A measure of the value of word of mouth

Consumers have always paid special attention to the opinions expressed directly to them. Marketers may spend millions of dollars on well-designed advertising campaigns, but what often makes consumers determined is often simple and free stuff: word-of-mouth recommendations from trusted sources. As consumers face too many product choices no longer ignore the traditional marketing methods of indiscriminate bombing, word of mouth publicity is quietly and effectively stand out.

In fact, the first factor behind any decision to make 20% to 50% of all buying decisions is word of mouth. Word of mouth is most influential when consumers first buy a product or when the product is relatively expensive - because in this case people conduct extensive investigations, seek more advice, and Consider the longer time. Word of mouth influence may also continue to rise: the digital revolution not only expanded its reach, speeding up its spread, making word of mouth is no longer just a close act, no longer just one-on-one communication. Today's word of mouth is spread in a one-to-many format: People post product reviews online and communicate their opinions through social networks. Some customers even create websites or blogs to praise or punish certain brands.

As the number, size and characteristics of online communities have improved and intensified, marketers have come to recognize the growing importance of word of mouth. However, measuring and managing word of mouth is not an easy task. In our opinion, word of mouth can be profiled to see exactly why it works; its impact can be measured by what we call the "word of mouth" index, a measure of how effectively brands influence consumer buying decisions Information capacity indicators. Understanding how and why this information works helps marketers design coordinated and consistent responses so that the right content is delivered to the right people in the right context. This practice can have a huge impact on what consumers recommend, buy and stay loyal.

Consumer-led world

The immense amount of information currently available has dramatically changed the balance of power between businesses and consumers. As consumers gain too much information, they increasingly suspect that traditional advertising and marketing campaigns run by the business are increasingly preferring to make purchasing decisions that are largely independent of the company's product information.

This power is structurally tilted toward consumers, reflecting the way people make purchasing decisions nowadays. Once consumers decide to buy a product, they will first identify a group of primaries that have been screened through marketing campaigns that include product experience, referrals, or fame. As consumers gather product information from a variety of sources and decide what products to buy, they evaluate these and other brands aggressively. Then, their after-sales experience will provide the basis for their next purchase decision. Although word of mouth has a different degree of impact at all stages of the process (Exhibit 1), it is the only factor that reaches consumers at every stage.

It is also one of the most disruptive factors. Word of mouth to promote consumers consider a particular brand or product's role is that rising advertising spending simply can not be achieved. Its role is not short-lived. Appropriate information resonates and expands in the circles of interest, affecting brand awareness, buying rate, and market share. The rise of online communities and online ways of communication has dramatically increased the likelihood of significant and far-reaching effects. In the mobile phone market, for example, we find that the dissemination of critical positive or negative information can increase a firm's market share by 10% or 20% over the course of two years, among other things. This effect also provides the basis for more systematic research and management of word of mouth.

Understand word of mouth

Word of mouth is undoubtedly complex and possesses many possible roots and motivations, and we identify three forms of word of mouth that marketers should understand: empirically, secondarily, and consciously.

Empirical reputation

Empirical reputation is the most common and powerful form that typically accounts for 50% to 80% of word-of-mouth activity in any given product category. It comes from the direct consumer experience of a product or service, largely in the experience deviated from the expectations of consumers arising. (When a product or service meets consumers' expectations, they seldom complain or praise a business.) Complaints lodged by airline baggage are typical examples of empirical word-of-mouth that have a negative impact on brand perception and Ultimately affecting brand value, thereby reducing the audience's acceptance of traditional marketing campaigns and undermining the positive word of mouth from other sources. In turn, a positive word-of-mouth will make your product or service down the road.

Secondary word of mouth

Marketing activities can also lead to word of mouth. The most common is what we call the secondary word of mouth: the public praise that emerges when consumers directly experience the messages or brand names that traditional campaigns convey to them. The impact of these messages on consumers is often greater than the direct impact of advertising, as the coverage and impact of marketing campaigns that trigger positive word-of-mouth communication is greater. Marketers need to consider the immediate effect of word-of-mouth and the delivery effect when deciding what kind of information and media mix can generate the greatest ROI.

Conscious word of mouth

Another word of mouth that is less common than the first two forms of word of mouth is a conscious word of mouth - for example, marketers can use celebrity endorsements to create a positive atmosphere for product launches. Part of the reason for investing in making a conscious word of mouth is its lack of measurability, and many marketers are not convinced that they can successfully launch awareness campaigns.

For all three forms of word-of-mouth, marketers need to understand and measure their impact and financial results in both the right and the left ways in the right way.

Word of mouth value

Calculated value begins with counting the number of recommendations and discounts for a product. This approach is somewhat appealing and straightforward, but there is also a big challenge: marketers struggle to explain the variability in the impact of different kinds of word-of-mouth information. Obviously, for consumers, the likelihood of buying a product due to family referrals is significantly higher than that of strangers. Both of these recommendations convey the same message, but their impact on the recipient is quite different. In fact, our research shows that highly influential recommendations (for example, from relevant messages from trusted friends) lead to a 50 times more likelihood of buying behavior than low-impact recommendations.

To assess the impact of these different kinds of recommendations, we developed a way to calculate what we call word of mouth, which multiplies the amount of brand information by the average sales impact of a brand message. This metric not only examines the impact of these messages but also examines their aggregates to allow marketers to accurately test the impact of these messages on branding, outreach activities, and sales and market share across the enterprise (Exhibit 2). This effect (that is, any verbal recommendation or discouragement that can alter the purchasing behavior) reflects what the message is about, who delivered the message, and where it is said. This effect varies by product category.

The message passed is the primary driver of word-of-mouth impact. We all find that in most product categories, the content of information must address the key features and functions of a product or service if it is to influence consumer decisions. For example, in mobile phones, designing is more important than battery life. In skin care products, word of mouth about packaging and ingredients is more influential than emotional information about what people feel about products. Marketers tend to focus on emotional positioning to create promotional activities, however, we found that consumers actually tend to discuss functional information and make word of mouth.

The second key driver is the identity of the sender of the message: The recipient of the word of mouth must trust the deliverer and believe he or she really understands the product or service in question. Our research did not find a homogeneous consumer group that is influential across a range of products: Consumers who understand cars may have an impact on car buyers, but they should not affect consumers who buy beauty products. About 8% to 10% of consumers belong to what we call influential people, and their common characteristic is the ability to be credible and influential. Influential word-of-mouth information is often three times as common as no-influencers, with each message four times as likely to impact the recipient's purchasing decisions as no-one. About 1% of these people exert their influence through digital technologies, most notably bloggers, whose influence is enormous.

Finally, the geographical environment in which word of mouth is spread is crucial to the power of information. The coverage of information that is circulated in a trusting, closely related community is usually smaller, but more influential than dissemination through decentralized communities, in part because we trust the opinions of those with the circles we value Members, usually closely related. It is for this reason that the traditional ways of providing recommendations on the table, and similar online approaches, are still important. After all, having 300 friends on Facebook may easily overlook 290 of them. What really makes an impact is a small circle of close friends who trust each other.

The value of word of mouth allows companies to understand the relative impact of word-of-mouth on the market performance of brands and products. Although marketers have long been aware that this impact can be significant, they may still be surprised once they have a real sense of how well that influence is. For example, when Apple's iPhone was launched in Germany, its share of the total number of word-of-mouth (or how many consumers talk about it) in handsets was about 10%, one-third less than market-leading products. However, the iPhone is also available in other countries, and the message delivered in Germany is five times more influential than the average. This means that the iPhone's word-of-mouth value score is 30% higher than market-leading products, and those who recommend the iPhone are three times more likely to recommend market-leading handsets. As a result, the direct sales generated by the iPhone's positive word of mouth are six times the sales generated by Apple's paid marketing campaigns. After 24 months of launch, iPhone sales in Germany almost reached one million a year.

The flexibility of word of mouth value allows us to measure its impact on the enterprise, product, and brand, regardless of the product category or industry in which it is located. Because it measures market performance, not just the amount of information, it can be used to tell what is driving or damaging word-of-mouth influence. Marketers want to turn knowledge into strength, both of which are crucial insights.

Control and use the power of word of mouth

Pursuing excellence in word-of-mouth marketing offers huge rewards that deliver a sustainable and significant competitive advantage, and few other marketing methods match. However, many marketers have not done so. Some worry that this approach is not yet mature as a marketing discipline when compared to highly developed marketing management in media such as television and newspapers. Still others fear that they can not access a wide range of data or fine-tune marketing tools that have been tempered for decades. Consider this for those who are unsure about managing word of mouth positively: the cumulative gains from outperforming competitors through superior television advertising are relatively small. This is because all businesses actively manage their traditional marketing activities and have similar knowledge. With so few companies actively managing word of mouth, the most powerful form of marketing, the potential benefits are much greater.

Managing word of mouth needs to begin 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, the key for skin care is "what"; for retail banks, the key is "who". The WOM can shed some light on the exact nature of influential people in a particular category, highlighting the most influential information, context, and circles. Having mastered these insights, companies can apply the three forms we find: empiricist, secondary, and conscious word of mouth to work hard to create a positive impact.

Although the importance of these triggers varies by product category, empirical word-of-mouth is the most important for each product category. Fundamentally speaking, using empirical word of mouth is to provide consumers with the opportunity to share positive experiences and resonate their experiences with the audience. Businesses such as Miele and Lego have built a reputation around the launch of the product and are engaging early adopters with high impact by engaging consumers in the product development process with the support of an online community. Constantly refreshing the product experience also helps to leverage empirical word of mouth - consumers are more likely to talk about them early in the product life cycle; it is for this reason that a product launch or product improvement has a positive impact on creating a positive Important. Businesses can also maintain their word of mouth after product launch: Apple maintains interest and excitement about the iPhone through its application store, and changing user-created content helps keep positive word of mouth.

Most companies actively apply insights about customer satisfaction when developing new products and services. However, a satisfied customer base may not be enough for word of mouth. For a positive, word of mouth with a real impact, the customer experience is not only significantly above expectations, but also above expectations the client values ​​and what he or she may be talking about. For example, while battery life is a key satisfaction driver for handset consumers, they talk about this factor less frequently than other product features, such as design and ease of use. To transform consumers into effective marketing vehicles, organizations need to excel at the product and service attributes that have the potential to be inherently word-of-mouth.

Management of secondary word of mouth requires the use of the insights provided by the word-of-mouth concept to maximize the return on marketing activity. By understanding the word-of-mouth effects of the various channels and information used and by allocating marketing resources accordingly, companies can enable consumers to spread their marketing messages and increase their reach and reach. In fact, McKinsey's research shows that in word-of-mouth-driven consumer-driven sales, consumer word-of-mouth sales generated in sales of multiple products such as skin care and cell phones double the amount of paid advertising.

There are two factors that help to create positive secondary word of mouth: interactivity and creativity. These two factors are interrelated and they are especially important for brands that are relatively innova- tive and often difficult to capture in the consumer's mind. One example of the successful use of this practice by businesses is the British candy maker Cadbury, whose "one-and-a-half" advertising campaign has carefully and creatively integrated online and traditional marketing that drives consumer interaction and sales.

The campaign was started on a television commercial featuring a gorilla playing Phil Collins's iconic song on drums. These two factors are weirdly juxtaposed to produce immediate impact. The concept touched consumers and they were willing to browse the ad online and create their own amateur version, triggering a consumer craze on YouTube. With fewer than three months of on-line advertising, more than 6 million video views were online and Cadbury milk chocolate sales increased more than 9% annually, boosting the brand's positive perception among consumers by about 20%.

The heart of a conscious word-of-mouth promotion is determining who has the influence of a brand and product advocate. Of course, businesses can not accurately control what consumers are telling others about; however, aspiring marketers can use insights on the value of word of mouth to move from secondary word of mouth to awareness campaigns.

The type of promotion an organization can choose depends on the extent to which marketers can identify and influence influential people. Marketers with one-to-one marketing, such as mobile phone operators, have the unique advantage of implementing effective and user-friendly awareness-building word-of-mouth promotions. Mobile operators have accurate customer data that accurately identifies influential people who know the product, tell many and give them what they want to believe. This means that information can be sent to specific individuals who are most likely to spread positive word of mouth through their social networks. With the spread of information, this method can have a huge word-of-mouth impact, similar to the ripple effect of a stone struck by a stone.

Businesses that can not accurately identify influential people must adopt alternative approaches. For example, although Red Bull did not text messages to specific consumers, it successfully used scientific knowledge to organize effective awareness-building word-of-mouth campaigns. After identifying influential players in different target segments, the energy beverage firm is confident that celebrities and other opinion leaders can often deliver the right message by engaging in an activity. Although Red Bull can not ensure who will attend the event, it knows that the attendee is the type of consumer it is looking for and that the positive information they deliver in their social networks can provide a good return on the marketing investment for the business.

Marketers always understand the effect of word of mouth, the design of effective word-of-mouth promotion activities clearly have its know-how. However, the scientific truth behind word-of-mouth values ​​has helped to shed light on how to sharpen and apply this art: it shows what information consumers may convey and the power of the information to enable marketers to estimate the impact of word-of-mouth on brand value and sales Actual impact. These insights are important for businesses that want to capitalize on the potential of word-of-mouth and drive a higher return on marketing investment.

About the Author:

Jacques Bughin is a senior director of the McKinsey office in Brussels, Jonathan Doogan is an associate director in London and Ole Jørgen Vetvik is a director in the Oslo branch.