Marketing buzz marketing viral marketing marketing communication

Psst, Marketers, Don't Mess With Homeland Security!

2007-02-01T08:21:00.000-05:00

As I'm sure you've heard by now, a series of suspicious devices were found around Boston leading to concerns about a terrorist plot and the shutdown of major travel arteries, including "T" lines (Boston's subway system, the first in the nation), portions of Interstate 93, Storrow Drive (in my opinion, the essential roadway to know to navigate Boston), and even a portion of Charles river. The first device was found at Sullivan Square in Charlestown (since both Northeastern and Sullivan Square are on the Orange T line this caused a bit of inconvenience for folks coming into campus).

Of course, we now know this was part of a guerilla marketing stunt to generate buzz around the animated television series "Aqua Teen Hunger Force" which airs on the Cartoon Network (UPDATE: The show appears on Adult Swim which shares channel space with the Cartoon Network; Cartoon Network by day, Adult Swim by night). The devices were actually LED devices depicting a character from the show (flashing the middle finger, which is how they greet others; see these photos on BoingBoing).

Well, it worked to generate buzz (see the BlogPulse chart above), but perhaps not the kind that the marketing firm Interference, Inc., or its client Turner Broadcasting, were hoping for (NOTE: I believe I heard Interference was the marketing company involved on an NPR show this morning or in a newspaper article; could someone please confirm this?). According to the Metro, Thomas Menino, the mayor of Boston, called the stunt an "act of corporate greed" and promised to hold the executives accountable for the actions, including the $500,000 in public safety expenses it cost the City of Boston (from the Metro article it seems that the executives of Turner are on the hook and not necessarily the marketing firm). Two people have already been arrested, Peter Berdvosky and Sean Stevens, who are the two allegedly responsible for placing the devices in Boston. The penalty for placing such hoax devices is two to five years for every device found.

As a student in my class on WOM, Buzz, and Viral Marketing Communication stated, you'd think they would have notified the cities involved -- Boston, New York, LA, Chicago, Atlanta, Seattle, Portland, Austin, San Franscisco, and Philadelphia -- that they were doing this (though I wondered what the City's response would have been). Turner Broadcasting has apologized for the stunt.

The Boston Globe wrote an interesting story where they reported a generation gap in the perception of the suspicious devices. According to the article, a 22-year old design student clearly knew that it was part of an advertising campaign, but a subway worker at the Sullivan Square T station didn't know what it was and called the police.

I did a little searching and came across an interview from 2001 with the CEO of Interference, Sam Ewen. Here's an excerpt:

Q: Guerilla marketing has that obtrusive element that can hurt a campaign too. What's the trick to make sure it's appealing and not annoying?

If you put the effort into the campaign, it isn't obtrusive at all. Of course, there is good and bad marketing. The goal is not just to be there but to be there at the right time and in the right place.

If you're on your way to work in the morning and someone hands you a free cup of coffee with a promotional message, that's something can catch your eye. But, we're not going to give you free tickets to a comedy club at 7:30 in the morning. Good guerilla marketers target you for who you are and what you like to do.

The interview was July 25, 2001, which is pre the 9/11 concerns and it looks like guerilla marketers need to take this into consideration as well.

This generational issue is pretty interesting to me. When I discuss various kinds of marketing tactics in class that many people (often 30+) seem to question (for example, some guerilla tactics or some stealth marketing tactics), many of my students (generally 18-24) are less concerned and suggest that "this is how things are" nowadays and "it's what you have to do to get noticed". This is clearly not a universal opinion among the students I've talked with but it's certainly not a minority opinion either.

This will certainly be a topic of discussion in my WOM, Buzz, and Viral Marketing Communication class tomorrow morning. It will be a great opportunity to distinguish "generating buzz" (a campaign designed to elicit talk about the topic of the campaign, but often the talk is about the campaign itself) from "word of mouth advocacy" (based on having a quality brand experience) which has been a topic of discussion in class and our readings. As I mentioned above, one of my students has already posted about this on our class blog. Keep an eye on it as students post their comments and other thoughts.

A couple other thoughts: if these devices were planted in nine other cities why didn't this cause the same concern in other cities? And according to the Metro, these devices may have been planted 2-3 weeks ago -- if this really was a homeland security concern, how come it took folks this long to find them?

UPDATE: Artists stage a protest in support of the two men charged thus far: Peter Berdvosky and Sean Stevens. Many suggest it's Turner, not the two individuals who were hired to place the devices, that are culpable.

UPDATE: Boston Globe reports that Interference Marketing Inc. told Peter Berdvosky to stay quite about his role in placing the devices because the campaign was inciting panic in Boston.

UPDATE: Read about how much faster individual citizens were in reporting the events relative to when mainstream media picked up the stories.

UPDATE: BBC News in the UK has picked up the story (hat tip to Justin Kirby).

UPDATE: Look at how much buzz Aqua Teen is getting compared to Turner and how little the marketing company is getting (Interference Marketing).

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Tags: WOM word of mouth Word-of-Mouth Marketing buzz marketing viral marketing marketing communication

WOMBP: February 2007 Update

2007-02-01T07:50:00.000-05:00

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Tags: WOM word of mouth Word-of-Mouth Marketing buzz marketing viral marketing marketing communication

A Penny For Your Thoughts: Referral Reward Programs and Referral Likelihood

2007-01-29T06:38:00.000-05:00

The January 2007 issue of the Journal of Marketing contains an article that will be of interest to those seeking to understand WOM and referral reward programs. Researchers Gangseog Ryu and Lawrence Feick wrote the article entitled "A Penny For Your Thoughts: Referral Reward Programs and Referral Likelihood."

Here's the abstract (an executive summary of the study can be found here):

Because referral reward programs reward existing customers and build the customer base, firms use them to encourage customers to make recommendations to others. The authors report on four experiments in which they find that rewards increase referral likelihood. More specifically, they find that rewards are particularly effective in increasing referral to weak ties and for weaker brands. It is also important who receives the reward. Overall, for weak ties and weaker brands, giving a reward to the provider of the recommendation is important. For strong ties and stronger brands, providing at least some of the reward to the receiver of the referral seems to be more effective. The authors discuss the implications of the results for the design of reward programs.

This is a very neat article so I'll go into some detail summarizing it. NOTE: This is not a comprehensive summary of the article, so please refer to the entire article for all of the details. If you're more interested in the practical/so what? implications, skip down to the section entitled "Practical Implications for Managers".

Goals of the Study (pp. 84-85)

The researchers set up four experiments where they examined the effects of the following on referral likelihood:

- the presence or absence of a reward;
- the size of the reward;
- who receives the reward (the existing customer, the new customer, or both);
- the impact of the relationship between the two parties (strong or weak tie [roughly speaking, this measures the closeness of the relationship: strong ties are well-known others while weak ties are less well-known acquaintances]);
- brand strength (strong or weak; a "strong brand" is one that has high brand awareness and well-established brand associations (see p. 86)

Theoretical Background (p. 85)

The researchers used exchange theory which, in this context, suggests that people make decisions to engage in WOM based on their perceptions of the costs and benefits associated with doing so (for example, benefits of WOM include reducing anxiety after the purchase, to be seen in a positive light by others, and expressing concern or helping another person out; costs might include the time and effort while communicating and the possibility that their conversational partner isn't happy about the recommendation they received from the other person which could damage the relationship). They add, though, that referral programs carry additional complexity when it comes the cost-benefit analysis. For example, when a referral is rewarded the conversational partner might perceive that their friend is making the referral to get the reward rather than for the intrinsic motivation of helping another friend out.

ROI of Referral Programs

For a referral program to be deemed effective, a company needs to obtain results beyond what would have otherwise occurred naturally. In the WOMMA Terminology Framework terms, the marginal gain from the "amplified" program needs to be able to cover its costs and go beyond the "organic" WOM that would have happened without the program.

Study 1: Presence/Absence of Rewards and Reward Size on Satisfied Customer's Referral Likelihood; Strength of Ties and Brands

The research method for the first study involved 275 undergraduate students at a university in Singapore completing surveys. The students were randomly assigned to different experimental conditions (whether a reward was used at all, the size of the reward, close friend versus casual acquaintance) and then asked to imagine they were wanting to buy an MP3 player and then which of two brands they would prefer (Brand A versus Brand B; brands were described as having higher/lower quality and higher/lower reputation to indicate brand strength; no actual brand names were used to avoid effects of prior brand beliefs). The size of the reward, if present at all, was 10% of the sales price (small reward condition) or 20% (large reward condition). Participants then indicated how likely they were to refer on a scale of 0% ("certain not to tell this person) to 100% ("certain to tell this person"). See the study for additional details and other variables.

Results indicated that referral likelihood was greater with strong ties than weak ties and that offering a reward significantly increased referral likelihood (however, the size of the reward didn't make a significant difference in increasing referral likelihood). When you take into account the relationship between the parties the researchers found that the presence of a reward did not affect referral likelihood with strong ties. With weak ties, though, offering the reward increased consumers' likelihood to refer. Further, the rewards were more likely to increase referral likelihood for weak brands (by 20%) but less likely for strong brands (only 10% increase).

Study 2: Trying to Understand the Mechanisms Underlying the Effects from Study 1 by Looking at the Perceived Social-Psychological Costs and Benefits of a Referral

Without describing the procedures, I'll summarize the results by stating that the researchers found support for the principles of exchange theory: consumers can and do evaluate the social and psychological costs and benefits differently when a reward is involved (p. 89). In general, any potential social benefits of a referral are perceived as lower, and the costs are perceived as higher, when a reward if offered versus when one isn't offered. But again, tie strength matters here. There are more perceived social and psychological costs and benefits between strong ties and when a reward is present. However, when engaging in WOM with weak ties, consumers are more likely to recognize the economic benefits of the reward and not worry as much about the potential social and psychological costs and benefits.

Study 3: Does It Matter To Whom the Reward Is Given? "Reward Me" (Existing Customer), "Reward You" (New Customer), and "Reward Both"

Again, cutting to the chase here, the researchers found it does make a difference who gets the reward based on the relationship of the parties to each other. With strong ties, it's not as important who receives the reward (the existing customer, the new customer, or both), though the trend indicates it's probably better to err on the side of rewarding the new customer or rewarding both people. With weak ties, however, rewarding the existing customer had the most impact on increasing referral likelihood.

Study 4: Seeking To Generalize Findings Beyond Hypothetical Scenario with MP3 Players to Actual Experiences with Mobile Phone Service

In this study, the researchers wanted to see if the same findings would apply to a service (rather than a good) and whose attributes are based on actual experience (rather than search characteristics). This study was done in South Korea and the following results of previous studies were replicated:

- Offering a reward to an existing customer increased referral likelihood between weak ties, but not strong ties;
- Referral likelihood was greater when a reward was offered for a weaker brand;
- For weak ties, there was little difference between the "Reward Both" and "Reward Me" reward schemes. For strong ties, referral likelihood was higher with "Reward Both" rather than "Reward Me."

They also found an interesting interaction effect between brand strength and the reward scheme. For a stronger brand, the "Reward Both" scheme performed a lot better than the "Reward Me" scheme. But for a weaker brand, the "Reward Me" performed just a little better than the "Reward Both" scheme. The researchers think that the underlying mechanism here is similar as for tie strength. That is, since people have a high level of commitment to a strong brand and a strong intrinsic motivation to refer, the "Reward Me" scheme leads people to think of themselves and their motives in a negative way (for example, feelings of guilt). A "Reward Both" scheme, however, may reduce the psychological costs involved with getting a reward since it's shared with the other person. Further, consumers of a strong brand tend to be less price sensitive and so the higher economic gain in the "Reward Me" scheme is probably perceived as less important.

Theoretical Contributions

From a theoretical perspective it expands social exchange theory from just the relationship between two parties, to include three parties: the existing customer, the new customer, and the brand. It also shows the utility of using exchange theory to understand WOM.

Practical Implications for Managers

Here's a quick summary of the implications the researchers identify:

Result: Offering rewards can increase referral likelihood, but there wasn't a difference in effect between smaller and larger rewards (in this study, 10% versus 20% of the purchase price).
Implication: Calibrate reward size carefully by calculating the revenue impact of the size of reward with how much additional referral likelihood is likely to occur (see the detailed results in the article for specific percentages of how much the referral likelihood might increase using different reward sizes). Then compare this calculation with the cost of other reward programs. (p. 92)

Result: Among strong ties, rewarding the existing customer (Reward Me) didn't increase the likelihood to refer. But rewarding the new customer (Reward You) or both (Reward Both) can slightly increase referral likelihood among strong ties.
Implication: Since most referral reward programs tend to involve strong ties, either explicitly (as in the case of "friends and family programs") or just end up that way (because people are more likely to interact with strong ties and more likely to know what is relevant and important to them, thus leading to higher recommendation behavior), its probably best to use the Reward You or Reward Both condition, rather than the Reward Me condition.

Result: Rewards increase referral likelihood to weak ties. Further, in weak tie recommendations, the recommender needs to receive a reward in return for the recommendation.
Implication: Since weak ties play an important role in "bridging" one social network to another social network, they are important to involve in the referral program in order to increase the spread of WOM. However, the trick is in devising programs that involve weak ties. Referrals to strong ties are likely to happen without the reward program and are likely to happen first. The researchers suggest that weak tie referrals is what really need to be encouraged and are likely to happen after the strong tie referrals.

One option suggested by the researchers is a segmentation approach based on reward size and reward scheme. First, increase the size of the reward as the number of referrals increase. This recommendation is based on the assumption that strong tie referrals are more likely to occur before weak tie referrals. The referral reward program would thus pay the least for strong tie referrals that would presumably occur naturally and pay the most for those weak ties that would be least likely to occur organically. Second, the reward scheme would shift from "Reward Both" or "Reward You" for strong ties (and presumably earlier referrals) to "Reward Me" for weak ties (and presumably later referrals). Shifting the rewards to the recommender should naturally switch the emphasis to weak tie referrals based on the social-psychological mechanisms discussed earlier.

Result: Distributing a reward to increase referral likelihood is more important for consumers who perceive a weaker brand.
Implication: The researchers suggest that weaker brands can benefit from rewards programs, even if the long-term goal may be to increase brand strength. In the shorter term, the brand may want to use a rewards program to increase trial and/or referral likelihood. Practitioners should use the Reward Me scheme for a weaker brand and the Reward Both scheme for stronger brands.

Limitations of the Study

The researchers point out a few limitations to their study:

- Future research needs to add in receiver receptivity as an important variable. Some receivers may be more receptive to a referral than others and the researchers suggest it's important to understand more about the dyadic relationship between the parties to understand this aspect of receptivity.

- Referral likelihood, rather than actual referral behavior, was studied. Since referral likelihood may not lead to actual referrals, future research needs to collect behavioral data.

- Different types of rewards should be considered beyond just monetary rewards. One option I thought of might be to grant access to exclusive information not provided to other consumers. This may reduce negative self-perceptions associated with receiving a monetary reward. Or, perhaps give the option of donating the reward to a charity or other "good cause."

- Future research should look at the effects of rewarding referrals on the recommender. For example, might rewarding the referral actually lead the recommender to feel less satisfied with the brand, less loyal, or otherwise change the attitude toward the brand? Might the referrer start to feel more like a "mercenary" and could this affect how they view the brand?

- Future research needs to look at the differences between knowledge of the program before purchase and after purchase. This study focused exclusively on post-purchase knowledge of the reward program.

- Cultural differences may play a role in the results. All of the participants were from Asia where other research suggests that Asians are more likely to see themselves as more interdependent rather than independent. This may affect how the social and psychological costs of the rewards are perceived. But the researchers ultimately suggest that because the findings about tie strength are consistent with earlier studies that involved U.S. participants, they feel that similar results would hold when using a sample of Western participants. (Of course, the distinction between Asian and Western in the study is very broad and might not take into account important differences based on national or regional variation).

- I would also add a couple other limitations that weren't discussed in the limitations section. One, rewards might have other effects besides stimulating referral behavior (such as serving as a reminder to talk about the brand; in fairness, the researchers acknowledge this on page 92). Two, exchange theory emphasizes a rational, cost-benefit analysis of consumer decision-making, and while the researchers show some support for this approach, it would be instructive to look at other frameworks that don't assume a rational actor.

OK, that's the summary with a bit of added commentary. I'll probably write more about this later on. In the meantime, feel free to contribute your thoughts in a comment.

Citation: Ryu, G. & Feick, L. (2007). A Penny For Your Thoughts: Referral Reward Programs and Referral Likelihood. Journal of Marketing, 71, 84-94.

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Tags: WOM word of mouth Word-of-Mouth Marketing referral marketing

Response to Justin Kirby's Comments About To Tell Or Not To Tell? Report

2007-01-19T14:09:00.000-05:00

Recently Justin Kirby of Viralmeister posted on his blog, and left a comment on my blog post, regarding concerns he had about the methodology of my research report "To Tell Or Not To Tell?" So that other interested readers could follow along I wanted to "promote" his comment to its own blog post and respond. I apologize in advance for this being a long post but I think it's important to address each concern in detail (and besides, it's an occupational hazard for me to provide verbose explanations -- ask my students, they'll tell you).

Justin was responding to my post on a recent study by Alain Samson at the London School of Economics (I pull excerpts for the sake of space; see Justin's full post):

... To his credit Dr Carl does point out that not everyone is cheer leading the Net Promoter Score and makes some valid points about the need to see the methods and results used in the analysis in order to assess the merits of this latest research from the London School of Economics. ... Anyway, I was mildly amused about Dr Carl’s stance on methodology because I felt the same way about his research on Bzzagent’s model (To Tell or Not to Tell), which by his own admission was based on Bzzagent’s internal analysis of the 270,000 word-of-mouth reports from their own agents. I’d love to see how Dr Carl adjusted for bias of not only Bzzagent’s internal analysis of the reports, which is far from objective, but also the bias of the reports from a ‘trained’ group who are both directed and incentivised to spread the word.
I just wonder where the control group was because I’m dubious about solely using a panel which has been designed to leverage the Hawthorn[e] Effect rather than a more conventional research panel that tries to adjust for this kind of bias. Maybe Dr Carl could put me right on this because I can’t help thinking that facts were fitted to theories about disclosure which fly in the face of Attribution Theory.

I'd like to take the opportunity to respond to Justin's comments to clarify his valid points from apparent misunderstandings of my research. For a quick overview of the main findings of the To Tell Or Not To Tell? report please read here (the full report can be downloaded as well).

First, the To Tell Or Not To Tell? (TTONTT) report was not based on "BzzAgent's internal analysis of the 270,000 word-of-mouth reports from their own agents." This was mistakenly reported in a ClickZ article entitled "BzzAgent to Agents: Spill the Beans, Or Else." I wrote a blog post to clarify the mistake in that article, which Justin linked to, so I would encourage Justin and other interested readers to re-read that post. As I wrote in that post, BzzAgent prepared their own white paper citing internal reports of their agents; none of the findings from TTONTT relied on those reports so there was no bias to adjust for regarding a separate analysis conducted by BzzAgent.

Second, Justin was concerned about the "bias of the reports from a ‘trained’ group who are both directed and incentivised to spread the word." Here again, this is a misunderstanding of the TTONTT methodology. I employed a dyadic methodology that relied on surveys completed by BzzAgents (not the internal reporting done by BzzAgents as part of a campaign, but surveys completed as part of this specific TTONTT research project) and their conversational partners (the people they talked with about the brand, product, or service). To account for any potential bias in the BzzAgent's responses to the TTONTT survey we validated their responses with their conversational partners' responses. So, for example, if a BzzAgent said they disclosed but the Conversational Partner said they didn't disclose, this was noted as a discrepancy, and the discrepancy results were fully reported and accounted for in the analysis on pages 10-11 of the report.

Third, Justin wondered where the control group was because he is:

dubious about solely using a panel which has been designed to leverage the Hawthorn[e] Effect rather than a more conventional research panel that tries to adjust for this kind of bias. Maybe Dr Carl could put me right on this because I can’t help thinking that facts were fitted to theories about disclosure which fly in the face of Attribution Theory.

Justin's point about a control group is valid and I appreciate the opportunity to respond. The TTONTT report was part of a larger project where we were trying to understand multiple perspectives on the same interaction -- the BzzAgent's and the Conversational Partners' (many studies rely on just one person's perspective) -- and also to determine how Conversational Partners were affected by talking with a participant in a word-of-mouth marketing program. And then, in addition, the study was to look at what role disclosure of the agent's affiliation with a WOM marketing company might be.

The study did not employ a control group where we gave instructions to some agents to disclose their identity, other agents to not disclose their identity, and then another group where no instructions regarding disclosure were given (the third group here could be used as a control group). The reason for not doing this was because it would have violated BzzAgent's policy surrounding disclosure, which required agents to disclose their identity (see page 8 of report). Instead, what we did was to conduct the analysis by comparing two groups after we collected the data: 1) Conversational Partners who knew they were talking with someone affiliated with a word-of-mouth marketing company and 2) Conversational Partners who did not know the agent's affiliation. NOTE: I relied on the Conversational Partners' responses (that is, non-Agents) for most of the analyses, except when I conducted the discrepancy analyses where I matched the BzzAgent's survey response to the Conversational Partners' survey responses.

By doing this post-hoc analysis, rather than using a field-based quasi-experimental design, or a laboratory-based experiment, this study has limitations, as all studies do (and there are other limitations to the study as well, all discussed in the report on pages 20-21). For example, we found that there was no difference between the outcome variables between the two groups (no difference in a conversational partner's likelihood to inquire further, to use the product/service, to buy the product/service, or to tell others about the product/service). But we did find that people who knew of the agent's affiliation told more people about the product/service. Because we didn't use an experimental design we can't conclude that disclosing agent affiliation led to higher pass-along or relay rates (more people being told). We can only say that conversational partners reported higher pass-along rates in conversations where they knew they were talking with someone affiliated with a WOM marketing program. However, while noting this limitation there are a number of important results that are, as Justin rightly points out, at odds with what we would expect from attribution theory (see my blog post responding to some of these counter-intuitive results; for readers unfamiliar with attribution theory as it relates to WOM, see Greg Nyilasi's chapter in the Connected Marketing book that Justin edited with Paul Marsden).

I was surprised myself by a number of results from this study -- this is the great thing about conducting original research -- so it would be inaccurate to say "that facts were fitted to theories about disclosure which fly in the face of Attribution Theory." But when you dig deeper into the analysis you find something that's pretty interesting and it's that attribution theory may still apply, as long as you take into account the relationship between the BzzAgent and the Conversational Partner. Here's what I mean...

If you're talking with a stranger or acquaintance -- people you don't know particularly well, or at all -- and the only thing you know about them is that they're part of a particular kind of WOM marketing campaign, then you might be more likely to question the person's credibility to give an unbiased opinion or an opinion that may not be in your best interest (in fact, some of the data I had about interactions with strangers actually trended in this direction; however since most BzzAgents speak with friends and family members (see page 6), rather than going up to strangers, we didn't have enough strangers to make valid statistical comparisons). However, if you know a person in a range of different contexts and have talked with them before, and know from those interactions that they generally have your best interests at heart, you're much less likely to question their sincerity when they share their opinion about the brand, product, or service. I think that because there was a high number of "stong-tie" relationships between the BzzAgents and Conversational Partners, this explains a good bit about why the results turned out the way they did (both BzzAgent's internal research and my own research partnering with them shows that the majority of the conversations are with already-known others).

Finally, Justin also expressed concern about a using a business model that's designed to leverage the Hawthorne Effect (meaning that people's behaviors will be affected by the act of giving people attention and making people feel more involved, which is what many WOM markting programs seek to do in order to stimulate WOM; interested readers should see Paul Marsden's chapter on product seeding programs in Connected Marketing). Here, again, I would reiterate that I surveyed Conversational Partners, in addition to the BzzAgents, who were not affiliated with the WOM marketing company. I would also offer that the study should be repeated with a wide range of different models and techniques of WOM marketing programs.

I hope that there are still a few readers who have made it to this point of the blog post! :-) I apologize for the length of this, but I appreciate the opportunity to clarify the study and I invite others to challenge the results and engage with the study so that we can achieve a better understanding of the role of disclosure in WOM marketing programs.

Justin, does this address all of your concerns?

Download the full version of the To Tell Or Not To Tell? report, as well as other papers I've written, for free at my download page

UPDATE (01/22/2007): Justin Kirby has posted a response to my response.

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Tags: WOM word of mouth Word-of-Mouth Marketing buzz marketing viral marketing marketing communication

Understanding the Buzz That Matters: Negative vs Positive Word of Mouth

2007-01-14T18:13:00.000-05:00

There's a new article* out about the relationship between positive WOM (PWOM), negative WOM (NWOM), and revenue growth, following in the tradition of research about the Net Promoter Score. The article is by Alain Samson, from the London School of Economics and Political Science, and was published in the International Journal of Market Research.

Here's the abstract:

This article discusses negative and positive consumer word of mouth (NWOM and PWOM) in a mostly quantitative context. Based on the correlations between WOM and business growth found in Marsden, Samson and Upton’s (2005) ‘Advocacy Drives Growth’ study, possible explanations for the superior predictive power of NWOM are presented. It is suggested that, similar to the Net Promoter® Score (NPS), NWOM is a good measure to capture both loyalty and advocacy among existing customers, while negative information may also have a strong effect on purchase decisions by potential customers. The number of brand choices and brand commitment are addressed across industries. It is proposed that brands (particularly services) in high-commitment/low-choice sectors have to be more sensitive to NWOM, while PWOM may be a better predictor for business growth in low-commitment/high-choice industries. Finally, using data from ‘Advocacy Drives Growth’, a new WOM measure in the form of a ‘Net Advocacy Score’ is presented.

The article is interesting for a couple reasons. First, Samson argues that the impact and utility of PWOM and NWOM depends on two factors: a) the industry (high/low choice and high/low commitment) and b) whether you analyze WOM from the perspective of customer retention (loyalty) or customer acquisition (advocacy).

The second reason it's interesting is because it seeks to extend the utility of the Net Promoter Score (the number of people who would be highly likely to promote or recommend a brand to a friend minus the number of people who would detract from the brand) by incorporating actual WOM behavior rather than just behavioral intentions (i.e., the likelihood of a recommendation, which is what the NPS measures). The new metric is called the "LSE Net Advocacy Score." In short, it combines the Net Promoter Score with reported NWOM, and is calculated as follows:

Net Advocacy Score = NPS - NWOM

(NWOM refers to the percentage of customers reporting making very negative comments in the past 12 months.)

According to Samson, a two-point increase in the Net Advocacy Score roughly corresponds to a 1% increase in revenue growth, at least for industries where there is relatively low-choice and high-commitment brands (in this case, mobile phone networks, retail banks, and supermarkets).

A couple limitations to keep in mind when reading this article. First, it was published as part of a Forum in this journal so it doesn't have a full-blown presentation of the methods and results used in the analysis. Greater detail will be important to validate the evidence presented in this article by other researchers. Also, the relationship between NPS and revenue growth has recently been called in to question by other academic researchers. Since the Net Advocacy Score (proposed in the present study) relies on the NPS in its calculations (NAS = NPS - NWOM), then additional research on the Net Advocacy Score should address the recent critiques of the NPS.

Here's my blog post about the "Advocacy Drives Growth" study.

Here's a link to the "Advocacy Drives Growth" study (PDF).

Be sure to read my other blog posts about the role of negative and positive WOM.

* Samson, A. (2006). Understanding the buzz that matters: Negative vs positive word of mouth. International Journal of Market Research, 48, 647-657.

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Tags: WOM word of mouth Word-of-Mouth Marketing buzz marketing viral marketing marketing communication

Ad Age's Article on the "Consumer" As Agency of the Year

2007-01-08T23:21:00.001-05:00

Via e-mail correspondence Jim Nail encouraged me to check out an AdAge article that named the "consumer" as Agency of the Year. In his blog post, Jim was critical of the piece saying that it missed the point of consumer control. In response to the following line that appears in the AdAge article...

The question for 2007 will be whether marketers and agencies find ways to harness that consumer-bred creativity...and deploy it to the service of brands.

... Jim writes that...

In other words, big corporations and brands still have the power, they only let the consumer have the illusion they have the power. The marketer may not be able to give the consumer a creative brief and tell them what to do, but if they are wiley enough, they can still manipulate, cajole, fool, and bribe the consumer to do what they want.

... and continued by saying:

The lesson Ad Age missed -- and that marketers should focus on -- is how to harness consumer-bred creativity and deploy it to the service of those consumers, by listening and learning what the consumer says makes for a great brand, then delivering it in real, differentiated, meaningful features and benefits.

I feel Jim has a valid point. All along the AdAge article is ostensibly talking about the power of the consumer and not the agency, but then seems to switch gears and talk about how consumer content can be assimilated into the brand, which the article suggests is ultimately controlled by the agency. The article reminds me of a classic process of hegemony whereby a dominant institution seeks to co-opt ideas and practices in ways to maintain its position of dominance. There seems little emphasis at all in the article about the process of listening, dialogue, and understanding to meet mutual needs, which would suggest a more equitable, dialogic, and mutually beneficial relationship between companies and customers.

I've really enjoyed AdAge over the past year as it has given a lot of wonderful coverage to word-of-mouth marketing and consumer generated media, especially in articles by Matthew Creamer and Jonah Bloom. But I think this article in particular fell prey to the title of the publication in which it appeared. As much as the article sought to escape from assumptions bound up in the age of advertising, it seemed unable to wrest itself from its grip.

One area where I do agree with the AdAge article is in the following point about the agency being dislpaced from its center:

What it does mean, however, is that big agencies -- great companies that once cast long shadows over corporate America -- are losing more of their control within a marketing process that for decades they have dominated. They're already being squeezed by procurement departments and jostled by media companies and nibbled at by a host of other kinds of agencies that grew in importance as TV ceased to be the only game in town.

For other views on the AdAge article see Peter Kim's and Jaffee Juice's blog posts on the same topic.
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Tags: CGM consumer control

Citizen Marketers: When People Are the Message

2007-01-03T16:05:00.000-05:00

Ben McConnell and Jackie Huba have done it again! I really enjoyed their first book, Creating Customer Evangelists, and now I am happy to report that I can say the same about their latest, Citizen Marketers: When People Are the Message. In fact, I plan to use it in my class this term at Northeastern on WOM marketing communication. I was fortunate to receive an advance copy of the book from them and wanted to comment on my decision to include it in my class. (By the way, I'm very late in the game here as a number of others have provided reviews of their book as well and it has been attracting quite a bit of attention).

I decided to adopt the book for my class because I think it's essential for students to understand the processes that lead people to generate their own content and advocacy for and about companies (what Ben and Jackie call "citizen marketers"), and how companies can best organize themselves to participate in conversations with citizen marketers.

In the book they explain four different kinds of citizen marketers: filters (people who collect info from a variety of sources and then package it for others to consume), fanatics (big-time fans and evangelists), facilitators (those who help to coordinate and build communities), and firecrackers (one-hit wonders who post something that attracts considerable attention and then interest subsequently wanes).

They also discuss the thesis of the "one percent rule" which states that in any community, only about 1% of the community is actually responsible for contributing the content that others in the community consume. Later in the book there's a great quote from Yahoo's Bradley Horowitz that adds another layer to this 1% rule. He's quoted as saying how the "act of consumption is itself becoming an act of production" (p. 134; in reference to how people's consumption and voting behavior creates content for others who subsequently consume the content).

I really like how Ben and Jackie discuss a number of case studies of communities that have been built by citizen marketers and the principles that led to their success. For example, they describe six factors that led to YouTube's success. Later on in the book they also describe why other attempts at creating community have failed, which is equally, if not more powerfully, instructive.

The motivations for citizen marketers are also discussed: altruism, personal relevance, common good, and status. They draw on the work of a cultural historian (Professor Steven Gelber) to argue that citizen marketers are hobbyists at their core, and that their activity is a kind of "productive leisure". Here is actually a place I would like to have seen Ben and Jackie explore in more detail: on p. 108 they quote Professor Gelber's explanation of how hobbies, during industrialization, "gained wide acceptance because they could condemn depersonalized factory and office work by compensating for its deficits while simultaneously replicating both the skills and the values of the workplace," a process that Gelber calls "disguised affirmation." That is, hobbies allow the participant to consider their activity as a form of "recreation" while subconsciously re-creating a certain ideology about work and their place in society. If we applied this analysis to citizen marketers, then, what kind of ideology is being re-created when people create content about companies, brands, products, and services? And what are the implications of this form of ideology re-creation to a democratic society? I hope to explore this a bit more with my students this term.

Another area I would like to see explored is how much the media form itself plays into the definition of being a citizen marketer. For example, if people created a great deal of advocacy in primarily face-to-face settings or over land-line phones, are they considered citizen marketers (or maybe we would call them evangelists?). Or is there something about broadcasting to a larger audience that's inherent in the definition? But then we'd need to consider the case of McChronicles (a blog maintained by a man in New York who chronicles his experience with McDonald's and described in the book) with Supersize Me! (a documentary film by Morgan Spurlock about his experiment eating only fast food from McDonald's for a month, but not discussed in the book). Do we also consider Morgan Spurlock to be a citizen marketer? Clearly one of the points Ben and Jackie make is that the more important thing is that people are the medium, giving a nod to Canadian media theorist Marshall McLuhan, and that "social media" technologies like blogs, podcasts, video sharing sites, etc. have democratized the ability to reach large amounts of people very efficiently. I think they would say that being a citizen marketer is really about people a feeling of a certain kind of ownership and participation in companies, brands, products, and services, and that this disrupts more traditional understandings of who filters information and promotes or undermines advocacy in a society.

Another thing I like is their chapter on "How To Democratize Your Business" which details through mini case-studies three primary ways companies have thus far worked with citizen marketers: through contests, through co-creation of the brand or product, and through community facilitation. The number of examples provided give the reader a glimpse of the possibilities for companies. Figuring out ways to engage citizen marketers is definitely a high priority.

They conclude their book with a cautionary note of how NOT to work with citizen marketers -- for example, not to engage in stealth marketing because it doesn't come from a place of authenticity that is prized by citizen marketers. One quotation I really found intriguing is this: "Social media is the antidote to campaign-based thinking." I'll be encouraging my students to reflect on what this means for how a company envisions their relationships with citizen marketers and their WOM marketing efforts. The quotation alludes to different philosophies of WOM marketing that my class discussed the first time I taught the class last summer.

To conclude this post I want to say thanks to Ben and Jackie for all their diligent efforts doing the research for this book and for sharing their knowledge of citizen marketers.

Disclosure: Ben and Jackie are members of the Word of Mouth Marketing Association (Jackie is on the Board of Directors) and I am on the advisory board of WOMMA. As mentioned above, I received an advance copy of the book and didn't have to pay a penny for it (my students won't be so lucky however).

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Tags: WOM word of mouth Word-of-Mouth Marketing marketing communication citizen marketers

WOMBP: January 2007 Update

2007-01-03T12:05:00.000-05:00

Happy new year!

The latest version of the WOM Marketing Communication Bibliography Project (WOMBP) is now uploaded. You can access it at my download page.

Here's the background of the project and details of the contributors.

Below are new entries in this version (these aren't necessarily new studies, they just weren't included in the last update):

Bowman, D. and D. Narayandas (2001). "Managing Customer-Initiated Contacts with Manufacturers: The Impact on Share of Category Requirements and Word-of-Mouth Behaviour." Journal of Marketing Research 43: 281-297.

Danaher, P. J., I. W. Wilson, et al. (2003). "A Comparison of Online and Offline Consumer Brand Loyalty." Marketing Science 22(4): 461-476.

Dellarocas, C., N. F. Awad, et al. "Exploring the Value of Online Product Ratings in Revenue Forecasting: The Case of Motion Pictures." Working Paper.

Dellarocas, C. and R. Narayan (2006). "A Statistical Measure of a Population's Propensity to Engage in Post-Purchase Online Word-of-Mouth." Statistical Science 21(2): 277-285.

East, R., K. Hammond, et al. (2005). "What is the Effect of a Recommendation." The Marketing Review 5: 145-157.

Granovetter, M. (1973). "The Strength of Weak Ties." American Journal of Sociology 78: 1360-1380.

Jin, Y., P. Bloch, et al. "A Comparative Study: Does the Word-of-mouth Communications and Opinion Leadership Model Fit Epinions on the Internet." 1-31.

Noyes, J. (2006). "BzzAgent tries to keep 'agents' part of 'hive'." The Boston Herald.

Nyilasy, G. (2006). "Word of mouth: what we really know - and what we don't." Connected Marketing: 161-184.

Samson, A. (2006). "Understanding the buzz that matters: negative vs positive word of mouth." Internation Journal of Market Research 48(6): 647-657.

Shin, A. (2006). "FTC Moves to Unmast Word-of-Mouth Marketing." Washington Post Online.

Wirtz, J. and P. Chew (2002). "The effects of incentives, deal proneness, satisfaction and tie strength on word-of-mouth behaviour." International Journal of Service Industry Management 13(2): 141-162.

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Tags: WOM word of mouth Word-of-Mouth Marketing buzz marketing viral marketing marketing communication

Flog Alert Repository?; Company Training About Ethics Violations

2006-12-20T09:42:00.000-05:00

Does anyone know of a central place where people are keeping a list of all the companies who have engaged in stealth marketing (including flogs, or fake blogs)? The latest flog (over a week old now) seems to be Sony for their PSP: alliwantforxmasisapsp.com (see links below for stories covering this development; of course is not the first time for Sony as they messed around with stealth marketing with the Sony Beta 7 as well).

Sony, or at least one part of Sony, is a member of the Word of Mouth Marketing Association (for which I'm an advisory board member), so I would hope that at least some representatives from their company are learning about how social media works and the ethics involved so that no part of their company continues the use of stealth tactics.

The viral marketing firm that created the flog for Sony is Zipatoni (not a WOMMA member). According to a report in a MediaPost article, a person claiming to be a Zipatoni representative contends they advised Sony that there might be this backlash, but their client went ahead with it anyway (this information should be treated with caution, though, because none of this has been confirmed).

Anyway, this story, the Edelman fake blog scandal with Wal-Mart, and many other companies point to the importance of the education work that needs to be done within corporations about social media and ethics. At the latest WOMMA Summit in D.C. Rick Murray from Edelman gave an update on how his company has implemented a mandatory training program for all their employees. Further, they set up a 24/7 hotline where anyone around the world can call in with questions to make sure they are behaving in an ethically approriate way. They also engaged in a review of all their existing programs to ensure that there are no further violations of the WOMMA Ethics Code (at the time of the presentation they were 98% done). Read this post for more details about what Edelman is doing in response.

Other links about the Sony fake blog for PSP:

Sony 'fesses to fake blog. Still gets it wrong. -- Michael O'Connor Clarke

Oh Sony, What Were You Thinking? -- David Binkowski

Sony pays PR firm to lie about wanting a PSP for Christmas -- Videogamesblogger.com Sony's holiday marketing campaign sniffed out -- Engadget

Sony Confesses To Creating 'Flog,' Shutters Comments -- Media Post Article

And be sure to check out the following link for a YouTube video created by gamers essentially saying that Sony is stupid for thinking that gamers are stupid and wouldn't figure out the flog.

Thanks to Constantin Basturea for some of the links above.

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Tags: WOM word of mouth Word-of-Mouth Marketing buzz marketing viral marketing marketing communication stealth marketing flogs fake blog

FTC Response on Word of Mouth Marketing Regarding Disclosure

2006-12-12T15:01:00.000-05:00

I'm blogging today from the Word of Mouth Marketing Association Summit in Washington, D.C. We just heard a presentation from Mary Engle, Associate Director for Advertising Practices at the Federal Trade Commission. She discussed the FTC's response to a complaint received from Commercial Alert (see background on the complaint and FTC consideration here). She summarized their complaint as follows:

Commercial Alert states that it is deceptive for marketers to pay consumers to engage in buzz without disclosure of the monetary exchange. They sought investigation of "buzz marketing" practices and asked the FTC to issue guidelines and bring cases. (NOTE: Commercial Alert should be calling this "shilling" or "stealth marketing" rather than calling this buzz marketing).

Here's the quick summary, with more details below:

- when payment is made to a consumer, that payment, by law, needs to be disclosed;
- marketers do not need to get parental permission for teens 13-18, but do need permission if the kid is under 13 (consistent with COPPA);
- non-monetary compensation (such as free samples, reward points, swag, etc.) do not need to be disclosed by law, but the FTC referenced that the WOMMA ethics code requires disclosure regardless of payment.

Here are the details:

The FTC declined the request to issue specific guidelines for WOM marketing, arguing that they feel a case-by-case investigation and enforcement is adequate. However, they did issue an official response later stating the the FTC's Endorsement & Testimonial Guides are applicable to WOM marketing. The FTC states that paid WOM advocacy fits the following definition of endorsement:

"An endorsement is any advertising message that consumers believe represents the opinions, beliefs, experience, etc. of a person other than the sponsoring advertiser" (Slide 8)

The Endorsement Guides require disclosure of the relationship between a seller and endorser "that might materially affect the weight or credibility of the endorsement" (Slide 9). They define a material connection as "one that isn't reasonably expected by the audience" (Slide 9). They also provide the following examples of these relationships: 1) seller is paying endorser, 2) endorser is related to seller, and 3) endorser is business associate of seller.

Their reasoning is that consumers wouldn't normally expect that someone has been paid to talk to them about a product. Further they suggest that consumers may give more weight to Person A's views rather than Person B's views if they know that Person A is independent from a seller while Person B is getting paid. Therfore, the reasoning goes, "Under the FTC Endorsement Guides, financial tie between the seller and paid agent should be disclosed."

Ms. Engle's presentation also addressed if the WOM program participant isn't paid, is disclosure still required? The FTC argues that it depends on whether consumers would give more weight to an endorsement if payment was or wasn't involved. It also notes that WOMMA's ethical guidelines call for disclosure even when there isn't payment. (For a research study about the potential business benefits of disclosure and guidelines for companies, please read my "To Tell Or Not To Tell?" report).

The Commercial Alert complaint also expressed concern about children's involvement in WOM marketing programs. The same disclosure applies in these cases. But what about parental consent? If a marketer solicits participation of kids under 13, then marketers need to comply with COPPA (Children's Online Privacy Protection Act), which means parental consent is required. But outside the scope of COPPA, the FTC doesn't enforce any other law that requires parental approval.

Download Mary Engle's Presentation from the FTC (opens into PDF file)
Commerical Alert's Reaction (Dec 11, Dec 12)
WOMMA's Reaction
Download To Tell Or Not To Tell? Research Report (link to download page)

Disclosure: Advisory Board Member of WOMMA

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Tags: WOM word of mouth Word-of-Mouth Marketing buzz marketing disclosure

What Some Leading Academic Researchers on Word of Mouth Marketing Are Up To

2006-12-10T17:26:00.000-05:00

On Monday, I'll be giving the "State of Word of Mouth Research and Measurement" talk at WOMMA's Research Symposium. I'll be reviewing some of the latest academic research that affects the WOM marketing industry and offering a modest proposal of research priorities for the upcoming year.

You can find my a copy of my presentation handouts here.

As part of the research for my presentation I interviewed some of WOMMA's academic advisory board members, some of the leading researchers working on WOM. I asked them to give me a description of their current projects. Some of their projects have been published already while others are in the earlier stages as working papers.

Because I won't have time to discuss all of this in my presentation Monday morning, I am attaching this PDF file as a supplement to my talk. To learn more about the WOMMA Advisory Board members please visit the Advisors page on WOMMA's website. And to learn more about other industry and academic research studies please download the WOM Bibliography Project from my download page.

Please note that this is a very selective and partial list so it's not meant to exlucde anyone. Any other folks who are doing interesting work in this area should feel free to contribute an update in the comments section to this post.

Also be sure to check out the latest research book published by WOMMA: Measuring Word of Mouth, Volume 2. (Disclosure: I served as the workgroup leader editing this volume).

Download presentation supplement

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Tags: WOM word of mouth Word-of-Mouth Marketing buzz marketing viral marketing marketing communication WOM research

WOMBP: December 2006 Update

2006-12-05T15:26:00.000-05:00

Anderson, E. W., C. Fornell, et al. (2004). "Customer Satisfaction and Shareholder Value." Journal of Marketing 68: 172-185.

Chandon, P., V. G. Morwitz, et al. (2005). "Do Intentions Really Predict Behavior? Self-Generated Validity Effects in Survey Research." Journal of Marketing 69: 1-14.

Dawar, N., P. M. Parker, et al. (1996). "A Cross-Cultural Study of Interpersonal Information Exchange." Journal of International Business Studies 27(3): 36.

Dholakia, U. M. and V. G. Morwitz (2002). "The Scope and Persistence of Mere-Measurement Effects: Evidence from a Field Study of Customer Satisfaction Measurement." Journal of Consumer Research 29(2).

English, B. (2000). "Pitching her tent "word of mouth", plus author Anita Diamant's promotional moxie, make for success." Boston Globe February 24, 2000: F1.

Helm, S. (2003). "Calculating the value of customers' referrals." Managing Service Quality 13(2): 124-133.

InfoMag (2006). "Surging Interest." InfoMag.

Kiecker, P. and D. Cowles (2003). "Interpersonal Communication and Personal Influence on the Internet: A Framework for Examining Online Word-of-Mouth." Journal of Euromarketing 11(2): 71-88.

Mittal, V. and W. A. Kamakura (2001). "Satisfaction, Repurchase Intent, and Repurchase Behavior: Investigating the Moderating Effect of Customer Characteristics." Journal of Marketing Research 38(1).

Morgan, N. A. and L. L. Rego (2006). "The Value of Different Customer Satisfaction and Loyalty Metrics in Predicting Business Performance." Marketing Science 25(5): 426-439.

Nicks, S. (2006). "What Not to Do With Net Promoter." Business Week Online August 1, 2006.

Oliver, R. L. (1999). "Whence Consumer Loyalty?" Journal of Marketing 63(Special Issue): 33-44.

Stokes, D. and W. Lomax (2001). "Taking Control of Word-of-Mouth Marketing: The Case of an Entrepreneurial Hotelier." Kingston Business School 44: 1-18.

Story, L. (2006). "What We Talk About When We Talk About Brands." The New York Times November 24, 2006.

Systems, S. (2004). "Growing your business with Net Promoter." White Paper: 1-11.

TARP "Measuring the Grapevine-Consumer Response and Word-of-Mouth." TARP White Paper: 1-25.

Vox, M. (2006). "Moms: WOM's Good, So's Online." Marketing VOX Online.

Wangenheim, F. V. and T. Bayon (2003). "The effect of word of mouth on services switching; Measurement and moderating variables." European Journal of Marketing 38(9/10): 1173-1195.

Yu, L. (2005). "How Companies Turn Buzz Into Sales." MIT Sloan Management Review Winter 2005.

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Tags: WOM word of mouth Word-of-Mouth Marketing buzz marketing viral marketing marketing communication

"One Question, and Plenty of Debate": More Scrutiny of the Net Promoter Score

2006-12-04T12:41:00.000-05:00

Readers of my blog know I've been following the recent academic research seeking to establish a relationship between likelihood to recommend metrics and business performance measures. In these articles the Net Promoter Score (NPS) has come under intense scrutiny.

The first study was the Morgan & Rego study published in Marketing Science (see series of posts beginning with this one for a summary). This is a very interesting study to read but a significant limitation was that it did not calculate the NPS as the creators do (Fred Reichheld, Bain, and Satmetrix), thus it wasn't an apples-to-apples comparison. This same limitation was noted by other researchers as well (see this post for details) and a paper has been submitted to correct and clarify this point (Keiningham, Aksoy, Cooil, and Andreassen, 2006; see Footnote 1 below for citation). Interestingly, this corrected study was also referenced on Fred Reichheld's Net Promoter blog.

But now it's Monday, and Monday's the day for big news to come out, so here we go... In today's Wall Street Journal Scott Thurm reports in his article "One Question, and Plenty of Debate" (subscription required) about a new study that calls into question the relationship between the NPS and business performance. The study was written by the same authors who penned the correction and clarification article in Marketing Science (Keiningham et al.) and it will be published next year in the Journal of Marketing, another very well-respected marketing journal.

According to the WSJ article, this new study was unable to replicate the claims made by Mr. Reichheld, Bain, and Satmetrix that "net promoter scores are better indicators of revenue growth than other customer-satisfaction measures." Further, for two of the industries (airlines and personal computers) cited in Mr. Reichheld's book (The Ultimate Question), the researchers found that a different customer-satisfaction measure, rather than NPS, better explains revenue growth.

Mr. Reichheld is quoted in the article making the point that too much is made of the correlation between NPS and revenue growth and that focusing on this correlation is missing the "forest for the trees." Instead he states that NPS is effective "because it forces top executives, and other managers, to focus on creating happy customers" (this quote was parahrased by the journalist in the article).

The WSJ article goes on to say that this is a consequential issue because many executives are making managerial decisions based on the use of the NPS metric and that critics "are trying to protect executives racing to adopt the net-promoter metric," expressing concern that "the corporate boardroom is probably misinterpreting the importance of this" (the latter quotation is from V. Kumar, a marketing professor at U of Connecticut School of Business, who will also be publishing a study soon that questions the link between NPS and business performance).

The new study by Keiningham et al. entitled "A Longitudinal Examination of 'Net Promoter' on Firm Revenue Growth" is currently embargoed (except for citation in academic journals) until its publication in 2007. However, through correspondence with the first author, I have learned that interested readers can download an executive summary here. The executive summary provides an overview and gives sufficent detail to illustrate that the methodology used was much closer to the methodology used by Mr. Reichheld, Bain, and Satmetrix.

I'll have more to say on the executive summary in a future blog post as well as what this latest research finding means for companies and the WOM industry. I'll also be referencing this debate on the NPS, among many other metrics and research traditions, in my "State of Word of Mouth Research and Measurement" presentation at the WOMMA Research Symposium on Dec. 11th in Washington, D.C.

Disclosure: I was interviewed for this Wall Street Journal article and I am on the Advisory Board for the Word of Mouth Marketing Association.

1. Keiningham, T., Aksoy, L., Cooil, B., & Andreassen, T. W. (2006). Net Promoter, Recommendations, and Business Performance: A Clarification and Correction on Morgan and Rego. Manuscript submitted for publication.

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Tags: Net Promoter Score word of mouth Word-of-Mouth Marketing WOM Loyalty marketing communication

Proud Teacher

2006-11-29T14:35:00.000-05:00

Three students from my WOM, Buzz, and Viral Marketing Communication class (Summer 2006) will be presenting at the WOMMA Research Symposium in D.C. Here's the press release!

Congrats Carrie, Ken, and Nick!

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Tags: WOM word of mouth Word-of-Mouth Marketing buzz marketing viral marketing marketing communication

Does the Morgan & Rego Study in Marketing Science Undermine the Net Promoter Score Metric?

2006-11-13T00:40:00.000-05:00

Since my series of blog posts about the Morgan & Rego article in Marketing Science that tested the value of different customer feedback metrics on predicting business performance, I've been asked if this study undermines the Net Promoter Score (NPS) as a useful metric for companies.

First, let me clarify that the following response is not meant to provide an endorsement or detraction regarding the use of the Net Promoter Score metric. Rather, it's to look at the available evidence from the Morgan & Rego study and assess the implications of that study.

OK, with that aside, the short answer is that we don't have sufficient data to come to a conclusion on the matter. As I noted in my series (here, here, and here) the main reason for this is that the Morgan & Rego study does not actually measure the Net Promoter Score in the same way that Reichheld, Satmetrix, and Bain & Co. do, so it's not fair to make a comparison. (This post explains the difference between how the Reichheld/Satmetrix/Bain "Net Promoter Score" is calculated and how the Morgan & Rego "net promoter" metric was calculated for the study).

Other researchers have also noted this disparity. Specifically, I recently learned that a manuscript has been submitted for publication (Keiningham et al., 2006)* whose goal is to correct and clarify the Morgan & Rego study on this point. In that manuscript they explain why the difference in calculation may actually make a difference in the conclusions that Morgan & Rego come to. Specifically, these authors contend that Morgan and Rego appear to have significantly misunderstood the data fields from which they calculated Net Promoter and Number of Recommendations. As a result, Net Promoter and Number of Recommendations were not actually examined. Therefore, conclusions regarding the effectiveness of the Net Promoter metric advocated by Reichheld on business performance cannot be accurately made from the Morgan & Rego study. Because the Keiningham et al. manuscript is under review I cannot provide more detail publicly at this time, but stay tuned!

For more details about what I see as the implications of the Morgan & Rego study on companies invested in understanding the importance of word-of-mouth marketing please read my last post.

* Keiningham, T., Aksoy, L., Cooil, B., & Andreassen, T. W. (2006). Net Promoter, Recommendations, and Business Performance: A Clarification and Correction on Morgan and Rego. Manuscript submitted for publication. (Thank you to these authors for allowing me to cite their paper in this blog post.)

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Tags: Net Promoter Score word of mouth Word-of-Mouth Marketing WOM Loyalty marketing communication

What Are the Implications of the Morgan and Rego Study for Companies Focusing on Word of Mouth Marketing?

2006-11-05T23:14:00.000-05:00

Over the weekend I posted a series of entries summarizing an important article that tested the value of various customer feedback metrics to understand how they relate to key indicators of business performance. I reviewed what the authors saw as the implications of this study and now I want to offer some of my thoughts as well.

Let’s start with the use of the Net Promoter Score. If the Morgan & Rego had computed their “net promoter” metric in the same way as the Bain/Satmetrix “Net Promoter Score” and then found the same results, then this study is a very big deal because a compelling reason companies have adopted the NPS metric is because of its correlation with revenue growth. We’ll have to await future studies from these or other authors that make an apple-to-apple comparison.

I haven't heard a response from Fred Reichheld or Bain/Satmetrix, but I imagine their response might be similar to a recent blog post Fred Reichheld made on his blog.

In response to other criticisms of the Net Promoter Score (besides Morgan and Rego), Fred Reichheld makes two points in the metric’s defense. First, he argues that NPS was never based on statistical correlations but instead based on the relationship between customers’ survey scores (their likelihood to recommend to others) and their subsequent behavior. He states that “People who rate a company higher on the NPS scale buy more and refer more friends to the company than people who rate it lower” (though Morgan & Rego would also dispute this; see p. 437). Reichheld claims that the statistical correlations are “not the foundation of the NPS theory, merely supporting evidence.” According to this reasoning, then, the Morgan & Rego finding showing a non-significant correlation for the net promoter metric and business performance is far less damaging.

The second defense that Riechheld offers is that industry definition is extremely important. He says that you can’t just look for correlations between NPS and business performance in the “online retailing” industry because this is too broad (for example, Home Depot and Victoria’s Secret are both in retailing, and LandsEnd.com and Brookstone.com are both online retailers, but neither of these pairs are really in the same business.

Reichheld’s bottom line is this: “In testing the relevance of NPS to your business, avoid starting with correlations. Instead, begin with real behaviors of individual customers over time. Then, when you examine the correlations of NPS and growth rates, focus your analysis on your true competitors.” This point about industry specificity is crucial since one of the limitations that Morgan & Rego identify is that they can generalize across industries but cannot account for differences within or between industries (see p. 437).

From my perspective, even if companies find value in using the NPS, the prescription that it’s the “only” number a company needs to grow is misleading (many others have noted this as well). For example, if a company has a low NPS score it’s important to understand *why* the number is low so that the company can improve. Thus additional research to determine why people talk positively or negatively is still necessary. Additionally, companies need to focus on other business indicators besides just revenue growth (therefore Morgan & Rego’s critique that revenue growth is not the only indicator of business performance is still valid).

So, should a company who’s currently using the Net Promoter Score stop using it based on the findings from the Morgan & Rego study? For many companies, it seems that it has helped the company focus on creating a better product or service experience for the customer. It has also directed people’s attention to the importance of customer word or mouth.

If a company is not currently using the Net Promoter Score, should they start using it? My best advice here is to let the power of WOM loose and seek out those companies who have used NPS to find out about their experiences in their particular industry. Let the power of a peer recommendation work its magic.

OK, so setting aside the NPS, Morgan and Rego’s study is also relevant to the WOM marketing industry because it confirms the value of ensuring customers have satisfactory experiences such that they don’t generate negative WOM or complaints. Additionally, companies need to focus on customer complaints, use these as a source of consumer insight into what makes them satisfied, and also better handle the complaints to offset the deleterious effects of negative WOM.

I’d love to learn what readers think. What do you think are the implications of the Morgan & Rego study for the WOM marketing industry?

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Tags: Net Promoter Score word of mouth Word-of-Mouth Marketing WOM Loyalty marketing communication

Morgan & Rego Study: Limitations & Avenues for Future Research

2006-11-03T23:44:00.000-05:00

Limitations

First, the findings are not generalizable to smaller firms or B2B businesses since these weren’t included in the study.

Second, it's difficult to control for differences between industries, and since there may be differences in the preconditions leading to loyalty in each industry, this limitation may affect the utility of satisfaction and loyalty metrics.

Third, all customers were treated equally in the analysis. There's no data on which consumers are most relevant to a firm's success (for example, where should a firm spend the majority of its resources, on the best customers, on the most number of customers, those who complain the most, etc.)?

Fourth, the study was limited to customer feedback mechanisms that were easy for employees and managers to comprehend. Further, the relationship between these and a firm's performance was linear; non-linear relationships and interaction effects among the customer feedback variables might be more useful. NOTE: To understand the importance of how non-linear and asymmetrical relationships might be relevant read this article by Anderson & Mittal (2000) [opens into PDF].

ALSO NOTE: As mentioned before the way the net promoter score was calculated in this study is different than the Bain/Satmetrix Net Promoter Score. Stay tuned, however, from these authors for using the same language and method in future studies.

Avenues for Future Research

First, maybe the reason that satisfaction is more related to firm performance is becuase it costs more for the firm to generate positive WOM recommendations than for customers to simply be satisfied.

Second, promoters don't seem to buy more nor does their influence on potential new prospects seem to be as strong as people believe. Why? Maybe the process of getting customers to engage in positive WOM paradoxically increases their involvement in the category and their desire to seek out the variety offered by other brands for future purchases. Or maybe people who engage in positive WOM are more likely to be opinion leaders who find utility in seeking out variety in brands and companies. Thus, more research needs to be done about the impact of recommendation behaviors on not only the behaviors of others, but also the behaviors of the person doing the recommending. Also, the authors wonder if more active repurchase behaviors that indicate loyalty, like share of wallet, are better predictors of financial performance than the self-reported attitudinal indicators of loyalty which tend to be more passive.

Third, some of the correlational findings between recommendation and satisfaction measures seem to contradict service-profit chain logic (opens into PDF). There was a significant positive correlation between number of recommendations and the proportion of customers complaining. The authors wonder to what extent are WOM behaviors, both positive and negative, driven by consumer characteristics versus the firm’s marketing actions?

So, in conclusion, then, the authors maintain that their results show the value of customer feedback metrics and their ability to predict business performance of the firm. Further, they argue that the best feedback metrics are average customer satisfaction, Top 2 Box customer satisfaction scores, proportion of customers complaining, and the repurchase likelihood loyalty metric. The authors failed to find support for the predictive value of loyalty metrics based on data from recommendation behaviors, net promoters, and the number of recommendations.

This is the end of the Morgan & Rego article summary series. Here are some additional thoughts on the implications of this study.

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Tags: Net Promoter Score word of mouth Word-of-Mouth Marketing WOM Loyalty marketing communication

Morgan & Rego Study: Discussion & Implications

2006-11-03T23:30:00.000-05:00

Discussion & Implications

Why is the study important? Here are the factors that the researchers identify. First, the authors link customer feedback measures with previously unexplored measures of financial performance, like Total Shareholder Return and Sales Growth. Their findings that Average Customer Satisfaction Scores and Top 2 Box Customer Satisfaction Scores actually do predict sales growth directly counter Reichheld’s claim that they do not. Their findings also counter previous findings that found no relationship between certain variables (for example, average customer satisfaction and gross margins were not found to be significantly related in past research but were found to be so in this research). There is also a positive relationship between customer satisfaction and market share. All of this is to say that a firm’s ability to satisfy its customers has an important impact on that firm’s business performance.

Second, this study shows the impact of customer complaining behavior on business performance. Previous research suggested that firms should try to actually increase the number of customer complaints so that the concerns of these “at-risk” customers can be better addressed. While there was one positive relationship between complaining behavior and market share (that is, more complaining behavior, more market share) the results of this study suggest that these complaints have not been adequately “heard” by the company, or if they have been “heard,” then the firm’s attempts to address the concerns have not counter-acted the negative effects of the customers’ complaining behavior on subsequent business performance. NOTE: The positive relationship between market share and complaining behavior is not surprising given Robert East’s work that suggests companies with higher market share tend to have both more positive AND negative WOM.

Related to this point about complaining behavior, the authors state that existing research by TARP (1986) suggests that customer complaints aren’t a good indicator of customer satisfaction but the authors state that the results of this study suggests that monitoring customer complaints provide insights into customer satisfaction and is valuable for predicting future business performance (the evidence for this is that the customer complaining variable and the other two satisfaction metrics were correlated with one another, and further there were similar patterns in the regressions across all three satisfaction measures).

Third, the study sheds new light on the relationship between customer loyalty and business performance. First, this study found that repurchase likelihood is related to a firm’s business performance which increases confidence in the current managerial practice of paying attention to repurchase likelihood. Second, the study also sheds light on the significance of positive consumer recommendations. In short, the authors argue that focusing on likelihood to recommend is not as useful as focusing on repurchase likelihood. (Other authors argue that you need to focus on recommendation likelihood because repurchase likelihood gets confused by inertia, indifference, or exit barriers that the company puts in the way to make it harder for customers to switch brands [see Reichheld, 2003, p. 48]).

The good news is that customer feedback systems can help a firm implement planning and control measures as there are metrics that help a company to predict business performance. Which ones to use, though, then becomes the issue. This study finds that the three customer satisfaction metrics and the repurchase likelihood metric (loyalty) are the best ones. The average number of recommendations seems only to have a positive impact on future market share and have a negative impact on future gross margins. The authors contend that the net promoter metric seems to have no predictive value at all. The data from this study suggests that increasing the number of promoters will not help the company’s business performance. Rather than focusing just on the net promoter score, companies should focus on a “scorecard” method that includes the following four metrics: average customer satisfaction, Top 2 Box satisfaction, proportion of customers complaining, and repurchase intent.

OK, now we'll discuss the limitations of this study, future avenues for research, and the researchers' conclusions.

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Reichheld, Fredrick E. 2003. The one number you need to grow. Harvard Business Review (December) 46–54.

TARP. 1986. Consumer Complaint Handling in America: An Update Study. Technical Assistance Research Programs, White House Office of Consumer Affairs, Washington, D.C.

*** Information in this post adapted from Morgan, N. & Rego, L. Marketing Science, Vol. 25, No. 5, September–October 2006, pp. 426–439.

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Tags: Net Promoter Score word of mouth Word-of-Mouth Marketing WOM Loyalty marketing communication

Morgan & Rego Study: Results

2006-11-03T23:25:00.000-05:00

Results

The researchers found that firm and industry characteristics did have an effect on financial performance (so it was good that the authors controlled for them!).

Above and beyond these characteristics then, the six behavioral measures also explained additional variance, from a low of 1% (for Total Shareholder Return) to a high of 16% (for market share).

Below is how well the each of the six customer satisfaction and loyalty metric explained the variance in the six business performance measures. The customer feedback metrics are listed in the order of their predictive power.

- Average Customer Satisfaction Score. This metric was statistically significant across all six business performance measures. It explained from 5% (net operating cash flow) to 16% (market share) of the variance in these performance measures.

- Top 2 Box Customer Satisfaction Score. This was statistically significant across 5 of the 6 performance measures and approached significance on the 6th one as well (Total Shareholder Return). It explained from 5% (net operating cash flow) to 16% (market share) of the variance in these performance measures.

- Proportion of Customers Complaining. This was statistically significant across 4 of the 6 performance measures (except Total Shareholder Return and Net Operating Cash Flow). It explained 4% (TSR) to 13% (market share).

- Repurchase Likelihood. This was statistically significant across 4 of the 6 performance measures (except Total Shareholder Return and Net Operating Cash Flow). It explained 4% (TSR) to 15% (market share).

- Number of Recommendations. This was statistically significant only across 2 of the 6 performance measures (Gross Margin & Profit Share). But the gross margin coefficient is negative! It explained 1% (TSR) to 12% (Tobin’s Q).

- Net Promoters. This was not statistically significant across any of the 6 performance measures… none! It explained from 2% (market share) to 12% (sales growth) of the variance in these performance measures.

OK, let's move to the discussion and implications of these results.

*** Information in this post adapted from Morgan, N. & Rego, L. Marketing Science, Vol. 25, No. 5, September–October 2006, pp. 426–439.

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Tags: Net Promoter Score word of mouth Word-of-Mouth Marketing WOM Loyalty marketing communication

Morgan & Rego Study: Purpose and Methods for Study

2006-11-03T17:31:00.000-05:00

OK, what follows are excerpts of my notes from reading this article.

The content was adapted from the article and I generally indicate with quotation marks where I've pulled direct quotes, but because these are from my informal notes I often cut-and-pasted from the article.

Purpose of Study

To determine which of the available customer feedback systems currently used by practicing managers (based on measures of customer satisfaction and loyalty) best predict a company's financial performance.

Method

Data Set

The authors took data from the American Consumer Satisfaction Index (ACSI; provided by the National Quality Research Center at the University of Michigan), which closely matches satisfaction and loyalty data that companies would have available in their own customer feedback mechanisms. Since 1994, the ASCI has collected data from 50,000 consumers annually from 200 of the Fortune 500 companies from 40 different industries to measure consumer evaluations of these companies’ products and services. Utility companies were removed from the analysis because of their monopoly position and from private companies since their financial data was not available. 80 different companies were represented for 7 years (1994-2000).

Financial Performance Measures

There were 6 measures of financial performance:

- Tobin's Q. Compares a firm’s market value to the replacement cost of its assets; forward-looking financial market measure

- Net Operating Cash Flow. Measures a firm’s ability to generate cash; historical accrual accounting info-based measure

- Total Shareholder Returns. Measures firm’s ability to deliver value to shareholders by increasing price of firm’s stock and distributing dividends; forward-looking financial market measure

- Sales Growth. Measures increase/decrease in sales revenue; customer market-based measure

- Gross Margin. Ratio of gross profit to sales revenue; shorter-term

- Market Share. Percentage of sales a firm has relative to entire industry sales; customer market-based measure

Customer Feedback Measures

There were 6 measures of customer feedback:

- Average Customer Satisfaction Score (Satisfaction Measure). This is the mean score on the three specific indicators used to estimate the ACSI latent satisfaction index. The three measures are 1) overall satisfaction, 2) expectancy disconfirmation, and 3) performance versus their ideal product or service in the category.

- Top 2 Box Customer Satisfaction Score (Satisfaction Measure). This refers to the two highest-scoring points on the five-point scale that firms typically use to capture customer satisfaction. Because the ACSI uses 10-point satisfaction scales, this metric was operationalized as the proportion of customers surveyed that rated the firm in the top 4 points on the 10-point single-item “overall satisfaction” ACSI scale.

- Proportion of Customers Complaining (Satisfaction Measure). Number of consumers of a firm who voice dissatisfaction with the product or service versus those who do not. This was calculated using the ACSI “voice” variable that comprises two items that ask if the consumer has either formally (as in writing or by phone to the manufacturer or service provider) or informally (as to others) complained about the product or service.

- Net Promoters (Identified as Loyalty-based Measure; could also measure advocacy). Percentage of a firm’s customers who make positive recommendations of the company brand to others minus those who do not (NOTE: this differs from Reichheld’s definition since his refers to a likelihood to make a recommendation).

The net promoter score in this study utilized ACSI data concerning consumer responses to the questions “Have you discussed your experiences with [brand or company x] with anyone?” and “Have you formally or informally complained about your experiences with [brand or company x]?” The first question measures both positive and negative recommendations, while the second question measures negative recommendations. Net promoters computed as the number of a firm’s surveyed customers that reported discussing their consumption experiences minus the number of the firm’s surveyed customers that reported formally or informally complaining expressed as a proportion of the total number of a firm’s surveyed customers.

- Repurchase Likelihood (Loyalty-based Measure). Customer’s stated probability of purchasing from the same product or service provider in the future. This was taken from the ACSI that asks consumers to rate “How likely are you to repurchase this brand/company?”

- Number of Recommendations (Loyalty-based Measure; could also measure advocacy). This refers to the number of people to whom consumers of a firm’s product or service engaged in positive word-of-mouth (WOM) behavior as captured in the authors' net promoters variable report having recommended the brand or company. The ACSI question asks: "With how many people have you discussed [brand or company x]?” Authors averaged this metric at the firm level, representing the average number of people to whom the surveyed customers of a firm who engaged in positive WOM have recommended the brand or company.

Co-Variates and Other Industry Characteristics

To account for effects of other factors the authors identified a number of firm-level and industry-level co-variates: for the firm, number of business segments the firm competes in, the intensity of advertising and R&D expenses, and size of assets; for the industry-level, Hirschmann-Herfindahl index (HHI; because market structure can affect financial performance) and demand growth.

To control for other industry characteristics, “we included three dummy variables in our analyses: ACSI sector definitions to identify service-focused versus physical goods-focused firms, annual reports to identify firms that market direct to their end-user consumers versus those using intermediaries, and the ASCI survey data collection protocol to indicate firms that face longer versus shorter interpurchase cycles.”

OK, so basically the authors are going to take the six customer feedback metrics (3 satisfaction and 3 loyalty metrics) and see which of these best predict the six business performance measures.

We should note at this point that the "net promoter" metric in this study is not calculated in the same way as the Net Promoter Score, which is calculated by subtracting the number of detractors (0-6 on a 10-point scale indicating how likely a person is to recommend a company or brand to others) from the number of promoters (9-10), disregarding the number of passive responses (7-8).

Next, the results!

*** Information in this post adapted from Morgan, N. & Rego, L. Marketing Science, Vol. 25, No. 5, September–October 2006, pp. 426–439.

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Tags: Net Promoter Score word of mouth Word-of-Mouth Marketing WOM Loyalty marketing communication

Very Important Study! -- The Value of Different Customer Satisfaction and Loyalty Metrics in Predicting Business Performance

2006-11-03T16:24:00.000-05:00

OK, this is a big one.

There’s a very important study for those interested in WOM marketing that has been published in Marketing Science, a well respected marketing journal, about which customer satisfaction and loyalty metrics best predict a firm’s business performance. It’s an even bigger study for those invested in the use of the Net Promoter Score.

Much has been made of the Net Promoter Score (NPS) as a powerful metric for companies to get a handle on the WOM activity of consumers. According to the proponents of the NPS, asking one simple question, how likely a person is to recommend a company or brand to their friends or colleagues, will allow you to effectively monitor a firm's performance (e.g., a firm's level of revenue growth). They claim that other metrics, such as satisfaction measures that so many firms routinely use, are far less important and perhaps not even worth using. While Reichheld and colleagues have been praised for coming up with an easy-to-implement solution to benchmark their success with WOM, they have also come under fire for over-simplifying the process of WOM tracking by advocating for just this one question.

At least one study has been conducted to confirm the findings of the NPS, extending it from U.S. companies to U.K. companies (opens into PDF file; see my blog post about this study), but there has been no peer-reviewed academic journal articles where the central premises of the NPS have been studied. Until now.

Researchers Neil Morgan and Lopo Leotto Rego entitled their article "The Value of Different Customer Satisfaction and Loyalty Metrics in Predicting Business Performance."

In their manuscript they offer what amounts to a scathing critique of the NPS arguing that it's 1) ineffective in predicting business performance and 2) misguided for companies to simply use this metric. By the way, these same researchers published counter-point letters-to-the-editor in the Harvard Business Review following the publication of Reichheld's influential article in the same publication.

This article deserves a careful read and consideration. However, like any research, there are important limitations that we also need to consider. Over the next few posts I'll offer a summary of the article and what I see as its implications to the use of the Net Promoter Score by companies and the WOM marketing industry.

For starters, here's the abstract (due to copyright restrictions I won't post the article here; it can be accessed at your local university library*):

Managers commonly use customer feedback data to set goals and monitor performance on metrics such as “Top 2 Box” customer satisfaction scores and intention-to-repurchase” loyalty scores. However, analysts have advocated a number of different customer feedback metrics including average customer satisfaction scores and the number of “net promoters” among a firm’s customers. We empirically examine which commonly used and widely advocated customer feedback metrics are most valuable in predicting future business performance. Using American Customer Satisfaction Index data, we assess the linkages between six different satisfaction and loyalty metrics and COMPUSTAT and CRSP data-based measures of different dimensions of firms’ business performance over the period 1994–2000. Our results indicate that average satisfaction scores have the greatest value in predicting future business performance and that Top 2 Box satisfaction scores also have good predictive value. We also find that while repurchase likelihood and proportion of customers complaining have some predictive value depending on the specific dimension of business performance, metrics based on recommendation intentions (net promoters) and behavior (average number of recommendations) have little or no predictive value. Our results clearly indicate that recent prescriptions to focus customer feedback systems and metrics solely on customers’ recommendation intentions and behaviors are misguided.

Very exciting stuff! Let's dig in...

* You can find the article in Marketing Science, Vol. 25, No. 5, September–October 2006, pp. 426–439.

UPDATE: You can find a pre-press version of the article on Dr. Rego's site. [Thanks to Constantin Basturea for pointing this out!]

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Tags: Net Promoter Score word of mouth Word-of-Mouth Marketing WOM Loyalty marketing communication

Blogging Success Study Released!

2006-11-02T17:09:00.000-05:00

It's been a long time in the works, but finally released!

John Cass (Backbone Media) and I conducted a research study with my class in Advanced Organzational Communication (Spring 2006) on what makes for a successful blog. We identified a number of best practices and also five themes that cut across all the interviews:

• Culture: If a company has particular cultural traits worth revealing or a bad reputation it wants to repudiate, blogging can be an attractive option.
• Transparency: Critical to establishing credibility and trust with an audience. People want to see an honest portrayal of a company and know that there are not ulterior motives behind the blog. Blog audiences respect a willingness to disclose all points of view on a subject.
• Time: It takes a lot of time to set up, research and write a quality blog. Companies need to identify a person who has the time or whose schedule is freed up to make the time, or need to engage a group of people to share the responsibility.
• Dialogue: A company’s ability and willingness to engage in a dialogue with their customer base about topics that the customer base is interested in is critical to its blogging success.
• Entertaining writing style and personalization: A blogger’s writing style and how much they are willing to reveal about their life, experience and opinions brings human interest to a blog, helps build a personal connection with readers and will keep people reading.

You can download the study as a PDF (name/e-mail registration required) or read it online. The online report takes the form of a blog so that people can comment on individual sections and is hosted on the Scout blogging server.

Be sure to check out the summaries of the interviews with each blogger to learn more detail about each blogger's experience.

Thanks so much to all the bloggers who agreed to participate in the study, the students in my class who did the interviews, and the folks from Backbone Media (John Cass, Stephen Turcotte, Megan Dickinson, Kristine Munroe and Dave Alpert).

Northeastern University Press Release

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Tags: blogs blog study Northeastern University Backbone Media

Gimci, Nicolas Cage, and WOM Marketing in South Korea

2006-10-28T22:14:00.000-04:00

This dispatch comes from Seoul, South Korea. I have been here for the past few days at the invitation of Ms. Inus Hwang, CEO of Advantage Marketing Lab and founder of Azoomma.com, an online community dedicated to Korean housewives (currently there are about 600,000 members). I met Ms. Hwang last year at the 1st International WOM Marketing Conference in Hamburg, Germany. Since that time they have changed their name from Azoomma Marketing Lab to Advantage Marketing Lab as they broaden their WOM marketing program offerings for other products and services beyond Korean housewives.

For this trip I was invited to speak at the 3rd Annual Korean WOM Marketing Conference, which took place on Thursday. There were over 100 brand managers, press, and academics in attendance at the event. Apparently Seth Godin's book Purple Cow has been pretty popular here, and more and more companies are beginning to use WOM marketing techniques (see this article from the European magazine, Infomag, for a brief overview of the media and marketing landscape in South Korea including how WOM, buzz, and community marketing are being used [note that the article confuses terminology quite a bit]). There are a few other WOM firms in the country now, and at least two are WOMMA members. Additionally, about two weeks ago, there was a big article in a Korean newspaper about the Net Promoter Score, which was the first introduction to the metric for a lot of companies in South Korea.

The title of my talk was "Will the Real Word-of-Mouth Marketing Please Stand Up?". In my presentation I discussed five common misunderstandings that people have of WOM marketing:

Misunderstanding #1: WOM Marketing = Buzz Marketing = Viral Marketing (confusion about terminology and thinking that buzz and viral marketing represent the only forms of WOM marketing)
Misunderstanding #2: WOM Works Best in Stealth Mode (there have already been cases here of stealth marketing)
Misunderstanding #3: WOM Is Only Used for Launching New Products and Services (this is partially related to Misunderstanding #1 in that companies tend to focus on the shorter-term WOM strategies rather than the longer-term principles and techniques, such as community, evangelist, and grassroots marketing)
Misunderstanding #4: WOM Versus Advertising (the sense is that if you do WOM marketing you don't also use advertising or vice versa)
Misunderstanding #5: WOM Cannot Be Measured (here I discussed a number of differnt ways firms are measuring WOM marketing programs and ROI)

While in Korea I also learned a great deal about the culture, people, and cuisine. In terms of cuisine, for example, I have learned to appreciate Gimci, which is fermented vegetables and a staple of Korean meals. The sequencing of foods that are eaten is also very smart (for example, eating noodles or rice after meat, followed by tea, really helps to settle the stomach). My Korean vocabulary now stands at about 10 words (hello, thank you, nice to meet you, good bye, etc.). I learned about "bang culture" which is where there are a number of public rooms devoted to PC gaming, DVD viewing, conversations, and singing (see the recent article in the New York Sunday times on PC bangs; bang literally means "room"). I have also learned that many people in Korea think I look like Nicolas Cage (I guess I should take that as a compliment!).

Ms. Hwang and her staff at Advantage Marketing Lab have been wonderful hosts and it has been a memorable experience for me. Hopefully I will have the chance to visit again soon!

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Tags: WOM word of mouth Word-of-Mouth Marketing buzz marketing viral marketing marketing communication