A New Method Of Measuring Word Of Mouth Marketing

Evaluating the impact and quantity of word of mouth marketing will help enterprises to make better use of this marketing method.

Consumers have always attached great importance to the opinions expressed directly to them. Marketers may spend millions of dollars on well-designed advertising campaigns, but what really makes consumers decide is often simple and free: word of mouth recommendation from trusted sources. As consumers who face too many product choices no longer pay attention to the bombardment of traditional marketing methods, word of mouth publicity quietly and effectively stands out.

In fact, in all purchase decisions, the most important factor behind 20% to 50% of decision making is word-of-mouth. Word of mouth is the most influential consumer when buying a product for the first time or when the product is relatively expensive.

But measuring and managing word of mouth is by no means an easy task. We believe that we can analyze word of mouth in order to understand exactly why it can play its role, and its influence can be measured by the "word-of-mouth value" index method that we call it, which is the index to measure the information ability of the brand to effectively influence consumers' purchasing decisions. Understanding how these information works and why it works can allow marketers to design a coordinated and consistent response to communicate the appropriate content to the right people in the right environment. This approach will have a great influence on consumers' recommendation, purchase and maintenance of loyal products.

A world dominated by consumers

The huge amount of information available now has significantly changed the balance of power between enterprises and consumers. As consumers get too much information, they are increasingly skeptical of traditional advertising and marketing activities led by enterprises, and increasingly like to make decisions independently and independently, and are not affected by the information of enterprise products.

This power is moving towards the structure. Consumer Tilting reflects the way people make decisions when buying and selling. Once consumers decide to buy a product, they will first identify a group of primary brands screened through product experience, recommendation or well-known marketing activities. When consumers collect product information from various sources and decide what products to buy, they will positively evaluate these and other brands. Then, their aftermarket experience will provide a basis for their next purchase decision. Despite the different degrees of word-of-mouth in this process, it is the only factor that affects consumers at every stage of the top three.

It is also one of the most disruptive factors. The role of word of mouth in promoting consumers to consider a brand or product is that the rising advertising expenditure can not be achieved at all. Its role is not a flash in the pan. Appropriate information will resonate and expand in interested circles, thereby affecting brand awareness, purchase rate and market share. The rise of online communities and online communication has significantly improved the possibility of producing significant and far-reaching effects. For example, in the mobile phone market, we find that the transmission of key positive or negative information can increase the market share of an enterprise by 10% or 20% over the next two years under the same circumstances. This effect also provides a basis for more systematic research and management of word of mouth.

Empirical word of mouth

Word of mouth is rather complex and has many possible roots and motives. We have identified three forms of word-of-mouth: Empirical word-of-mouth, secondary word of mouth and conscious word of mouth.

Empirical word of mouth is the most common and powerful form. It usually accounts for 50% to 80% of word of mouth activities in any given product category. It comes from the direct experience of consumers in certain products or services, and is largely due to deviations from the expectations of consumers. When products or services meet the expectations of consumers, they seldom complain or praise an enterprise. Airline complaints caused by lost luggage is a typical example of empirical word of mouth. It will adversely affect brand perception and ultimately affect brand value, thereby reducing audience acceptance of traditional marketing activities and damaging the positive word of mouth effect from other sources. Conversely, positive word of mouth can make products or services sail with the wind.

secondary Word of mouth

Marketing activities can also lead to word of mouth. When consumers directly feel the reputation of traditional marketing activities passed on to their information or advertised brands. The impact of these messages on consumers is usually more direct than advertising, because the coverage and influence of positive word of mouth marketing activities are relatively greater. When deciding which information and media portfolio can produce the greatest return on investment, marketers need to consider the direct effect and transmission effect of word of mouth.

Conscious word-of-mouth

Unlike the first two types of word-of-mouth, another common word of mouth is conscious word-of-mouth. For example, marketers can use celebrity endorsements to create a positive atmosphere for the launch of products. The number of companies that invest in conscious word of mouth is a minority, partly because its effectiveness is difficult to measure. Many marketers are not sure whether they can successfully launch promotional activities with conscious word of mouth.

For these three forms of word of mouth, marketers need to understand and measure their impact and financial results in two ways from the positive and negative aspects.

Word-of-mouth value

The value of computation starts with counting the recommended and discouraging times for a product. This method is attractive and relatively simple, but there is also a big challenge: marketers are hard to explain the variability of the impact of different types of word of mouth information. For consumers, the likelihood of buying a product due to family recommendation is significantly higher than that of strangers. These two recommendations can convey the same message, but their influence on the receiver is not the same. Our research shows that highly influential recommendations, such as information conveyed by trusted friends, are 50 times more likely to result in buying behavior than low impact recommendations.

In order to assess the impact of these different kinds of recommendation, we developed a method to calculate the word of mouth value, which multiplied by the average sales influence of a brand information by the number of brand information. This indicator not only tests the influence of these information, but also examines the total amount, so that marketers can accurately test the impact of these information on brand, individual promotion activities and the sales and market share of the entire enterprise (Table 1). This influence (that is, any verbal recommendation or discouraging ability to change purchasing behavior) reflects what information involves, what information is transmitted, and where it is said. This effect is different from product category.

The content conveyed by information is the primary driving force for the impact of word of mouth. In most product categories, if we want to influence the decision of consumers, the content of information must be directed against the important characteristics and functions of products or services. For example, in mobile phone products, design is more important than battery life. In skin care products, the word-of-mouth of packaging and composition is more influential than that of the products concerned. Marketers often create promotional activities around emotional orientation. However, we find that consumers tend to discuss functional information and form word of mouth.

The second key driving factor is the identity of the information transmitters: word of mouth recipients must trust the transmitters and believe that they really understand the products or services they are talking about. Our research has not found a homogeneous consumer group that has an influence in all kinds of products: the consumers who understand the automobile may have an influence on the buyers, but they can not affect consumers who buy beauty products. About 8%~10% consumers belong to what we call influential people. Influential people form 3 times the word of mouth information, and each information has 4 times more influence on the recipient's purchase decision than that of an influential person. About 1% of these people are influenced by digital technology. The most notable thing is bloggers, whose influence is enormous.

Finally, the regional environment of word-of-mouth is crucial to the influence of information. Compared with dispersed community communication, information coverage in a trusted and closely related circle is usually smaller, but more influential. Part of the reason is that people who trust their opinions are often closely related to members of the circles we value.

It is for this reason that the traditional way of providing advice on the table and the way it is online are still important. What really matters is a close circle of friends who trust each other.

Word of mouth value enables enterprises to understand the relative impact of word of mouth on brand and product market performance. Although marketers have always known that this effect may be very large, they may still be surprised once they really understand how powerful this influence is. For example, when Apple Corp's iPhone was launched in Germany, its share of word of mouth in mobile phone products (or how many consumers were talking about this kind of mobile phone) was about 10%, 1/3 less than that of the leading market. However, iPhone is also being launched in other countries. The information transmitted in Germany has 5 times its reputation impact. This means that iPhone's score of word of mouth value is 30% higher than that of market leading products, and the influential person who recommends iPhone is 3 times the recommended market leader. As a result, direct sales generated by iPhone's positive word of mouth are 6 times the sales generated by Apple Corp's paid marketing activities. After 24 months of launch, iPhone sales in Germany almost reached 1 million in one year.

The flexibility of word of mouth values allows us to measure its impact on businesses, products and brands, regardless of the product category or industry. Because it measures market performance, not just the amount of information, it can be used to identify what factors are driving or damaging the impact of word of mouth. It is essential for marketers to transform knowledge into strength.

Controlling and utilizing the power of word of mouth

The pursuit of excellence in word of mouth marketing will bring huge rewards and bring about sustainable competitive advantages. Few other marketing methods can match them.

However, many marketers have not done so. Some people worry that this method is not mature as a marketing discipline compared with the highly developed marketing management in such media as television and newspapers. Others worry that they cannot use extensive data or carefully adjust marketing tools that have been trained for decades. Those who are unsure of actively managing word of mouth should consider this: the cumulative earnings generated by excellent TV advertising (e.g., better than competitors) are relatively small. This is because all enterprises will actively manage their traditional marketing activities and have similar knowledge. Because the active management of word of mouth, the most powerful form of marketing, is so small that its potential revenue will be much greater.

Word-of-mouth management needs to start with understanding the value of word of mouth: what aspects of word-of-mouth value - who, what, or where - is most important for a product category. For example, for skin care, the key is "what"; for retail banks, the key is "who". Word of mouth value analysis can clarify the exact nature of influential people in a certain category, and point out the most influential information, background and circle. With these insights, enterprises can use the three forms we find: empirical, secondary and conscious word-of-mouth, and strive to form positive influence.

Although the importance of these causative factors varies from product to category, empirical word of mouth is the most important product category. Fundamentally speaking, the use of empirical word of mouth is to provide consumers with opportunities to share positive experiences and let their experiences resonate among audiences. Companies such as Miele and Lego build their reputation around products before they are launched, and enable consumers to participate in the product development process through online community support, thus forming a very influential early adopter. Constantly updating the product experience also helps to make use of empirical word of mouth, which is more likely for consumers to talk about it in the early stage of product life cycle. For this reason, product promotion or product improvement is very important for the formation of positive word of mouth. Companies can also maintain word of mouth after the launch of the product: Apple Corp maintains its interest in iPhone and its excitement through its app store, and keeps changing the content created by users to maintain the continuous dissemination of positive word of mouth.

Most enterprises actively use in-depth insights into customer satisfaction when developing new products and services. However, satisfied customer groups may not be enough to form word of mouth. To form a positive word of mouth with actual influence, customer experience is not only significantly higher than expected, but also higher than expectations in terms of what customers value and what they may talk about. For example, although battery life is a key driver of satisfaction for mobile phone consumers, they talk about this factor less than other features such as design and ease of use. To transform consumers into effective marketing carriers, enterprises need to perform well in terms of product and service attributes with inherent reputation.

Managing the secondary word of mouth requires deep insights from the concept of word of mouth value to maximize the return on marketing activities. By understanding the word-of-mouth effect of various channels and information and distributing marketing resources accordingly, enterprises can enable consumers to disseminate their marketing information and improve their coverage and influence. In fact, McKinsey's research shows that sales of word of mouth among consumers, such as skin care and cell phones, are 2 times more than that of paid advertising.

There are two factors contributing to creating positive secondary word of mouth: interaction and creativity. These two factors are interrelated, and they are especially important for innovative, relatively low brand brands that are usually hard to attract consumers' attention. A case in which companies successfully applied this approach is Cadbury, a British candy manufacturer. Its "one cup and a half" advertising campaign is a comprehensive and creative integration of online and traditional marketing, promoting consumer interaction and sales. The promotional campaign started with a TV advertisement featuring a gorilla playing Phil Collins's signature song in drums. These two factors are juxtaposed together to produce immediate impact. This concept has touched consumers, who are willing to browse the advertisement online and make their own amateur version, which has triggered the consumer's imitation of YouTube. Less than three months after the advertising campaign, the online browsing volume of videos has exceeded 6 million times. The annual sales volume of Cadbury milk chocolate has increased by more than 9%, and the brand's positive cognition of consumers has increased by about 20%.

The core of conscious word of mouth promotion is to identify people who have the influence of brand and product advocates. Enterprises can not accurately control the content that consumers tell others. However, a highly ambitious marketer can use in-depth insights on word of mouth value from the promotion of secondary word of mouth to the promotion of conscious word of mouth.

　　 enterprise The type of promotional activities that can be chosen depends on how far the marketers can identify and lock in influential people. Marketers, such as mobile operators, who are able to carry out one-to-one marketing, have exceptional advantages and can implement effective, easy to manipulate and promote wom. Mobile phone operators have accurate customer data and can accurately identify influential people who understand products and tell many people and provide them with the advice they want to believe. This means that information can be sent to individuals who are most likely to spread positive word of mouth through their social networks. With the spread of information, this method can produce a tremendous impact on word of mouth, similar to the ripple effect of a thousand waves.

It is necessary to adopt an alternative way to accurately identify influential enterprises. For example, although Red Bull does not send text messages to specific consumers, it successfully organizes effective awareness promotion campaigns with scientific knowledge. After identifying the influential people in different target market segments, the energy beverage company is convinced that celebrities and other opinion leaders can usually transmit appropriate information through activities. Although Red Bull is not sure who will attend the event, it knows that the attendees are the consumers they are looking for, and the positive information they transmit in their social networks can bring an excellent return for the marketing investment of the enterprise.

Marketers have always known about the effectiveness of word of mouth, and designing effective word of mouth promotion activities obviously has its knack. However, the scientific truth behind word of mouth value helps to reveal how to sharpen and apply this art: it shows what information consumers may pass and the influence of these information, so that marketers can estimate the actual impact of word of mouth on brand value and sales volume. These insights are of great significance to companies that want to make use of the potential of word of mouth and achieve higher returns on marketing investment. (author profile: Jacques Bughin is a senior director of McKinsey Brussels branch, Jonathan Doogan is deputy director of London branch, Ole J.rgen Vetvik is a director of Oslo branch. )