MCKINSEY QUARTERLY: A NEW WAY TO MEASURE WORD-OF-MOUTH MARKETING GURU MARIE PALAK SHWETHA

AGENDA Introduction 3 Types of Word of Mouth Measuring WOM Implications of WOM Harnessing WOM

A NEW WAY TO THINK ADVERTISING More and more products and innovations on the market Huge amount of money spent by the brands for advertising INCREASING WOM

WOM: A CONSUMER DECISION TOOL WOM used in 20 to 50% of all the purchase decisions FIRST PURCHASE EXPENSIVE PURCHASE (high involvement) ONE TO MANY BASIS NEW CHALLENGE FOR MARKETERS: UNDERSTAND AND USE IN EFFICIENT WAY WOM

CONSUMER DRIVEN VALUE Consumer became skeptical toward brand ads THE SOLUTION: THINK INDEPENDTLY throught WOM CONSUMER are more powerfull WOM impacts: Brand Perceptions Purchase rates Market Shares IMPORTANCE FOR COMPANIES TO INVESTIGATE AND MANAGE WOM

Introduction 3 Types of Word of Mouth Measuring WOM Implications of WOM Harnessing WOM

I. EXPERIENTIAL WORD OF MOUTH MARKETING Product/Service fails to meet expectations Brand Sentiment/ Equity Reduced brand receptiveness to tradition marketing Effect of positive word of mouth from other sources Eg:- National Geographic: Augmented Reality

II. CONSEQUENTIAL WORD OF MOUTH MARKETING  Consumers directly exposed to traditional marketing campaigns  Stronger impact than direct advertisements  High campaign reach and influence Direct Effect Pass-On Effect Message and marketing media mix that generates highest ROI

III. INTENTIONAL WORD OF MOUTH MARKETING Downsides: 1.Difficulty in measuring the impact 2.Uncertainty regarding implementation of such campaigns successfully

Introduction 3 Types of Word of Mouth Measuring WOM Implications of WOM Harnessing WOM

MEASURING WOM Number of recommendations or dissuasions Variability in power

WORD OF MOUTH EQUITY VolumeImpact WOM Equity WOM What?Who?Where? Volume  Number of WOM messages Impact  Average Sales Impact

DRIVERS OF WORD OF MOUTH What? Content of the message Who? Identity of the sender Where? Environment + Relevant key buying factor - Irrelevant key buying factor + Influential - Non-Influential + Close Network - Large network

Introduction 3 Types of Word of Mouth Measuring WOM Implications of WOM Harnessing WOM

IMPLICATIONS FOR MANAGERS FlexibilityPerformance not volumeIdentify drivers of WOMInsights!

Introduction 3 Types of Word of Mouth Measuring WOM Implications of WOM Harnessing WOM

Internet plays the role of amplifier. Magnitude is larger than ever that was available. FLIPSIDE ADVANTAGES Cannot control what consumers say and examples of companies being hurt by this characteristic If I am happy I am likely to recommend and if I am unhappy, I am likely to propagate a negative WOM It can be a by- product from traditional advertising Consumers tend to trust other consumers than they trust brands WOM directly driving or explaining sales drives of up to 20% to 50%. HARNESSING WORD OF MOUTH

“If you still have doubts that WOM marketing is not an effective tool, its time to rethink. Because of social media, it has emerged to be the biggest contributor of a firm’s growth and YOY sales performances.” Who is sending the message : A sender and the receiver receiving the message. (Both should trust each other) The message content (For. Ex recommending a product)… substantiating the recommendation. What triggers the sender to give the recommendation. (It may be by hearing from others) The context in which the WOM message takes place is crucial. 4 ESSENTIAL DRIVERS TO DETERMINE IF WOM IS IMPACTFUL

2 characteristics that create 1. INTERACTIVITY Positive Word of Mouth 2. CREATIVITY INTENTIONAL WOM CAMPAIGNS: Identifying influential individuals who become brand and product advocates. Messages can be directed at specific individuals who are most likely to spread positive word of mouth through their social networks. As a message spreads, this approach generates an exponential word-of- mouth impact, similar to the ripple effect when a pebble is dropped in a pond. Ex: Cadbury’s Gorilla Ad with the Iconic Phil Collins song. Result: 1. More than 6 million views on YouTube. 2. YOY sales of Cadbury increasing by more than 9%. 3. Brands positive perception among consumers increased by 20%.