Measuring Word of Mouth

We all know that Word of Mouth is important  -- influencing between 20 and 50% of all decision, depending on whose research you're reading. Probably the easiest way to measure your "Word of Mouth" campaign is to use coupons. A coupon can easily go viral on Twitter and be spread out to thousands of people in less than a week. If you're using network mapping software, you can evenly see the connections and influencers that are helping spread the coupon around.

Another perspective is offered byJacques Bughin, Jonathan Doogan, and Ole Jørgen Vetvik

in a recent McKinsey newsletter:

While word of mouth is undeniably complex and has a multitude of potential origins and motivations, we have identified three forms of word of mouth that marketers should understand: experiential, consequential, and intentional.

Experiential

Experiential word of mouth is the most common and powerful form, typically accounting for 50 to 80 percent of word-of-mouth activity in any given product category. It results from a consumer’s direct experience with a product or service, largely when that experience deviates from what’s expected. (Consumers rarely complain about or praise a company when they receive what they expect.) Complaints when airlines lose luggage are a classic example of experiential word of mouth, which adversely affects brand sentiment and, ultimately, equity, reducing both receptiveness to traditional marketing and the effect of positive word of mouth from other sources. Positive word of mouth, on the other hand, can generate a tailwind for a product or service.

Consequential

Marketing activities also can trigger word of mouth. The most common is what we call consequential word of mouth, which occurs when consumers directly exposed to traditional marketing campaigns pass on messages about them or brands they publicize. The impact of those messages on consumers is often stronger than the direct effect of advertisements, because marketing campaigns that trigger positive word of mouth have comparatively higher campaign reach and influence. Marketers need to consider both the direct and the pass-on effects of word of mouth when determining the message and media mix that maximizes the return on their investments.

Intentional

A less common form of word of mouth is intentional—for example, when marketers use celebrity endorsements to trigger positive buzz for product launches. Few companies invest in generating intentional word of mouth, partly because its effects are difficult to measure and because many marketers are unsure if they can successfully execute intentional word-of-mouth campaigns.

What marketers need for all three forms of word of mouth is a way to understand and measure its impact and financial ramifications, both good and bad.

Word-of-mouth equity

A starting point has been to count the number of recommendations and dissuasions for a given product. There’s an appealing power and simplicity to this approach, but also a challenge: it’s difficult for marketers to account for variability in the power of different kinds of word-of-mouth messages. After all, a consumer is significantly more likely to buy a product as a result of a recommendation made by a family member than by a stranger. These two kinds of recommendations constitute a single message, yet the difference in their impact on the receiver’s behavior is immense. In fact, our research shows that a high-impact recommendation—from a trusted friend conveying a relevant message, for example—is up to 50 times more likely to trigger a purchase than is a low-impact recommendation.

To assess the impact of these different kinds of recommendations, we developed a way to calculate what we call word-of-mouth equity. It represents the average sales impact of a brand message multiplied by the number of word-of-mouth messages. By looking at the impact—as well as the volume—of these messages, this metric lets a marketer accurately test their effect on sales and market share for brands, individual campaigns, and companies as a whole (Exhibit 2). That impact—in other words, the ability of any one word-of-mouth recommendation or dissuasion to change behavior—reflects what is said, who says it, and where it is said. It also varies by product category.

What’s said is the primary driver of word-of-mouth impact. Across most product categories, we found that the content of a message must address important product or service features if it is to influence consumer decisions. In the mobile-phone category, for example, design is more important than battery life. In skin care, packaging and ingredients create more powerful word of mouth than do emotional messages about how a product makes people feel. Marketers tend to build campaigns around emotional positioning, yet we found that consumers actually tend to talk—and generate buzz—about functional messages.

The second critical driver is the identity of the person who sends a message: the word-of-mouth receiver must trust the sender and believe that he or she really knows the product or service in question. Our research does not identify a homogenous group of consumers who are influential across categories: consumers who know cars might influence car buyers but not consumers shopping for beauty products. About 8 to 10 percent of consumers are what we call influentials, whose common factor is trust and competence. Influentials typically generate three times more word-of-mouth messages than noninfluentials do, and each message has four times more impact on a recipient’s purchasing decision. About 1 percent of these people are digital influentials—most notably, bloggers—with disproportionate power.

Finally, the environment where word of mouth circulates is crucial to the power of messages. Typically, messages passed within tight, trusted networks have less reach but greater impact than those circulated through dispersed communities—in part, because there’s usually a high correlation between people whose opinions we trust and the members of networks we most value. That’s why old-fashioned kitchen table recommendations and their online equivalents remain so important. After all, a person with 300 friends on Facebook may happily ignore the advice of 290 of them. It’s the small, close-knit network of trusted friends that has the real influence.

Word-of-mouth equity empowers companies by allowing them to understand word of mouth’s relative impact on brand and product performance. While marketers have always known that the impact can be significant, they may be surprised to learn just how powerful it really is. When Apple’s iPhone was launched in Germany, for example, its share of word-of-mouth volume in the mobile-phone category—or how many consumers were talking about it—was about 10 percent, or a third less than that of the market leader. Yet the iPhone had launched in other countries, and the buzz accompanying those messages in Germany was about five times more powerful than average. This meant the iPhone’s word-of-mouth equity score was 30 percent higher than that of the market leader, with three times more influentials recommending the iPhone over leading handsets. As a result, sales directly attributable to the positive word of mouth surrounding the iPhone outstripped those attributable to Apple’s paid marketing sixfold. Within 24 months of launch, the iPhone was selling almost one million units a year in Germany.

The flexibility of word-of-mouth equity allows us to gauge the word-of-mouth impact of companies, products, and brands regardless of the category or industry. And because it measures performance rather than the sheer volume of messages, it can be used to identify what’s driving—and hurting—word-of-mouth impact. Both insights are critical if marketers are to convert knowledge into power.

What this says is that more than ever, what we do and what we measure isn't just "PR" or "Social Media" -- but customer opinion, customer behavior and its impact on business.

Comments

[memphis cosmetic dentistry]

I feel like you could probably teach a class on how to make a great blog. This is fantastic! I have to say, what really got me was your design. You certainly know how to make your blog more than just a rant about an issue. You've made it possible for people to connect. Good for you, because not that many people know what they're doing.

[dentist Sydney City dental implants]

"What this says is that more than ever, what we do and what we measure isn't just "PR" or "Social Media" -- but customer opinion, customer behavior and its impact on business." I absolutely agree to this. It doesn't matter if you have a high PR or your site is number one on search engines. If you get bad reviews constantly, you can expect your business to tumble down.

[free dental care]

i like this part of blog: ""While word of mouth is undeniably complex and has a multitude of potential origins and motivations, we have identified three forms of word of mouth that marketers should understand: experiential, consequential, and intentional.""

[Sara Waltemire]

It is clear that word of mouth information has a huge influence on people's buying decisions. Being able to measure this impact can clearly help businesses communicate with opinion leaders and be sure to target influential group members. This is great for positive word of mouth, but I wonder how you can use this measure information to counteract negative word of mouth. What tactics do you think are the best response to negative word of mouth about your company?