May 26, 2011

Word of mouth marketing flaws exposed

miracle on 34th street
“Miracle on 34th Street”: Lesson for today’s marketers?

 

Only 15% of word of mouth marketing campaigns show results, but WOM drives sales — when companies honor and nurture it

Christopher S. RollysonWord of mouth marketing is seen by many marketers as the economic engine of social business (or social media) because people recommend products and services to each other: All marketers have to do is give them the right information to share and make it easy for them to recommend things, right? Wrong. Or, in popular parlance, “It’s complicated.”

Here, I’ll identify some of the flawed concepts that underlie word of mouth marketing (WOMM) so that you can avoid being part of its 85 percent casualty rate. I’ll show in general how you can tweak the idea and succeed with social business initiatives more often.

Word of mouth marketing is flawed

At Alterian’s 2010 user conference, Don Peppers shared this arresting statistic in his keynote: Only 15% of WOMM initiatives show positive ROI. Shocking — at least until you start thinking about it. Loosely speaking, WOM (sans “marketing”) happens when a trusted and relatively unbiased “friend” shares her experience with a product/service with someone close to her. “Someone like me” who isn’t tainted by sales commissions or quarterly revenue targets. Marketing, on the other hand, is generally about creating need or driving sales. Do you see the problem?

In this context, WOM and marketing are mutually exclusive: The latter’s purpose is to serve the company by moving product; the former serves the person first. It’s a conflict of interest, and it will rarely work. Ever.

93% of word of mouth is offline

In a second data point, Keller Fay Group’s latest TalkTrack study revealed that the overwhelming majority of WOM (as defined by them) takes place offline and face to face (via e-consultancy and @stefanw), not online through social business. This is not surprising when you stop to think about what traditional WOM is, largely a conversation between family or close friends. Tight ties. However, neither of these references dives into WOM or WOMM deeply enough to understand why and how they can work or not.

WOM among loose ties

Digital communications significantly reduce the cost of many kinds of interaction, so WOM among loose ties will continue to grow. However, marketers should recognize that loose ties and tight ties have important differences because the motivations and level of trust are different. Loose ties are not just inferior tight ties; people form loose ties for many reasons, but the online many-to-many environment enables people to manage their reputations and influence by leveraging the network effect. Tight tie relationships are limited in number, multidimensional and high investment.

How marketers can succeed with word of mouth

WOM serves the customer, not you. Trust that if you don’t interfere, positive results will often result.

Having led marketing for several firms, I can appreciate why marketers would love the concept of word of mouth marketing. Given that they are in conflict, it’s important to focus on WOM while avoiding WOMM. I’ll wager that the majority of the 85 percent of failures result from not understanding and honoring their differences. The good news is, WOM drives sales — when companies honor and nurture it. Here’s how:

  • First — and this is a leap of faith — accept that WOM serves the customer, not you. Trust that if you don’t interfere, positive results will often result. There is no halfway here; intent and honesty are WOM’s key differentiators. Don Peppers shared Staples’ “Speak Easy” fiasco as a warning (“sponsored” tweets and bloggers are other traps). All companies say that they put the customer first, but many aren’t being honest with themselves or their customers.
  • Second, the company must put itself first to be congruent with itself as a business. It shouldn’t try to do WOM. But the company, acting in its self-interest, can support WOM. Marketers must safeguard these boundaries if they want to succeed because they form the foundation of trust among the three principal actors: company, friend and customer.
  • Third, accept that your products and services are not a great fit for most people. In a pervasive transparent network, the market will figure out what works and what doesn’t. Don’t try to “make markets” by convincing people to buy unless you have a valid value proposition for them. Focus on serving people for whom you have a superior value proposition. This is the key to thriving in a transparent environment.
  • Fourth, trust customers’ friends to engage with WOM — for their own motivations. Remember, they are there to serve their friend, not to move your product. WOM is their role, not yours. Campaigns like Staples’ fail because marketers don’t understand their role and unknowingly turn WOM into shilling. Sorry.
  • Remember Miracle on 34th Street? It was breakthrough to send customers to other stores when they had a better value proposition for the customer. It increased WOM because it surprised people and exceeded expectations. But it was Kris Kringle (a “friend”) who started it based on his personal integrity. Later Macy’s turned it into a tactic, but Kris never did.
  • Accepting WOM transparency is difficult because it requires significant culture change. Firms that don’t accept this new reality will fight and lose. The market will expose them in the end.
  • On the other hand, those that take this road will be more successful because they will be aligned with customers and their friends. Moreover, focusing on valid value propositions and customers will tend to lead the company to innovate more successfully.

Christopher S. Rollyson is a partner in Socialmedia.biz and managing director of CSRA, a management consultancy that advises enterprises and startups on social business strategy and execution. Contact Christopher by email, follow him on Twitter and Google Plus or leave a comment below.

  • http://womma.org/word Pat McCarthy

    Interesting post. Did Don cite a specific study that found only 15% of WOMM initiatives working? I went to the link you cited and didn't find any definitive evidence. And what would he qualify as a WOMM initiative?

    Please let me know if you have data to support your argument. I'd be very interested to see it.

    Thanks,
    Pat McCarthy
    Social Media Coordinator
    WOMMA

  • http://socialnetworkroadmap.com csrollyson

    Pat, have responded to this, plz see the convo @csrollyson; I cited Don's keynote and have asked him, on your behalf, to share his source. I'm not sure how carefully @womma has read my post here, which draws a big distinction between WOM and WOMM; my understanding of Don's keynote is that the 15% figure was connected with WOMM. Would love to get your take on this distinction!

  • thedisruptive

    Hi Christopher – thanks for the post, it's a very interesting read. Pls see my response: http://ow.ly/54t5u. Your comments are welcome and appreciated.

    Best,
    Dave
    Marcello Entertainment
    @MarcelloENT ” target=”_blank”>http://www.marcelloentertainment.com

  • http://socialnetworkroadmap.com csrollyson

    All, for anyone else interested in the @donpeppers source, here it is, in his words: “Link to the WOMM research I cited http://bit.ly/k744h2 I probably should slow down and qualify this better, but the point stands.” Thanks, Don!

  • https://www.semantic-ad.com/Social_Marketing.html Austin_Social

    Hard to believe only 15% of WOM marketing is done online these days. Makes me wonder how they measured this.

    Our Austin online marketing company has many clients that use social media marketing and WOMM. I might believe 85% of WOMM is initiated face-to-face, but surely this is followed by email, texting, FB, Twitter, etc. for just about everyone. And this would be true for commercial marketing as well as personal social networking.