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Top 10 List for Word of Mouth Marketing

Word-of-mouth advertising is important for every business, as each happy customer can steer dozens of new ones your way. And it's one of the most credible forms of advertising because a person puts their reputation on the line every time they make a recommendation and that person has nothing to gain but the appreciation of those who are listening. What are you doing to make sure your potential ambassadors feel confident enough in your business to recommend it? What are you doing to trigger word-of-mouth?

Here are some tips to help you generate word-of-mouth:

Word-of-mouth is triggered when a customer experiences something far beyond what was expected. Slightly exceeding their expectations just won't do it. You've got to go above and beyond the call of duty if you want your customers to talk about you.

Don't depend on your staff to trigger word-of-mouth by delivering "exceptional customer experience." Good customer service is sporadic, even in the best establishments. The customer who receives exceptional service today can't be sure their friends will receive the same tomorrow, so even the most well-served are unlikely to put their necks on the line and make a recommendation. Deep down, customers know service comes from an individual, not from an establishment. And even the best people have bad days.

Physical, nonverbal statements are the most dependable in triggering word-of-mouth. These statements can be architectural, kinetic or generous, but they must go far beyond the boundaries of what's normal. If you don't want to be average, why do you insist on being normal? Here are some examples of these statements:

  • Architectural. The piano store that looks like a huge piano, with black and white keys forming the long awning over the long front porch. The erupting volcano outside the Mirage in Las Vegas. A glass-bottom floor that allows customers to see what's happening on the floor below them. Do you remember when McDonalds began building attached playgrounds to all their restaurants? It's worked like magic for more than 20 years.
  • Kinetic. The tossing of fresh fish from one employee to another at Pike Place Market in Seattle. The magical, twirling knives of the tableside chefs at Benihana. Kissing the codfish when you get "screeched in" at any pub in Newfoundland. (A screech is a loud and funny ceremony during which non-Newfoundlanders down a shot of cheap rum, repeat some phrases in the local dialect and kiss a codfish. Everyone who visits that wonderful island returns home with a story of being "screeched in.") While it may at first seem like a kinetic word-of-mouth trigger is a violation of #2 above, "Don't depend on your staff...," it's really not. A kinetic word-of-mouth trigger is constantly observable by management. It isn't a "customer service" experience delivered privately, one on one.
  • Generous. Are you willing to become known as the restaurant that allows its guests to select--at no charge--their choice of desserts from an expensive dessert menu? You can cover the hard cost of it in the prices of your entrees and drinks. Flour, butter and sugar are cheap advertising. Are you the jewelry store that's willing to become known for replacing watch batteries at no charge, even when the customer hasn't purchased anything and didn't buy the watch from your store? Word will spread. And watch batteries cost less than any type of advertising.

Architectural, kinetic, generous: These are the flour, butter and sugar of effective word-of-mouth. Will you put these rich ingredients into the mouths of your potential word-of-mouth ambassadors?

Budget to deliver the experience that will trigger word-of-mouth. Sometimes your word-of-mouth budget will be incremental, so that its cost is tied to your customer count. Other times it'll require a capital investment, so that repayment will have to be withheld from your advertising budget over a period of years. The greatest danger isn't in overspending but in under spending. Under spending on a word-of-mouth trigger is like buying a ticket that only takes you halfway to Europe.

Don't promise it in your ads. Although it's tempting to promise the thing you're counting on to trigger word-of-mouth, these promises will only eliminate the possibility of your customers becoming your ambassadors. Why would a customer repeat what you say about yourself in your ads? You must allow your customers to deliver the good news. Don't rob your ambassadors of their moment in the sun.

Top 10 List for Word of Mouth Marketing - Page 3

Executives certainly know what social media is. After all, if Facebook users constituted a country, it would be the world's third largest, behind China and India. Executives can even claim to know what makes social media so potent: its ability to amplify word-of-mouth effects. Yet the vast majority of executives have no idea how to harness social media's power. Companies diligently establish Twitter feeds and branded Facebook pages, but few have a deep understanding of exactly how social media interacts with consumers to expand product and brand recognition, drive sales and profitability, and engender loyalty.

We believe there are two interrelated reasons why social media remains an enigma wrapped in a riddle for many executives, particularly nonmarketers. The first is its seemingly nebulous nature. It's no secret that consumers increasingly go online to discuss products and brands, seek advice, and offer guidance. Yet it's often difficult to see where and how to influence these conversations, which take place across an ever-growing variety of platforms, among diverse and dispersed communities, and may occur either with lightning speed or over the course of months. Second, there's no single measure of social media's financial impact, and many companies find that it's difficult to justify devoting significant resources-financial or human-to an activity whose precise effect remains unclear.

What we hope to do here is to demystify social media. We have identified its four primary functions-to monitor, respond, amplify, and lead consumer behavior-and linked them to the journey consumers undertake when making purchasing decisions. Being able to identify exactly how, when, and where social media influences consumers helps executives to craft marketing strategies that take advantage of social media's unique ability to engage with customers. It should also help leaders develop, launch, and demonstrate the financial impact of social-media campaigns (for insight into the world's biggest social-media market, see " Understanding social media in China ").

In short, today's chief executive can no longer treat social media as a side activity run solely by managers in marketing or public relations. It's much more than simply another form of paid marketing, and it demands more too: a clear framework to help CEOs and other top executives evaluate investments in it, a plan for building support infrastructure, and performance-management systems to help leaders smartly scale their social presence. Companies that have these three elements in place can create critical new brand assets (such as content from customers or insights from their feedback), open up new channels for interactions (Twitter-based customer service, Facebook news feeds), and completely reposition a brand through the way its employees interact with customers or other parties.

The social consumer decision journey

Companies have quickly learned that social media works: 39 percent of companies we've surveyed already use social-media services as their primary digital tool to reach customers, and that percentage is expected to rise to 47 percent within the next four years. Fueling this growth is a growing list of success stories from mainstream companies:

Creating buzz: Eighteen months before Ford reentered the US subcompact-car market with its Fiesta model, it began a broad marketing campaign called the Fiesta Movement. A major element involved giving 100 social-media influencers a European model of the car, having them complete "missions," and asking them to document their experiences on various social channels. Videos related to the Fiesta campaign generated 6.5 million views on YouTube, and Ford received 50,000 requests for information about the vehicle, primarily from non-Ford drivers. When it finally became available to the public, in late 2010, some 10,000 cars sold in the first six days.

Learning from customers: PepsiCo has used social networks to gather customer insights via its DEWmocracy promotions, which have led to the creation of new varieties of its Mountain Dew brand. Since 2008, the company has sold more than 36 million cases of them.

Targeting customers: Levi Strauss has used social media to offer location-specific deals. In one instance, direct interactions with just 400 consumers led 1,600 people to turn up at the company's stores- an example of social media's word-of-mouth effect.

Yet countless others have failed to match these successes: knowing that something works and understanding how it works are very different things. As the number of companies with Facebook pages, Twitter feeds, or online communities continues to grow, we think it's time for leaders to remind themselves how social media connects with an organization's broader marketing mission.

Marketing's primary goal is to reach consumers at the moments, or touch points, that influence their purchasing behavior. Almost three years ago, our colleagues proposed a framework-the "consumer decision journey"-for understanding how consumers interact with companies during purchase decisions. Expressing consumer behavior as a winding journey with multiple feedback loops, this new framework was different from the traditional description of consumer purchasing behavior as a linear march through a funnel. Social media is a unique component of the consumer decision journey: it's the only form of marketing that can touch consumers at each and every stage, from when they're pondering brands and products right through the period after a purchase, as their experience influences the brands they prefer and their potential advocacy influences others.

The fact that social media can influence customers at every stage of the journey doesn't mean that it should. Depending on the company and industry, some touch points are more important to competitive advantage than others. What's more, our work with dozens of companies adapting to the new marketing environment strongly suggests that the most powerful social-media strategies focus on a limited number of marketing responses closely related to individual touch points along the consumer decision journey. The ten most important responses, range from providing customer service to fostering online communities (exhibit). One of those ten-monitoring what people say about your brand-is so important that we see it as a core function of social media, relevant across the entire consumer decision journey. The remaining nine responses, organized in three clusters in the exhibit, underpin efforts to use social media to respond to consumer comments, to amplify positive sentiment and activity, and to lead changes in the behavior and mind-sets of consumers.

Exhibit

Social media enables targeted marketing responses at individual touch points along the consumer decision journey.

1. Monitor

Gatorade, a sports drink manufactured by PepsiCo, has been diligently working toward its goal of becoming the "largest participatory brand in the world." It has created a Chicago-based "war room" within its marketing department to monitor the brand in real time across social media. There are seats where team members can track custom-built data visualizations and dashboards (including terms related to the brand, sponsored athletes, and competitors) and run sentiment analyses around product and campaign launches. Every day, all of this feedback is integrated into products and marketing-for example, by helping to optimize the landing page on the company's Web site. Since the war room's creation, the average traffic to Gatorade's online properties, the length of visitor interactions, and viral sharing from campaigns have all more than doubled.

Such brand monitoring-simply knowing what's said online about your products and services-should be a default social-media function, taking place constantly. Even without engaging consumers directly, companies can glean insights from an effective monitoring program that informs everything from product design to marketing and provides advance warning of potentially negative publicity. It's also critical to communicate such feedback within the business quickly: whoever is charged with brand monitoring must ensure that information reaches relevant functions, such as communications, design, marketing, public relations, or risk.

2. Respond

Valuable though it is to learn how you are doing and what to improve, broad and passive monitoring is only a start. Pinpointing conversations for responding at a personal level is another form of social-media engagement. This kind of response can certainly be positive if it's done to provide customer service or to uncover sales leads. Most often, though, responding is a part of crisis management.

Last year, for example, a hoax photograph posted online claimed that McDonald's was charging African-Americans an additional service fee. The hoax first appeared on Twitter, where the image rapidly went viral just before the weekend as was retweeted with the hashtag #seriouslymcdonalds. It turned out to be a working weekend for the McDonald's social-media team. On Saturday, the company's director of social media released a statement through Twitter declaring the photograph to be a hoax and asking key influencers to "please let your followers know." The company continued to reinforce that message throughout the weekend, even responding personally to concerned Tweeters. By Sunday, the number of people who believed the image to be authentic had dwindled, and McDonald's stock price rose 5 percent the following day.

Responding in order to counter negative comments and reinforce positive ones will only increase in importance. The responsibility for taking action may fall on functions outside marketing, and the message will differ depending on the situation. No response can be quick enough, and the ability to act rapidly requires the constant, proactive monitoring of social media-on weekends too. By responding rapidly, transparently, and honestly, companies can positively influence consumer sentiment and behavior.

3. Amplify

"Amplification" involves designing your marketing activities to have an inherently social motivator that spurs broader engagement and sharing. This approach means more than merely reaching the end of planning a marketing campaign and then thinking that "we should do something social"-say, uploading a television commercial to YouTube. It means that the core concepts for campaigns must invite customers into an experience that they can choose to extend by joining a conversation with the brand, product, fellow users, and other enthusiasts. It means having ongoing programs that share new content with customers and provide opportunities for sharing back. It means offering experiences that customers will feel great about sharing, because they gain a badge of honor by publicizing content that piques the interest of others.

In the initial phases of the consumer decision journey, when consumers sift through brands and products to determine their preferred options, referrals and recommendations are powerful social-media tools. A simple example is the way online deal sites such as Groupon and Gilt Groupe provide consumers with credit for each first-time purchaser they refer. Our research shows that such direct recommendations from peers generate engagement rates some 30 times higher than traditional online advertising does.

Once a consumer has decided which product to buy and makes a purchase, companies can use social media to amplify their engagement and foster loyalty. When Starbucks wanted to increase awareness of its brand, for example, it launched a competition challenging users to be the first to tweet a photograph of one of the new advertising posters that the company had placed in six major US cities, providing winners with a $20 gift card. This social-media brand advocacy effort delivered a marketing punch that significantly outweighed its budget. Starbucks said that the effort was "the difference between launching with millions of dollars versus millions of fans."

Marketers also can foster communities around their brands and products, both to reinforce the belief of consumers that they made a smart decision and to provide guidance for getting the most from a purchase. Software company Intuit, for example, launched customer service forums for its Quicken and QuickBooks personal-finance software so users could help one another with product issues. The result? Users rather than Intuit employees answer about 80 percent of the questions, and the company has employed user comments to make dozens of significant changes to its software.

4. Lead

Social media can be used most proactively to lead consumers toward long-term behavioral changes. In the early stages of the consumer decision journey, this may involve boosting brand awareness by driving Web traffic to content about existing products and services. When grooming-products group Old Spice introduced its Old Spice Man character to viewers, during the US National Football League's 2010 Super Bowl, for example, the company's ambition was to increase its reach and relevance to both men and women. The commercial became a phenomenon: starring former player Isaiah Mustafa, it got more than 19 million hits across all platforms, and year-on-year sales for the company's products jumped by 27 percent within six months.

Marketers also can use social media to generate buzz through product launches, as Ford did in launching its Fiesta vehicle in the United States. For example, social media played an integral role in the success of "Small Business Saturday," the US shopping promotion created by American Express for the weekend immediately following Thanksgiving (for American Express CMO John Hayes's perspective on that launch, see " How we see it: Three senior executives on the future of marketing "). In addition, when consumers are ready to buy, companies can promote time-sensitive targeted deals and offers through social media to generate traffic and sales. Online menswear company Bonobos, for example, provided an incentive for its Twitter followers by unlocking a discount code after its messages were resent a certain number of times. As a result of this effort, almost 100 consumers bought products from the site for the first time. The campaign delivered a 1,200 percent return on investment in just 24 hours.

Finally, social media can solicit consumer input after the purchase. This ability to gain product-development insights from customers in a relatively inexpensive way is emerging as one of social media's most significant advantages. Intuit, for example, has its community forums. Starbucks uses MyStarbucksIdea.com to collect its customers' views about improving the company's products and services and then aggregates submitted ideas and prominently displays them on a dedicated Web site. That site groups ideas by product, experience, and involvement; ranks user participation; and shows ideas actively under consideration by the company and those that have been implemented.

Converting knowledge to action

Despite offering numerous opportunities to influence consumers, social media still accounts for less than 1 percent of an average marketing budget, in our experience. Many chief marketing officers say that they want to increase that share to 5 percent. One problem is that a lot of senior executives know little about social media. But the main obstacle is the perception that the return on investment (ROI) from such initiatives is uncertain.

Without a clear sense of the value social media creates, it's perhaps not surprising that so many CEOs and other senior executives don't feel comfortable when their companies go beyond mere "experiments" with social-media strategy. Yet we can measure the impact of social media well beyond straight volume and consumer-sentiment metrics; in fact, we can precisely determine the buzz surrounding a product or brand and then calculate how social media drives purchasing behavior. To do so-and then ensure that social media complements broader marketing strategies-companies must obviously coordinate data, tools, technology, and talent across multiple functions. In many cases, senior business leaders must open up their agendas and recognize the importance of supporting and even undertaking initiatives that may traditionally have been left to the chief marketing officer. As our colleagues noted last year, "we're all marketers now."

Consider the experience of a telecommunications company that proactively adopted social media but had no idea if its efforts were working. The company had launched Twitter-based customer service capabilities, several promotional campaigns built around social contests, a fan page with discounts and tech tips, and an active response program to engage with people speaking about the brand. In social-media terms, the investment was relatively large, and the company's senior executives wanted more than anecdotal evidence that the strategy was paying off. As a starting point, to ensure that the company was doing a quality job designing and executing its social presence, it benchmarked its efforts against approaches used by other companies known to be successful in social media. It then advanced the following hypotheses:

  • If all of these social-media activities improve general service perceptions about the brand, that improvement should be reflected in a higher volume of positive online posts.

  • If social sharing is effective, added clicks and traffic should result in higher search placements.

  • If both of these assumptions hold true, social-media activity should help drive sales-ideally, at a rate even higher than the company could achieve with its average gross rating point (GRP) of advertising expenditures.

The company then tested its options. At various times, it spent less money on conventional advertising, especially as social-media activity ramped up, and it modeled the rising positive sentiment and higher search positions just as it would using traditional metrics. The company concluded that social-media activity not only boosted sales but also had higher ROIs than traditional marketing did. Thus, while the company took a risk by shifting emphasis toward social-media efforts before it had data confirming that this was the correct course, the bet paid off. What's more, the analytic baseline now in place has given the company confidence to continue exploring a growing role for social media.

In other cases, social media may have a more specific role, such as helping to launch a new product or to mitigate negative word of mouth. Similar types of analyses can focus on mixing the impact of buzz, search, and traffic; correlating that with sales or renewals (or whatever the key metric may be); and then gauging the result against total costs. This approach can give executives the confidence and focus they need to invest more money, time, and resources in social media.

As these social-media activities gain scale, the challenges center less around justifying funding and more around organizational issues such as developing the right processes and governance structure, identifying clear roles-for all involved in social-media strategy, from marketing to customer service to product development-and bolstering the talent base, and improving performance standards. New capabilities abound, and social-media best practices are barely starting to emerge. We do know this: because social-media influences every element of the consumer decision journey, communication must take place between as well as within functions. That complicates lines of reporting and decision-making authority.

If insights from monitoring social media are relevant to nonmarketing functions such as product development, for instance, how will you identify and disseminate that information efficiently and effectively-and then ensure that it gets used? If you spot an opportunity to have a meaningful conversation with a key influencer, how will you quickly engage the right senior executive to follow through? If you recognize a fast-moving service concern, how will you respond rapidly and openly-and when should you do so outside the traditional service organization? Senior executives across the company must recognize and begin to answer such questions.

Social media is extending the disruptive impact of the digital era across a broad range of functions. Meanwhile, the perceived lack of metrics, the fear, and the limited sense of what's possible are eroding. Executives can identify the functions, touch points, and goals of social-media activities, as well as craft approaches to measure their impact and manage their risks. The time is ripe for executive-suite discussions on how to lead and to learn from people within your company, marketers outside it, and, most of all, your customers.

About the authors

Roxane Divol is a principal in McKinsey's San Francisco office, David Edelman is a principal in the Boston office, and Hugo Sarrazin is a director in the Silicon Valley office.

The authors would like to acknowledge the contributions of Sirish Chandrasekaran, Dianne Esber, Rebecca Millman, and Dan Singer to the development of this article.

It seems only logical that the more interesting a product is to consumers, the more they will talk about it. But the latest research from two Wharton professors suggests that when it comes to creating buzz-worthy advertising campaigns, how people communicate (e.g., whether they talk face to face or over email) is a big factor in determining what they discuss.

In their paper titled, " How Interest Shapes Word-of-Mouth over Different Channels," marketing professors Jonah Berger and Raghuram Iyengar explore the relationship between successful marketing and the methods used to spread it. The topic is especially timely in the digital age, when there is a lot of attention paid to word-of-mouth and social media.

Berger and Iyengar analyzed two unique sets of data involving thousands of everyday discussions across different conversation channels, then conducted a controlled lab experiment in which they manipulated conversation to examine the effects. The results of all three studies point to a single conclusion: How interesting a product is to discuss matters more when people communicate through discontinuous channels, such as blog posts, texts, emails and online conversations. "The punch line of this paper is quite clean," Iyengar says. "It is one of the first pieces of evidence that we have seen that it is not only the message but also the medium."

The professors draw a distinction between discontinuous and continuous channels. The latter include face-to-face or phone conversations in which there is an instant response. When people speak in this manner, interesting products or brands are not talked about with any more frequency than less distinctive ones because social convention demands an immediate response, the researchers note. "It's awkward to have dinner with a friend in silence, or ride in a cab with a colleague without conversing, so rather than waiting to think of the most interesting thing to say, people will talk about whatever is top-of-mind to keep the conversation flowing," they write. "It's not that people do not have enough interesting things to talk about; rather, they do not have the time to select the most interesting thing."

By contrast, discontinuous channels allow the participant to take time to craft a good response - or no response at all. It is socially acceptable for a woman to post a link on Facebook about a new pair of shoes that caught her eye, for example, and have no one "like" it. "A really simple way to think about it is the following," Berger notes. "Imagine if you're online and someone sends you something. You don't have to reply. You're only going to share things when they cross a certain threshold of interesting. The option of not saying anything is fine in a discontinuous conversation."

Armed with this knowledge, marketers can be more precise in crafting their campaigns to achieve better results. It's not as simple as blanketing the web with pop-up ads or blasting the airwaves with commercials, Iyengar points out. It's about picking the right medium for the right message. When that happens, marketers can hope that the flames of word-of-mouth will ignite and spread like a wildfire.

"Practitioners often believe that products need to be interesting to be talked about, but our results suggest they are only right for certain word-of-mouth channels," the authors note in their paper. "If the goal is to get more discussion online ... framing the product in an interesting or surprising way should help. Ads or online content that surprises people, violates expectations or evokes interest in some other manner should be more likely to be shared."

The authors point to the example of blender manufacturer Blendtec's series of commercials, which have garnered more than 150 million views on YouTube. In one commercial, a smiling actor in a lab coat and safety glasses drops his iPhone into the blender to answer the question, "Will it blend?" Upbeat music plays as the blender pulverizes the phone into a fine black powder. The actor lifts the blender lid to expose "iSmoke" and cheerfully warns viewers not to breathe in while he empties the contents into a bowl. The amusing ad has generated more than 10 million views and 24,000 "likes" since Blendtec uploaded it in 2007. "It's very smart on the part of Blendtec because it's just a blender. Why would it evoke interest?" Iyengar says. "But they showcased it in an unexpected way."

Finding the Right Cues

The professors used several research methods to support their proposal. First, they analyzed aggregate data collected by marketing research firm Keller Fay Group, which relied on a large, nationally representative sample to avoid bias. The professors examined how often 1,200 products and brands were talked about by 5,690 people who had both online and offline conversations. While word of mouth was more frequent in face-to-face contact, the opposite was true when it came to correlating the level of interest. In addition, more distinctive products were mentioned more frequently in online conversations. The second study broke down the data to the individual level with similar results, suggesting that "the continuity of the conversation channels drove these effects," the researchers write.

To explore their proposition further, Berger and Iyengar conducted an experiment in which participants sat together for conversation. Some were told to expect a pause before and between conversational turns (to mimic a discontinuous style like what they would experience communicating virtually). The professors then measured how those pauses affected the relationship between interest and whether a topic was discussed. Once again, the results were consistent that more distinctive products came up more frequently during discontinuous exchanges.

"The experimental approach is particularly useful because it allows us to test the mechanism we believe underlies the effects observed in the field," the researchers conclude. "People who care more about seeming interesting may talk more online than offline, people may encode or remember interesting conversations that occur over one channel versus another, and some brands may be inherently more likely to be talked about online rather than face to face. Similarly, it may be easier to leave a boring conversation when your conversation partner is not physically there."

Real-world application is at the heart of the research. "Brands, companies, nonprofit organizations, even politicians are chasing word of mouth," Berger says. "It's cheaper and more effective than traditional advertising. What this research shows is how to do it. If your goal is to get offline word of mouth, then interest isn't going to be as important."

That doesn't mean all marketers should rush to create the next viral video. For some products, it seems that offline buzz is more valuable. Berger uses breakfast cereal as an example. It's not the most exciting topic in the world, but it is top of mind, which means it's more likely to be discussed in a face-to-face conversation at the water cooler or the playground. "We get up in the morning and eat [cereal] for breakfast, so there's a good chance that we'll talk about it," he notes.

The professors point to data showing that food and dining are the most frequently discussed product categories in continuous conversation, more so than media, entertainment or technology. "Thus for offline word-of-mouth, considering how to trigger people to think about the product or brand may be a helpful approach to generating discussion," they write.

Another important factor in pitching a product is figuring out how to establish cues for consumers. Again, that differs based on whether the channel is online or offline. Iyengar offers the example of Starbucks, which used an early strategy of market saturation. Multiple stores in close proximity established brand recognition and triggered consumer desire for the product. "What are some cues that people can [use to] remember your product?" Iyengar asks. "In Starbucks, it's frequency. But there can be other types of cues. In an online context, it might be less about the cues but the content itself that is interesting."

Berger cites the example of Doritos commercials that have aired during the last two Super Bowls, an event that has become synonymous with creative advertising. The ads are a good move on the part of the manufacturer because they mainly target offline, face-to-face communication, he says. "What's interesting about that situation is that people watching the Super Bowl are also sitting there talking about tortilla chips, guacamole, seven-layer dip. Those aren't the most exciting things in the world, but [people] are talking about them because they are right in front of them."

Iyengar says he and Berger are considering taking their research deeper by replicating it in a field study, perhaps focusing more on online communication, such as Facebook. The results could further assist marketers in crafting campaigns in the fast-changing environment of social media.

"It's really about understanding what drives people to talk about things on different channels," Berger notes. "If we don't understand why they share word of mouth, we can't make it more likely to get them to share" in this way.

Top 10 List for Word of Mouth Marketing - Page 6

Breaking Down the Methodology Behind Word of Mouth Marketing

You've spent 12 months building the most wicked product on the planet. Now what?

Now, you need customers, revenue, and growth. So here's the sequence most entrepreneurs follow:

Step 1: You launch a blog
Step 2: You launch your Facebook page
Step 3: You start promoting your writing to your fan community of 50

Then you wait. You've built it; why aren't they coming?

You get pissed off. You hop in your car, go to the gym, or take a walk outside to take your mind off things. Then you see that big Coca Cola billboard with shiny, happy stock-photo people and blinding, bright colors - you can't help but swoon. You're craving Coca Cola's fizzy goodness and wishing that Santa would bring you a $10 million paid advertising budget.

Hold it - the glamour of paid advertising is a total illusion

Get it together. Get back to your computer immediately and watch the first cat video that you can find. Little do you know it, but that's your brilliant plan. It's twice as powerful as any paid channel advertising strategy, and it's free. Word of Mouth Marketing (WOM) = your growth engine.

According to the McKinsey Quarterly, "word of mouth generates more than twice the sales of paid advertising in categories as diverse as skincare and mobile phones."

And thanks to digital media, it's not about neighbor A knocking on neighbor B's door for advice anymore. Social media, content marketing, and online commenting platforms take WOMM to data-driven scale.

WOM is About Street Smarts, Not Rocket Science

What does it take to get you talking about something? Most likely, it's made you laugh out loud, saved you time, and solved your most pressing problems. It's caught you by surprise and has struck an emotional chord.

As Wharton Marketing Professor Jonah Berger puts it:

Any product can be remarkable. Any product can be emotional.

It's about the connection you build with your end-user psychologically, functionally, personally, and emotionally.

Take one of the most ordinary products on the market, for instance - a blender (WOMM-U fans, does this ring a bell?). Does the word 'awesome' come to mind? Probably not. Now watch the following video made by a company called Blendtec.

What happens next?

You share the video with everybody, and all of a sudden, Blendtec is awesome. You need it in your kitchen to replace the frou-frou blades in your cupboard.

The "Mystery" About WOMM

Like any good marketing plan, it follows a standard framework. Amazing marketers take the same basic skeletons and flesh them out.

"It doesn't take a marketing genius - though they are smart marketers - to think about this," says Berger. "What it takes is understanding the psychology behind social transmission - what makes us talk about and share thing."

The trick is to stop thinking of your brand-building as a stream of consciousness, creative endeavor. Think like a system with the following steps:

1. Take Control: Controversy Gets People Talking

Want to be a powerful influencer? Then own it. To be an authority, your brand persona needs to project confidence and charisma. No matter what you do, this mission-critical component will be your wow-factor.

Ryan Holiday is a media strategist for notorious clients like Tucker Max and Dov Charney. His perspective? Great marketing starts with your product.

If your product sucks, everybody's going to know. As much as you can successfully BS the world, you can't BS yourself. And when you try to market BS, you're going to fall on your ass.

"It's not worth talking about, it's not interesting, and I can't get excited about it," Holiday wrote.

Tucker Max is a total $%#@, and he'll be the first to admit it. The people who love him think he's awesome. The people who hate him? Well, 'awesome' isn't exactly the word that comes to mind.

Thing is, he doesn't care. You can't please everybody. 'Awesome' is always worth marketing, even if there's a flip side that others hate. Don't be afraid to polarize people. If you're scared to put yourself out there at the risk of pissing people off, you'll be missing out.

Controversy gets people talking, and in terms of WOM, that's awesome.

2. Value = What Your Customers Care About

Tucker Max himself points out that value is central to the equation. Audiences can smell fluff from a million miles away (especially from a computer screen).

"Have you noticed I haven't written one word about book reviews or magazine interviews or radio or any of that?" he says.

Because for the most part, I've found that they don't really matter.

I can tell you from very extensive experience that my book has done so well ONLY because people who read it recommended it to other people, and they went out and bought it.

Word of mouth. Nothing else...lasting, real word of mouth can only come from one source: creating value.

It's simple, folks. Know what your customers care about. What keeps them up at night, what motivates them to go to work in the morning, and what holds them back. It's your job to give them exactly what they need.

Continue reading Dan's post here.

Call it viral, buzz or word-of-mouth advertising: Getting customers to spread the word about a new product through their social or professional networks is a hot strategy in the marketing world. Its proponents insist that the technique - whether online or face-to-face - is sure to boost a company's return on investment (ROI).

But how can companies find the right individuals to deliver the message? Marketers may wonder if they are finding the best "seeding points" - that is, well-connected people at the hub of social networks who will latch on to a product and promote it widely among the people they know.

New research led by Wharton marketing professors Raghuram Iyengar and Christophe Van den Bulte, working with University of Southern California preventive medicine professor Thomas W. Valente, has found that traditional targets may not be as influential as previously thought. The pharmaceutical firm that sponsored the research for their recently published paper, " Opinion Leadership and Social Contagion in New Product Diffusion," had its "a-ha" moment when they found Physician No. 184 on a map.

The map was part of the researchers' presentation that reported the results to the sponsoring firm. Charted on the map was a tangle of points and lines representing physicians practicing in a large city and the connections between them. Researchers had tracked how prescriptions of a new drug spread from one physician to another, depending on who talked to whom and referred patients to whom.

Mapped out on the screen, the story became clear: The medical community was actually divided into two sub-networks split apparently by ethnicity, with one sub-network dominated by physicians with mostly Asian names and the other with mostly European names. Connecting the two, like a spider suspended on a thread between two webs, was the dot for Physician No. 184 - a doctor the company's marketing department and salespeople barely knew.

Not only did the study indicate that word-of-mouth had been affecting physicians' prescription behavior - even after controlling for the effect of sales calls (referred to as "detailing visits" in the pharmaceutical industry) - but it also showed that converting the right individual could have a dramatic impact. And for executives in the conference room, it revealed something else: They had been overlooking some of the networks' most important social hubs.

"That was the biggest 'a-ha!' for the company," said Van den Bulte. Physician 184 "was not the most important in the number of connections he was getting, but he was vitally important in linking the networks."

Who's the Leader?

The study indicates that the spread of a product by word-of-mouth - what the authors call "contagion" - can and does happen over social networks. The study also indicates that marketers may need to re-think whom they identify as the best seeding points in their word-of-mouth campaigns.

Traditionally, drug companies have focused their efforts on reaching notable community leaders, believing well-known experts to be the most effective emissaries of a new product. In other industries, said Iyengar, marketers and their market research companies have tried to find opinion leaders through direct surveys, asking people, in essence, "Are you an opinion leader?" and then linking those answers to observable characteristics such as age, income, education level, media habits and so on. That, however, has proved rather ineffective, leading some companies to give up on finding seeding points and go for flashy "buzz" campaigns everyone talks about, such as when British fashion retailer French Connection UK put its four-letter acronym in large letters on its bags and shopping windows.

Both of those approaches differ from those used by sociologists and network researchers, who focus on how people interconnect. For example, to identify the most influential leader in a medical community, a sociologist would ask, "Whom do you turn to for advice for treating this kind of ailment?" The different approaches can produce widely different results, the study found.

The researchers tracked the behavior of physicians in three cities - San Francisco, Los Angeles and New York - looking specifically at how quickly they started prescribing a new drug to treat a potentially lethal disease. The study started by identifying the physicians who were active in treating the condition during the two years before the drug's launch. Researchers then surveyed those physicians and identified a group of what researchers called "self-reported opinion leaders," doctors who reported themselves to be well-connected, influential members of the community.

The researchers also asked all physicians to name up to eight other doctors with whom they felt comfortable discussing the clinical management and treatment of the disease, and up to eight doctors to whom they typically referred patients. These nominations from fellow physicians produced a second group, whom researchers called "sociometric leaders" - the most influential and well-respected physicians in the community based on how often they were mentioned by their peers.

"Our study shows that these two measures of opinion leadership do not overlap very well," said Iyengar. "Asking people how important they are is not the best measure of how important they really are. Just because people think they're important doesn't mean it's true. And some people are actually more important than marketers believe, or even they themselves believe."

Physician 184, for example, didn't fit the description of an individual who marketers thought would be the most effective promoter of their product - an outgoing, high-profile doctor whose name often pops up on research papers or on conference speaker lists. "Physician 184 was self-effacing. He did not want to stand on a soap box," said Van den Bulte. "He was respected, but not in a flashy fashion. He was the opposite of a rock star."

Reputation Matters

Physician 184 didn't stand out as a "self-reported opinion leader," but he did stand out in the second group. He was known widely in the local community because he was very involved with treating patients suffering from the disease, and worked tirelessly and closely with colleagues to solve problems and get things done.

Matching the network data with prescription records, the study showed that sociometric leaders like Physician 184 were quicker than the self-reported opinion leaders to use the new drug, and were also more likely to influence other physicians to try it. The study also found that sociometric leaders did take into account what their colleagues were doing. For marketers, this implies that word-of-mouth can affect opinion leaders as well as followers, in contrast to what is often believed and taught - that only followers are affected by social influence.

Although self-reported opinion leaders were quick to adopt the new drug, they lagged behind the sociometric leaders identified by their colleagues, the study found. The researchers speculate that this was because the self-reported opinion leaders, identifying themselves as having above average status, are less interested in what others are doing. "The people who believe themselves to be opinion leaders are less affected by others," Iyengar said. "These are guys who say, 'I know I'm important. I don't need to care about what other people are doing.'"

The pharmaceutical company found the research so intriguing that it commissioned a similar study, Van den Bulte said. Researchers subsequently collected data for several cities in China where the company planned to launch word-of-mouth marketing efforts targeting sociometric, rather than self-reported, opinion leaders.

Meanwhile, Rivermark LLC, the marketing research company in Lambertville, N.J., that connected the Wharton researchers with the drug company for the first study, recently contacted Iyengar and Van den Bulte about conducting another study. "What is happening now is that people in the pharma industry are starting to wonder how to best re-allocate their marketing efforts to leverage the power of word-of-mouth and they want hard evidence about what works or not," Van den Bulte said.

In the new study, the company has decided to re-deploy its sales force in three cities, reassigning its salespeople to target physicians who are sociometric opinion leaders, rather than self-reported leaders or high-profile research experts. As part of the effort, the company has even tweaked its lists of physicians who are invited to speak at seminars and other events.

The study will compare a year's worth of sales in the three cities with three other similar cities in which the sales force makes no change in strategy. The new sales figures will also be contrasted with sales figures in the previous year.

"This second study tries to answer the question of whether corporate marketers can actively leverage opinion leaders to turbo-boost their marketing ROI. This may well be the very first academic study open to peer-review that investigates this in a clean before-after, test-control field experiment," said Van den Bulte. "The data is still coming in, but the early results are encouraging."

Consumers have always valued opinions expressed directly to them. Marketers may spend millions of dollars on elaborately conceived advertising campaigns, yet often what really makes up a consumer's mind is not only simple but also free: a word-of-mouth recommendation from a trusted source. As consumers overwhelmed by product choices tune out the ever-growing barrage of traditional marketing, word of mouth cuts through the noise quickly and effectively.

Podcast

Harnessing the power of word of mouth

Indeed, word of mouth is the primary factor behind 20 to 50 percent of all purchasing decisions. Its influence is greatest when consumers are buying a product for the first time or when products are relatively expensive, factors that tend to make people conduct more research, seek more opinions, and deliberate longer than they otherwise would. And its influence will probably grow: the digital revolution has amplified and accelerated its reach to the point where word of mouth is no longer an act of intimate, one-on-one communication. Today, it also operates on a one-to-many basis: product reviews are posted online and opinions disseminated through social networks. Some customers even create Web sites or blogs to praise or punish brands.

As online communities increase in size, number, and character, marketers have come to recognize word of mouth's growing importance. But measuring and managing it is far from easy. We believe that word of mouth can be dissected to understand exactly what makes it effective and that its impact can be measured using what we call "word-of-mouth equity"-an index of a brand's power to generate messages that influence the consumer's decision to purchase. Understanding how and why messages work allows marketers to craft a coordinated, consistent response that reaches the right people with the right content in the right setting. That generates an exponentially greater impact on the products consumers recommend, buy, and become loyal to.

A consumer-driven world

The sheer volume of information available today has dramatically altered the balance of power between companies and consumers. As consumers have become overloaded, they have become increasingly skeptical about traditional company-driven advertising and marketing and increasingly prefer to make purchasing decisions largely independent of what companies tell them about products.

This tectonic power shift toward consumers reflects the way people now make purchasing decisions. Once consumers make a decision to buy a product, they start with an initial consideration set of brands formed through product experience, recommendations, or awareness-building marketing. Those brands, and others, are actively evaluated as consumers gather product information from a variety of sources and decide which brand to purchase. Their postsales experience then informs their next purchasing decision. While word of mouth has different degrees of influence on consumers at each stage of this journey (Exhibit 1), it's the only factor that ranks among the three biggest consumer influencers at every step.

Exhibit 1

Word of mouth is influential throughout the consumer decision journey.

It's also the most disruptive factor. Word of mouth can prompt a consumer to consider a brand or product in a way that incremental advertising spending simply cannot. It's also not a one-hit wonder. The right messages resonate and expand within interested networks, affecting brand perceptions, purchase rates, and market share. The rise of online communities and communication has dramatically increased the potential for significant and far-reaching momentum effects. In the mobile-phone market, for example, we have observed that the pass-on rates for key positive and negative messages can increase a company's market share by as much as 10 percent or reduce it by 20 percent over a two-year period, all other things being equal. This effect alone makes a case for more systematically investigating and managing word of mouth.

Understanding word of mouth

While word of mouth is undeniably complex and has a multitude of potential origins and motivations, we have identified three forms of word of mouth that marketers should understand: experiential, consequential, and intentional.

Experiential

Experiential word of mouth is the most common and powerful form, typically accounting for 50 to 80 percent of word-of-mouth activity in any given product category. It results from a consumer's direct experience with a product or service, largely when that experience deviates from what's expected. (Consumers rarely complain about or praise a company when they receive what they expect.) Complaints when airlines lose luggage are a classic example of experiential word of mouth, which adversely affects brand sentiment and, ultimately, equity, reducing both receptiveness to traditional marketing and the effect of positive word of mouth from other sources. Positive word of mouth, on the other hand, can generate a tailwind for a product or service.

Consequential

Marketing activities also can trigger word of mouth. The most common is what we call consequential word of mouth, which occurs when consumers directly exposed to traditional marketing campaigns pass on messages about them or brands they publicize. The impact of those messages on consumers is often stronger than the direct effect of advertisements, because marketing campaigns that trigger positive word of mouth have comparatively higher campaign reach and influence. Marketers need to consider both the direct and the pass-on effects of word of mouth when determining the message and media mix that maximizes the return on their investments.

Intentional

A less common form of word of mouth is intentional -for example, when marketers use celebrity endorsements to trigger positive buzz for product launches. Few companies invest in generating intentional word of mouth, partly because its effects are difficult to measure and because many marketers are unsure if they can successfully execute intentional word-of-mouth campaigns.

What marketers need for all three forms of word of mouth is a way to understand and measure its impact and financial ramifications, both good and bad.

Word-of-mouth equity

A starting point has been to count the number of recommendations and dissuasions for a given product. There's an appealing power and simplicity to this approach, but also a challenge: it's difficult for marketers to account for variability in the power of different kinds of word-of-mouth messages. After all, a consumer is significantly more likely to buy a product as a result of a recommendation made by a family member than by a stranger. These two kinds of recommendations constitute a single message, yet the difference in their impact on the receiver's behavior is immense. In fact, our research shows that a high-impact recommendation-from a trusted friend conveying a relevant message, for example-is up to 50 times more likely to trigger a purchase than is a low-impact recommendation.

To assess the impact of these different kinds of recommendations, we developed a way to calculate what we call word-of-mouth equity. It represents the average sales impact of a brand message multiplied by the number of word-of-mouth messages. By looking at the impact-as well as the volume-of these messages, this metric lets a marketer accurately test their effect on sales and market share for brands, individual campaigns, and companies as a whole (Exhibit 2). That impact-in other words, the ability of any one word-of-mouth recommendation or dissuasion to change behavior-reflects what is said, who says it, and where it is said. It also varies by product category.

Exhibit 2

By looking at impact as well as volume, marketers can measure the effects of word-of-mouth messages more accurately.

What's said is the primary driver of word-of-mouth impact. Across most product categories, we found that the content of a message must address important product or service features if it is to influence consumer decisions. In the mobile-phone category, for example, design is more important than battery life. In skin care, packaging and ingredients create more powerful word of mouth than do emotional messages about how a product makes people feel. Marketers tend to build campaigns around emotional positioning, yet we found that consumers actually tend to talk-and generate buzz-about functional messages.

The second critical driver is the identity of the person who sends a message: the word-of-mouth receiver must trust the sender and believe that he or she really knows the product or service in question. Our research does not identify a homogenous group of consumers who are influential across categories: consumers who know cars might influence car buyers but not consumers shopping for beauty products. About 8 to 10 percent of consumers are what we call influentials, whose common factor is trust and competence. Influentials typically generate three times more word-of-mouth messages than noninfluentials do, and each message has four times more impact on a recipient's purchasing decision. About 1 percent of these people are digital influentials-most notably, bloggers-with disproportionate power.

Finally, the environment where word of mouth circulates is crucial to the power of messages. Typically, messages passed within tight, trusted networks have less reach but greater impact than those circulated through dispersed communities-in part, because there's usually a high correlation between people whose opinions we trust and the members of networks we most value. That's why old-fashioned kitchen table recommendations and their online equivalents remain so important. After all, a person with 300 friends on Facebook may happily ignore the advice of 290 of them. It's the small, close-knit network of trusted friends that has the real influence.

Word-of-mouth equity empowers companies by allowing them to understand word of mouth's relative impact on brand and product performance. While marketers have always known that the impact can be significant, they may be surprised to learn just how powerful it really is. When Apple's iPhone was launched in Germany, for example, its share of word-of-mouth volume in the mobile-phone category-or how many consumers were talking about it-was about 10 percent, or a third less than that of the market leader. Yet the iPhone had launched in other countries, and the buzz accompanying those messages in Germany was about five times more powerful than average. This meant the iPhone's word-of-mouth equity score was 30 percent higher than that of the market leader, with three times more influentials recommending the iPhone over leading handsets. As a result, sales directly attributable to the positive word of mouth surrounding the iPhone outstripped those attributable to Apple's paid marketing sixfold. Within 24 months of launch, the iPhone was selling almost one million units a year in Germany.

The flexibility of word-of-mouth equity allows us to gauge the word-of-mouth impact of companies, products, and brands regardless of the category or industry. And because it measures performance rather than the sheer volume of messages, it can be used to identify what's driving-and hurting-word-of-mouth impact. Both insights are critical if marketers are to convert knowledge into power.

Harnessing word of mouth

The rewards of pursuing excellence in word-of-mouth marketing are huge, and it can deliver a sustainable and significant competitive edge few other marketing approaches can match. Yet many marketers avoid it. Some worry that it remains immature as a marketing discipline compared with the highly sophisticated management of marketing in media such as television and newspapers. Others are concerned that they can't draw on extensive data or elaborate marketing tools fine-tuned over decades. For those unsure about actively managing word of mouth, consider this: the incremental gain from outperforming competitors with superior television ads, for example, is relatively small. That's because all companies actively manage their traditional marketing activities and all have similar knowledge. With so few companies actively managing word of mouth-the most powerful form of marketing-the potential upside is exponentially greater.

The starting point for managing word of mouth is understanding which dimensions of word-of-mouth equity are most important to a product category: the who, the what, or the where. In skincare, for example, it's the what; in retail banks, the who. Word-of-mouth-equity analysis can detail the precise nature of a category's influentials and pinpoint the highest-impact messages, contexts, and networks. Equipped with these insights, companies can then work on generating positive word of mouth, using the three forms we identified: experiential, consequential, and intentional.

Although the importance of these triggers varies category by category, experiential sources are the most important across them. Harnessing experiential word of mouth is fundamentally about providing customers with the opportunity to share positive experiences and making the story relatable and relevant to the audience. Some companies, such as Miele and Lego, build buzz around products before launch and work to have early, highly influential adopters by involving consumers in product development, supported by online communities. Consistently refreshing the product experience also helps harness experiential word of mouth-consumers are more likely to talk about a product early in its life cycle, which is why product launches or enhancements are so crucial to generating positive word of mouth. Buzz also can be sustained after launch: Apple has maintained interest in and excitement about the iPhone via its apps store, as constantly evolving and user-generated content maintains positive word of mouth.

Most companies actively use customer satisfaction insights when developing new products and services. Yet a satisfied customer base may not be enough to create buzz. To create positive word of mouth that actually has impact, the customer experience must not only deviate significantly from expectations but also deviate on the dimensions that matter to the customer and that he or she is likely to talk about. For instance, while battery life is a crucial driver of satisfaction for mobile-handset consumers, they talk about it less than other product features, such as design and usability. To turn consumers into an effective marketing vehicle, companies need to outperform on product and service attributes that have intrinsic word-of-mouth potential.

Managing consequential word of mouth involves using the insights provided by word-of-mouth equity to maximize the return on marketing activities. By understanding the word-of-mouth effects of the range of channels and messages employed and allocating marketing activities accordingly, companies can equip consumers to spread marketing messages and drive their reach and impact. In fact, McKinsey research shows that marketing-induced consumer-to-consumer word of mouth generates more than twice the sales of paid advertising in categories as diverse as skincare and mobile phones.

Two things supercharge the creation of positive consequential word of mouth: interactivity and creativity. They are interrelated, and particularly important for brands in relatively low-innovation categories that often struggle to gain consumer attention. One example of a company successfully harnessing this power is the UK confectioner Cadbury, whose "Glass and a Half Full" advertising campaign used creative, thoughtful, and integrated online and traditional marketing to spur consumer interaction and sales.

The campaign began with a television commercial featuring a gorilla playing drums to an iconic Phil Collins song. The bizarre juxtaposition was an immediate hit. The concept so engaged consumers that they were willing to go online, view the commercial, and create amateur versions of their own, triggering a torrent of YouTube imitations. Within three months of the advertisement's appearance, the video had been viewed more than six million times online, year-on-year sales of Cadbury's Dairy Milk chocolate had increased by more than 9 percent, and the brand's positive perception among consumers had improved by about 20 percent.

Intentional word-of-mouth campaigns revolve around identifying influentials who become brand and product advocates. Of course, companies can't precisely control what consumers tell others. But ambitious marketers can use word-of-mouth equity insights to shift from consequential to intentional campaigning.

The type of campaign that companies choose to adopt depends on the degree to which marketers can find and target influentials. Marketers capable of undertaking one-to-one marketing-such as mobile-phone operators-are uniquely positioned to execute controlled and effective intentional word-of-mouth campaigns. Mobile carriers have granular customer data that can precisely locate influentials who know the category, talk to many people, and provide them with trusted opinions. That means 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.

Companies unable to target influentials precisely must take a different approach. While Red Bull, for example, can't send text messages to specific consumers, it has successfully deployed science to orchestrate effective intentional word-of-mouth campaigns. After identifying influentials among its different target segments, the energy-drink company ensures that celebrities and other opinion makers seed the right messages among consumers, often through events. While it can't be sure who will attend, Red Bull knows that those who do will be the kinds of consumers it seeks-and that the positive messages they will relay across their own social networks can generate a superior return for its marketing investment.

Marketers have always been aware of the effect of word of mouth, and there is clearly an art to effective word-of-mouth campaigning. Yet the science behind word-of-mouth equity helps reveal how to hone and deploy that art: it shows which messages consumers are likely to pass on and the impact of those messages, allowing marketers to estimate the tangible effect word of mouth has on brand equity and sales. These insights are essential for companies that want to harness the potential of word of mouth and to realize higher returns on their marketing investments.

About the authors

Jacques Bughin is a director in McKinsey's Brussels office, Jonathan Doogan is an associate principal in the London office, and Ole Jørgen Vetvik is a principal in the Oslo office.

Buzz is the stuff of marketing legends. Dark and witty Harry Potter, the traffic-stopping retro Beetle, the addictive Pokémon, cuddly Beanie Babies, the hair-raising Blair Witch Project —all are recent examples of blockbuster commercial successes driven by customer hype. For some reason, people like to share their experiences with one another—the restaurant where they ate lunch, the movie they saw over the weekend, the computer they just bought—and when those experiences are favorable, the recommendations can snowball, resulting in runaway success. But ask marketing managers about buzz, and many will simply shrug their shoulders. It's just serendipity, they say, or sheer luck.

My research suggests otherwise. Investigating the marketing practices at more than 50 companies, my colleagues and I at McKinsey have found that buzz— a phenomenon we've dubbed "explosive self-generating demand"— is hardly a random force of nature. Instead, it evolves according to some basic principles. My research shows that companies can predict the spread of buzz by analyzing how different groups of customers interact and influence one another.

Many executives have little idea how to orchestrate a marketing campaign that exploits the full power of customer word of mouth. Instead, they remain enslaved to five common misconceptions about the phenomenon. Before companies can reap the total benefits of buzz, they must understand the principles of how it works, and doing so requires a close examination of those five myths.

MYTH 1: Only outrageous or edgy products are buzz-worthy.

Everyone can point to a buzz-driven consumer craze that was due in part to the sheer inanity or fringe quality of a product—think of Pet Rocks or the movie The Matrix. Yet according to our analysis, a surprisingly large portion of the U.S. economy—a shade above two-thirds—has been at least partially affected by buzz. (See " What Buzz Affects" for an industry-by-industry breakdown.) Obviously, buzz greatly affects the entertainment and fashion industries, but it also influences agriculture, electronics, and finance. Indeed, few industries are immune these days, partially because of technological innovations like the Internet that enable customers to spread buzz quickly. Consider the pharmaceutical industry, which has recently witnessed a dramatic increase in the power of buzz. In the past, pharmaceutical companies marketed new prescription drugs primarily through a direct sales force that distributed educational materials and free samples to physicians. Consumers were rarely aware of new therapies except as prescribed by their doctors.

Today, thanks to extensive advertising and the Internet, consumers have access to health-care information on a scale undreamed of just ten years ago. Indeed, a revolution is under way, transforming people from passive to active participants. In choosing their treatments, such active consumers can—and do— generate and spread buzz. Case in point: Viagra, one of the most talked-about prescription drugs ever, even among those who don't need it.

Shrewd pharmaceutical companies are now taking a two-pronged approach to jump-start buzz among both doctors and consumers. For example, when Merck launched Fosamax, a therapy for osteoporosis, the company carefully chose scientists and physicians with high standing to conduct the clinical trials and to promote the new treatment. In addition, Merck increased the visibility of the new treatment by sponsoring symposia at international meetings. On the consumer side, the company launched a major marketing campaign in women's magazines to inform readers of the risks of osteoporosis and educate them about the value of screening and preventive treatment. Before long, the debilitating bone condition became a common topic of discussion among women and between women and their doctors. As a result of these efforts, Merck was able to generate significant buzz for a previously unnotable subject.

Not every product is a good candidate for buzz. How, then, can managers assess buzz-worthiness? Two criteria make it possible.

Medicine is one thing, but sometimes even the most ordinary products can benefit from buzz. Remember Hush Puppies? When the company discovered that hip New York City kids were snapping up vintage pairs of its shoes at secondhand stores, it rushed into action. It began making its shoes in shades like Day-Glo orange, red, green, and purple. Next, it sent free samples to celebrities, and not long after, David Bowie and Susan Sarandon were spotted wearing them. Then the company tightly controlled distribution, limiting the shoes to a handful of fashionable outlets. Soon high-end retailers like Saks, Bergdorf Goodman, and Barneys were begging for them. In just three years, from 1994 to 1996, Hush Puppies saw its annual sales of pups in North America skyrocket from fewer than l00,000 pairs to an estimated 1.5 million.

Of course, not every product is a good candidate for buzz marketing. How, then, can managers assess buzz-worthiness? Two criteria make it possible.

First, products ripe for buzz are unique in some respect, be it in look, functionality, ease of use, efficacy, or price. For Chrysler's PT Cruiser, the degree of difference from the competition clearly lies in its retro, gangster-era look. In the case of collapsible scooters, the key buzz-worthy factors are functionality and ease of use: what other product allows people to dash from place to place on a lightweight, folding device?

Second, products with great buzz potential are usually highly visible. For many products, that condition is a no-brainer. The popularity of fashion accessories, like Gucci's baguette bags, tends to spread like wildfire because they are easily seen by others. Every time someone in a meeting pulls out a Palm device to jot a note, the company gets another endorsement of its popular PDA.

But insightful companies have discovered that products can be made visible. One way is to create forums, such as Internet chat groups, where customers can exchange information about a product— such as a new medical treatment—that might otherwise have remained hidden. Often, creative approaches are needed to facilitate the discussion. Pfizer, the maker of Viagra, faced an uphill battle when trying to generate buzz for its breakthrough drug, because impotence was a taboo subject. But by popularizing the medical terms "erectile dysfunction" and "ED," the company transformed the undiscussable into fodder for the bedroom and backyard alike.

What Buzz Affects*

Slightly more than two-thirds of the U.S. economy has been influenced by buzz.


13% Largely Driven by Buzz

Toys, sporting goods, motion pictures, broadcasting, amusement and recreation services, fashion

54% Partially Driven by Buzz

Finance (investment products), hotels and lodging, electronics, printing and publishing, tobacco, automotive, pharmaceuticals and health care, transportation, agriculture, food and drink

33% Largely Immune to Buzz

Oil, gas, chemicals, railroads, insurance, utilities

*McKinsey & Company estimate for 1994 U.S. economy (total equals $6 trillion)

As the rapid growth of emerging markets gives millions of consumers new spending power, those consumers are encountering a marketing environment every bit as complex and swiftly evolving as its counterpart in developed countries. Product choices and communication channels are exploding; so is the potential of digital platforms; and, as everywhere, consumer empowerment is on the rise.

The impact of these changes has been so profound in developed markets that three years ago, our colleague David Court and his coauthors proposed a new approach for understanding consumer behavior. On the basis of research involving 20,000 consumers across five industries and three continents, our colleagues suggested replacing the traditional metaphor of a "funnel" in which consumers start at the wide end, with a number of potential brands in mind, before narrowing their choices down to a final purchase. Envisioning consumer behavior as less of a linear march and more of a winding voyage with multiple feedback loops, our colleagues put forward an iterative framework, which they called the consumer decision journey, and identified four critical battlegrounds where marketers can win or lose.

These four battlegrounds are initial consideration, when a consumer first decides to buy a product or service and thinks of a few brands; active evaluation, when the consumer researches potential purchases; closure, when the consumer selects a brand at the moment of purchase; and postpurchase, when the consumer experiences the product or service selected. They are as relevant for emerging markets as they are elsewhere. As in developed markets, technology is unleashing the possibility of increasingly deep customer engagement at each phase of the journey, but with some important twists reflecting differences in the characteristics of emerging-market consumers, who generally don't have the same level of experience with brands and product categories as their developed-market counterparts do. Many are still looking to buy their first car, first television, or first package of diapers, for example.

In this article, we highlight the implications of three key differences between emerging-and developed-market consumers that we've uncovered in our research (Exhibit 1). First, harnessing the power of word of mouth is invaluable, as it seems to play a disproportionate role in the decision journeys of emerging-market consumers. Second, getting brands into a consumer's initial consideration set is even more important in emerging markets, because that phase of the journey appears to have an outsized impact on purchase decisions. Finally, companies need to place special emphasis on what happens when products reach the shelves of retailers, because the in-store phase of the consumer decision journey tends to be longer and more important in emerging markets than in developed ones.

Exhibit 1

Three factors in the consumer decision journey take on greater importance in emerging markets than in developed markets.

Harnessing word of mouth through geographic focus

Word of mouth plays a more central role in the decision journeys of emerging-market consumers than for those in developed markets. When we surveyed food and beverage consumers in a range of developed and emerging markets, roughly 30 to 40 percent of the respondents in the United Kingdom and the United States said they received recommendations from friends or family members before making purchases. Consumers in Africa and Asia reported higher, sometimes dramatically higher, figures: more than 70 percent in China and 90 percent in Egypt, for example (Exhibit 2). Similarly, 64 percent of the Chinese respondents said they would consider recommendations from friends and family for moisturizer, compared with less than 40 percent of respondents in the United States and the United Kingdom.

Exhibit 2

Purchase decisions of emerging-market consumers are heavily influenced by recommendations from friends and family members.

An important explanation for word of mouth's outsized role is that in a land of consumer "firsts"-more than 60 percent of Chinese auto purchasers are buying their first car, and the comparable figure for laptops is 30 to 40 percent-few brands have been around long enough to ensure loyalty. Seeing a friend use a product is reassuring. Indeed, the less a consumer knows about a product and the more conspicuous the choice, the more the consumer is likely to care about the opinions of others. "The more people I know who are using a product," consumers reason, "the more confident I can be that it will not fall apart, malfunction, or otherwise embarrass me." The presence (or absence) of that confidence shapes the group of brands that consumers choose to evaluate. It is particularly influenced by the postpurchase experience of friends and family, along with their loyalty to a brand.

Often, word of mouth is a local phenomenon in emerging markets, partly because of the simple reality that emerging-market consumers generally live close to friends and family. In addition, word of mouth's digital forms, which transcend geography and are growing rapidly in emerging markets, still have more limited reach and credibility there than in developed ones. According to our annual survey of Chinese consumers, just 53 percent found online recommendations credible-a far cry from the 93 percent who trusted recommendations from friends and family. That same survey showed that only 23 percent of Chinese consumers acquired information from the Internet about products they bought. For food, beverage, and consumer electronics consumers in the United States and the United Kingdom, that figure is around 60 percent.

Word of mouth's relatively local nature means that companies in emerging markets are likely to reap higher returns if they pursue a strategy of geographic focus than if they spread marketing resources around thinly (targeting all big cities nationwide, for example). By attaining substantial market share in a cluster of cities in close proximity, a company can unleash a virtuous cycle: once a brand reaches a tipping point-usually at least a 10 to 15 percent market share-word of mouth from additional users quickly boosts its reputation, helping it to win yet more market share, without necessarily requiring higher marketing expenditures.

In China, the bottled water brand C'estbon has a very small national share, but a 25 percent to 30 percent market share, on average, in the southern part of the country. Most of the brand's sales are to small stores and restaurants, where it has a dominant 45 to 50 percent share in that region. In India, this approach worked for P&G, with its Whisper brand of sanitary napkins, which the company introduced in targeted local communities by offering training and free samples to adolescent girls in schools. After successfully creating word of mouth in those communities, P&G gradually expanded the campaign to reach two million girls at 150,000 schools. The result was a drastic reduction in the use of cloth-based protection-to 6 percent, from 66 percent, among the targeted group, according to the company's assessment.

Building brands that get considered

Emerging-market consumers tend to consider smaller sets of brands initially and, compared with consumers elsewhere, are less likely to switch later to a brand that was not in their initial set. For example, research we conducted in nine product categories (including food and beverages, consumer electronics, and home and personal-care products), indicated that Chinese consumers initially consider an average of three brands and purchase one of them about 60 percent of the time. The comparable figures in the United States and Europe are four brands, with a purchase rate of 30 to 40 percent.

To include a brand in the initial consideration set, consumers must obviously be aware of it, so achieving visibility through advertising on TV and other media is an essential first step. Here again, geographic focus is critical. Emerging-market consumers not only generally live close to friends and family but also tend to view local TV channels and read local newspapers rather than national ones. (China, for example, has about 3,000 mostly local TV stations.) Gaining a high share of voice through local outlets in targeted geographies can help create a sense that a company's priority brands are in the forefront-which is valuable, because status-conscious, relatively inexperienced emerging-market consumers tend to prefer brands they perceive as leaders.

But spending heavily on advertising alone is not sufficient to ensure consideration. Companies also need to reach these consumers with messages that have been tailored to suit local market preferences and concerns, and are likely to be trusted. Testing messages-even those that have delivered powerful results in developed markets-is a key part of that equation. When Acer China tested its slogan "Simplify my life" in China, as part of a campaign emphasizing the low cost of its PCs, the message didn't resonate. For typical Chinese consumers, a PC is a very big-ticket purchase, so they care chiefly about durability. Chinese purchasers of PCs also tend to be entertainment rather than productivity oriented. In focus groups, it became clear that Acer's intended message of "great value for money" was arousing suspicion that the company's products might not perform reliably. A change in Acer's message to stress reliability rather than simplicity and productivity helped the company to build a more relevant and trusted brand, to get onto the short lists of more consumers, and to double its market share in less than two years.

Winning the in-store battle

The in-store phase of the consumer decision journey tends to be longer and more important in emerging markets than in developed ones. Emerging-market consumers have a penchant for visiting multiple stores multiple times and for collecting information methodically, especially when they purchase big-ticket items. The typical Chinese decision journey in one major consumer electronics category takes at least two months and involves more than four store visits. These consumers like to test products, interact with sales reps to collect product information, and negotiate with retailers to get the best deal.

As a result, in emerging markets there is significantly more room to influence and shape consumer decisions at the moment of purchase. We first quantified this distinction in 2008 (Exhibit 3). This finding has been reinforced by subsequent research revealing, for example, that the in-store experience is by far the biggest factor in finalizing emerging-market consumers' flat-screen-TV purchase decisions and that Chinese consumers are almost two times more likely to switch brand preferences while shopping for fast-moving consumer goods than US consumers are.

Exhibit 3

In-store execution heavily influences consumer decisions in China.

Important as it is to control the in-store experience, the challenge can hardly be overstated. Products may be sold in tens of thousands of retail outlets after going through two or three layers of distributors. Companies often have limited visibility into what happens at the moment of purchase. Inconsistent merchandising, packaging, and in-store promotions can easily overshadow superior products and carefully crafted advertising strategies.

The first step in avoiding such waste is gaining a clear view of the retail landscape-how it is segmented and where the priority outlets are. Companies must then develop tailored control systems based on incentive schemes, collaboration with distributors, and retail-management programs. For priority outlets, companies must often deploy a heavy-control model using supervisors and mystery shoppers with supporting IT infrastructure to ensure that the performance of stores is visible enough to assess.

Unilever deploys massive resources in India to cover 1.5 million stores in tens of thousands of villages. Many of the salespeople carry a handheld device so that they can book replenishment orders anywhere, anytime, and synch their data with distributors. In Indonesia, Coca-Cola sells 40 percent of its volume directly to local retailers, with whom it collaborates closely. The lion's share of Coke's remaining Indonesian volume is sold to wholesalers with fewer than five employees and less than $100,000 in annual revenues. These wholesalers, in turn, distribute Coke products to small retailers. To improve in-store execution in the many outlets Coca-Cola doesn't serve directly, the company deploys additional support, including supplying them with free coolers and dispensers and providing sales effectiveness training for merchants (for more on the in-store battle, see " From oxcart to Wal-Mart: Four keys to reaching emerging-market consumers ").

Although these principles-harnessing word of mouth, getting brands into a consumer's initial consideration set, and emphasizing in-store execution-may sound obvious, acting on them is not easy. It requires bold investment decisions, efforts to build the skills of local teams, and the courage to operate in ways that are fundamentally different from what headquarters might regard as normal. Fortunately, the potential rewards are commensurate. When emerging-market consumers perceive a brand consistently and positively across the major touch points, including friends and family and the in-store experience, they are far more likely to choose that brand, profiting companies that spend smartly rather than heavily.

About the authors

Yuval Atsmon is a principal in McKinsey's London office, Jean-Frederic Kuentz is a principal in the Taipei office, and Jeongmin Seong is an associate principal in the Shanghai office.