A new study quantifying the effects of word of mouth has implications for all channels in the marketing mix, and should lead to a better focus on building recommendations and brand advocacy via paid and owned media, according to an industry panel at Social Media Week New York, on Tuesday.
Marketers now have the same hard numbers to quantify word of mouth as other disciplines and can make the case for this channel in the media mix, said Brad Fay, COO of Keller Fay Group, a market research firm that worked on the study, “Return on Word of Mouth,” from the Word of Mouth Marketing Association (WOMMA). This has the potential to change the way word of mouth is handled by marketers, Fay said.
“It is no longer an article of faith,” he said.
Word of mouth drives $6 trillion of annual consumer spending, according to the study, and is responsible for an average of 13 percent of sales, compared to 20 percent to 30 percent for the combined paid media spend of the average advertiser. It is also at least five times as effective as paid media in driving sales, the study found.
Marketers have always known word of mouth was valuable, but hadn’t had clear ROI measures before, said WOMMA’s president, Suzanne Fanning. She cited a Nielsen study that found 92 percent of consumers cited recommendations from friends and family as the most important factor in purchases, but added a WOMMA study found only 6 percent of marketers consider themselves experts in word of mouth. That reticence is due to their discomfort in finding relevant metrics, she said.
“It’s hard enough to measure in social media,” Fanning said. “It’s downright impossible offline.”
By applying marketing-mix modeling to the total marketing spend of six major marketers—including Weight Watchers, PepsiCo, and Discovery Communications—the WOMMA study was able to study word of mouth across three years of media spending, said Peter Storck, chairman of WOMMA’s research panel. The modeling allowed researchers to draw a more accurate picture of the reach of word of mouth and its ability to amplify the efforts of other marketing channels, said Storck, who is senior VP of research analytics for social marketing company House Party Inc.
The study found word of mouth can amplify traditional, paid media efforts, but it is often stronger in offline channels than online. This was not surprising, since word of mouth of friends and family, delivered in person or at events, is powerful, the panelists said.
Two-thirds of the word of mouth studied was direct conversations about brands and products, but another third amplified paid media, such as content marketing or TV advertising, Fay said.
Weight Watchers observed the effect play out last month when it advertised during the Super Bowl for the first time, said Hurley Lee, VP of digital and social. This amplification is important for a business such as Weight Watchers, which both advertises heavily and depends extensively on recommendations. The weight-loss company even draws on word of mouth for the testimonials in its advertising.
“How do you maintain relevancy? The best way is to have people talking about your brand,” Hurley said.
At the same time, word of mouth via online channels, such as social media and brands’ Web sites, is not a total loss since it can achieve scale that offline interactions can’t, Hurley noted. “It’s the combination of both,” she said.
Part of the difficulty in measuring word of mouth comes from differentiating channels where conversations play out, the panelists said. A big challenge to measuring social media comes from irrelevant information, said Erin Tavcag, partner at Converseon, a consultancy that also worked on the study. “You don’t want to count a bot sharing coupons,” he said.
“It’s a complicated mix of things going on,” added Beth Rockwood, senior VP of market resources at Discovery Communications. Even texting should count as a word-of-mouth interaction, especially among young people who use it extensively, she said.
With the understanding of the amplification impact, brands can now make the case for creating programs and content designed to spur word of mouth, knowing they will produce ROI.
But authenticity becomes a challenge when trying to harness word of mouth, Rockwood said. Part of that challenge is creating content that will work with the brand and impress consumers, she said, “giving them something to talk to other people about.”
Discovery, which has developed its annual Shark Week into a word-of-mouth bonanza, also has found ways to leverage that to create brand affinities with its advertisers. Rockwood noted the channel created a branded entertainment piece with Volkswagen that included a shark cage built like a Volkswagen Beetle. That piece caused an increase in conversations without viewer pushback, she said: “That’s not an easy thing to do.”
Marketers should turn their brands’ Web sites into the center of a community, adding shareable content that is not necessarily all about the brand, Fay said. Every time fans come to the site, they should find something new worth sharing, he said.
“If you’re hearing from a brand advocate that they like something, that’s a high bar,” Rockwood said.
Click on infographic to enlarge (PDF).