The impact of word-of-mouth marketing: a McKinsey report

Tweet

word-of-mouthWe’ve been extolling the virtues of word-of-mouth marketing over big-budget advertising for some time now, and when a firm of consultants like McKinsey start doing the same thing it really feels like our message is hitting home.

A recent article in McKinsey Quarterly looked at the impact of word-of-mouth-marketing for businesses and how companies can take better advantage of buzz.

The article shows how many marketers are spending millions of dollars on elaborate advertising campaigns when often what’s really needed to help influence consumers is a  “word-of-mouth recommendation from a trusted source” which “cuts through the noise” of traditional marketing methods.

This is nothing new to us here at FreshNetworks. We’ve always said that online communities and social networks amplify word-of-mouth and that the right message can resonate and expand, affecting brand perceptions and increasing sales. But what is interesting is the way the article looks at at the impact of word-of-mouth marketing - or, what McKinsey term, “word-of-mouth equity”.

Word-of-mouth equity is a brand’s power to generate messages that influence the consumer’s decision to purchase. In essence, this is the average sales impact of a brand message multiplied by the number of word-of-mouth messages.

When assessing the impact of word-of-mouth marketing the following factors need to be taken into account:

1. What’s being said

In order to influence consumer decisions a successful word-of-mouth message should address important products or service features. (While marketers tend to build campaigns around emotional positioning, consumers actually tend to talk—and generate buzz—about functional messages).

2. The identity of the person who sends the message

The word-of-mouth receiver must trust the sender and believe that they really know the product or service in question. Otherwise that message will not trusted or spread any further.

3. The environment where the message is circulated.

Messages passed within tight, trusted networks have less reach but a greater impact than those circulated through dispersed communities (Think about the difference in hearing an opinion from someone you know and trust, to someone you’ve just met on the street), so there’s usually a high correlation between people whose opinions are trusted and the members of networks that are most valued.

If businesses take these key driving forces into account when pursuing excellence in word-of-mouth marketing, the potential benefits are huge. Yet many marketers avoid actively using word-of-mouth as it’s seen as an immature and somewhat unsophisticated approach to marketing.

As a starting point, marketers should look at word-of-mouth through social media. Social media monitoring can be used to track how the message is being spread online as well as the impact it is having on your brand or business. Marketers should also engage in social networks and online communities where they can help guide and stimulate word-of-mouth by interacting with customers and people who are interested in their business or services.  Any negativity or derogatory comments can be addressed and managed in an appropriate and timely manner and, more importantly, any good comments and recommendations will be broadcast to the entire online universe. Now that’s really spreading the word.

The McKinsey article is our Required Reading at FreshNetworks this week, and you can read the full article online.

Social media drives global product recall

Tweet

Not a day for MacLaren

Not a day for MacLaren

Maclaren has become the latest victim of social media activism. They have joined a growing list of companies to have suffered at the hands of bloggers and Tweeters [Twitterers?].

I find this story interesting for two reasons:

  1. It highlights how social media jumps geographical boundaries.
  2. It reminds me how much Social Media experts love to hype these effects.


Maclaren is a UK manufacturer of prams. On Tuesday they announced the recall of 1M baby pushchairs in the US. This was after 15 reports of injuries to children’s fingers. They also offered US customers free repair kits.

However, despite having identical products in both UK and US markets, in the UK, rather than a recall or an offer of repair kits, they simply assured parents not to worry about it.

It didn’t take long for social networks and blogging sites to react. Some created email templates to send to the firm and even David Milliband, UK Foreign Secretary, referenced the debate in a Tweet.

So 3 days on and Maclaren has adopted an identical policy in the UK.

Conclusions
On one hand the social media part of this is a big deal. The Financial Times wrote about it and the company has changed a policy that may have a huge impact on their bottom line. All thanks to social networks spanning the globe.

On the other hand, they moved pretty quickly and the real story here is the recall, not the social media impact. They listened to what was said on blogs and Twitter and before the end of the week had changed their policy. I’d call that good social media monitoring and pretty speedy action for a large company.

And that brings me to my second point: the social media echo-chamber can blow these things out of proportion. It annoys me when I read blogs proclaiming Armageddon after cases like this. Sure, this has been a really critical week for Maclaren. One can only imagine the anguish throughout the business. Yes, there is now one more company where social media has made it to the boardroom. But they did not commit a massive social media faux pas. They reacted with common sense after taking a little time to reflect.

I suspect 90% of customers will probably not be aware of the hesitation that came ahead of the policy change. In a month’s time this will be remembered as just a recall story.

Why all brands can benefit from buzz tracking (not just the X-Factor)

Tweet

Science buzz!!!
Image by Unhindered by Talent via Flickr

On Sunday, lots of people were talking about Dannii, Danyl and instant X-Factor feedback. If you weren’t one of them (or if you’re not in the UK) let me quickly recap: on X-Factor, a talent / singing / reality TV programme, one of the judges, Dannii Minogue, brought up the sexuality of contestant Danyl when she was supposed to be commenting on his performance on stage. There has been a lot discussed about this and we posted about how Twitter is a great barometer and feedback mechanism in this kind of situation, how the brand that is X-Factor was able, almost immediately, to know what was being said about them and to plan how they should respond.

Like any good brand, the X-Factor on Saturday night would have benefited greatly from buzz tracking. From watching, tracking and analysing what was being said in real time. Analysing the extent to which the sentiments being expressed were positive, or negative, finding particularly dense areas of discussions and helping the brand to identify both what is being said and also where it is being said.

Buzz tracking really is a powerful tool for a brand, both because of the information it can reveal, but also because of the issues it raises that a brand needs to deal with. Tracking and monitoring what people are saying about your brand, products and services will allow you to know, in real-time, when something has happened that needs rectifying, or when something is said that you can use to amplify positive word of mouth about your brand. Knowing the extent to which your brand is being discussed positively or negatively provides a benchmark for you to monitor, and if you track it overtime you will start to see the impact of things you do and say, as a brand, on how people are discussing you.

And this information is very powerful. Both for making immediate decisions, and for planning and monitoring in the long-term. When a brand has a bad experience, and people are talking negatively about it (as happened to brand X-Factor on Saturday night), an effective buzz monitoring strategy will alert you to this shift in sentiment and allow you to identify what has caused this. You are then able to decide first if you want to respond and then how. You can then monitor the impact your response is having and amend or strengthen is as necessary. This information drastically shortens the time brands need to respond and so can have a very positive effect on your ability to resolve what is happening.

In the long-term, buzz tracking allows a brand to understand seasonal changes in it’s image in social media, and to show the impact that various on and offline activities have on these discussions. Work that we have done at FreshNetworks for brands in the travel industry, for example, shows that people tend to be more positive about travel brands at certain times of the year (typically when they are thinking of going on holiday or when they just return) and has helped to show the impact that TV advertising campaigns have had on the positive sentiment expressed about a brand online.

So buzz tracking is a powerful tool for any brand, both for what it tells you and for what it allows you to do. It is an information resource, and one that, if used correctly, can give you a real-time understanding of what is being said about your brand and how people are feeling about it. This kind of information is the ammunition any brand needs to inform its own social media strategy and how it should react on a case-by-case basis. Rather than have to wait to see how an issue plays out over a few days, brands can now get a real understanding of how people feel in real time and then respond to it.

Project Gaydar and online privacy (or what you might be telling the world)

Tweet

Speak No Evil, See No Evil, Hear No Evil
Image by Alicakes* via Flickr

An experiment by students at MIT has shown that they were able to ‘successfully’ predict the sexuality of people based on their friends on Facebook. The so-called ‘Project Gaydar’* showed that by looking at information that a person’s friends share online (in this case, their gender and sexual preferences) they were able to learn something about an individual themselves, even if their profile had high levels of privacy.

On one hand this may not be ground-breaking research - people tend to be friends with people who have similar interests to them and so it might be expected that gay men are likely to have a higher than average proportion of gay male friends. However, the research does highlight, again, the privacy issues that people need to think about when using social networks, and when sharing information online.

The ongoing growth of social networks and online communities is actually the tale of the ongoing growth of people sharing information online. This is a good thing. People are connecting with friends old and new, and are engaging with people and organisations who have similar interests, face similar challenges or are discussing similar questions. This sharing of information is unprecedented. It allows people to get advice and recommendations from people like them, and from people who are in similar situations. This is a huge benefit to individuals and organisations alike, but this sharing of information does, of course, mean that people are sharing things about themselves with anybody who may stumble cross the content they have added. And if people are able to put together your contributions to various communities and sites, they may know more about you than you realise.

That people can read things that you are sharing online should be no surprise to anybody. But that people can analyse your connections and the various contributions you make across the web, now and in the past, means that they can, if they so choose, build up a fairly comprehensive picture. What the MIT students did with just one facet of somebody’s life (their sexuality) could be repeated to build a much more complete picture of people using the information they leave across social networks and online communities. That this surprises people is a sign of the maturity of social networking, and online communities more broadly asa social phenomenon.

People are, in many cases, just using online communities as extensions of their offline activity. They are doing old things in new ways. Meeting people, talking to friends, solving problems, sharing advice. The real power of social media is that it is a large collection of information that is connected to people, organisations or places, and that is archived and kept for posterity. It can be sorted, added to, amended and changed by the person who originally contributed it or by others. People are associating themselves with data in a vast information resource, just by doing what they will do anyway.

This is, of course, the power of social media and why it offers so much to us all. But many people are still thinking of it as just a new medium through which to do old things. That is why they don’t realise the full extent of what they are sharing (and why this can be a powerful and good thing) and why they are shocked by the findings of studies such as ‘Project Gaydar’ at MIT.

* You can read the full paper here - Gaydar: Facebook friendships expose sexual orientation

What to do once your firm’s social media policy is written

Tweet

Image by Crystl via Flickr

A couple of weeks ago, we wrote about how to write your firm’s social media policy. How it was important, first and foremost, for firms to have a social media policy. And  that it is best to involve employees throughout the process of developing and implementing it.

For any firm, a social media policy is sensible. Your employees are already all using social media, they are talking to each other on their, they  might say who they work for, they are giving advice to friends and maybe to customers. Having a vibrant and active set of employees online is great for any firm, but a simple set of guidelines helps both the brand and also the employees.

But once you have your social media policy written, that’s not the end of the story. It should be a living document, and critically one that your employees buy into an believe in. You want use of social media to become part of your employees lives. And you want your brand to benefit from this involvement, from having employees active in social media and from having conversations about them, you and your brand. So writing a policy is just the first step. Below are four steps to help ensure that, once you have it written, your firm’s social media strategy stays relevant and beneficial to your organisation.

1. Make it a visible, shareable document

The main purpose of any social media strategy should be to encourage employees to use social media, to help them do this, and to help them do it in a way that protects them and the brand they work for. As such it isn’t so much a static policy to be filed away somewhere; rather, it should be a living document that is easy for people to find, read and make suggestions for.

2. Have an internal social media champion

Have an internal social media champion in your firm. Or have many. They should be the first port of call for people  if they have a query about what they should, or shouldn’t be doing. They should make sure people know about the policy and help others to understand it. But, perhaps more importantly, they should be be encouraging  people to use social media, to try new things and to innovate. It’s important for your firm to stay abreast of changes in social media, and  to make sure you have a serious and committed presence online. Your employees are your best representatives; get them out there.

3. Talk about social media success

Social media shouldn’t be an add-on; it should be part of what you do. Maybe it helps you to solve customers’ problems more quickly, maybe there’s been a great conversation about your brand, or maybe somebody just had a great idea that you found out about. Make sure you are taking every opportunity to champion success stories and people in your firm using social media well. Talk about it often to reinforce how important it is and to encourage people to try new things.

4. Keep things moving

The worst thing that can happen to your social media policy is that it becomes out-of-date. And as social media and our use of it online is changing so rapidly, this is a real danger. So make sure you keep things moving, work with your champions to keep abreast of what people are doing, and where they are doing it. Allow employees to comment on and make suggestions for your policy. But, perhaps most important, is to make sure your policy is written about behaviours and not specific social media tools. We may all be talking about Twitter  right now, but soon it will be something else.