To most of us, myself included, it probably makes intuitive sense to expect consumers in emerging markets to be more susceptible to traditional, in-your-face forms of advertising. After all, people in those countries haven’t had as much time to become critical or even cynical about mass marketing. In addition, they are relatively inexperienced consumers, faced with an increasing amount of choice, along with an emerging wealth to satisfy their needs and newly created wants.

As a result, we may (perhaps naïvely) think that a sector like automobiles should provide a breeding ground for successful advertising campaigns in emerging markets. Well, if you think ‘cars in China’, then think again.

According to a recent article on Forbes.com, consumers in China aren’t blinded by flashy adverts, sponsorship or dealer promotions, but influenced by word-of-mouth, especially when it comes to buying cars.

Here are a few points covered by the article:

Chinese car buyers rely on word-of-mouth, auto shows and the Internet. (Blogs have become a particularly popular means to exchange ideas in China.)

Chinese consumers seem to distrust both traditional advertising and car dealerships staffed with managers who are as inexperienced with cars as most car buyers themselves.

TNS research and KPMG found that Chinese car owners turn to family and friends to make car purchase decisions (40% said that advice from familiars was the most credible source of information; 30% said that the Internet was as a credible source).

According to Klaus Paur, Shanghai-based automotive director at TNS China, Chinese need recommendations and advice, because they are inexperienced consumers in certain categories.

The Chinese “craving for a tangible buying experience” is evident in the fact that tens of thousands of Chinese car buyers visit the international auto exhibitions in Shanghai and Beijing, as well as auto shows in smaller cities across China, in order to “compare a full array of latest models from all manufacturers, conveniently displayed right before their eyes.”

The article brings up several interesting issues:

Firstly, car buying in China provides a good example of an ‘emerging market’ in which consumers can capitalize on ‘emerging technologies’, like the Internet, to help their purchasing decisions – with the potential to “bypass” decades of traditional marketing.

Secondly, in the case of China, there may be an interesting cultural component to the relevance of word-of-mouth and personal experience in shaping buying decisions.

As a prime example of a ‘collectivist culture’, Chinese orientation towards the group, or indeed the ‘wisdom of the group’, could give word-of-mouth not only a unique but perhaps even particularly strong position in consumer culture. In addition, cross-cultural psychology comparing Western European to East Asian cultures has shown that the Chinese tend to rely on more ‘intuitive’ than ‘formal’ reasoning strategies: when concrete instances of objects they have encountered or their own sense experience are at odds with formal rules, logic or abstractions, East Asians are more likely to make decisions based on their intuition. If you add this propensity to the Chinese lack of experience as car consumers, along with the complexity and high investment inherent in buying cars, it should be no surprise that visiting car shows is another popular way of make purchasing decisions.

Posted by Alain on August 1, 2007

It has been almost four months now since I first blogged about current Net Promoter Score (NPS) debate among market research practitioners and academics.

This month, the debate about NPS continues, as evident in a new critique of NPS’ predictive utility published in the Journal of Marketing. Since its publication, I have found myself involved in a number of interesting email exchanges, particularly with Tim Keiningham (co-author of the article and Senior VP at Ipsos Loyalty) and Justin Kirby (co-author of ‘Connected Marketing’). I have also recently given a podcast interview to Justin Kirby, which covers some of my thoughts on NPS, among other things.

In any event, I very much welcome the dialogue about NPS, because it should ultimately help our understanding of the NPS and other metrics. Research (as done by Keiningham and colleagues) should advance the insights necessary to identify the strengths and weaknesses of different measures. Indeed, as a DIY market research tool, the NPS invites you, the practitioner or academic, to ‘see for yourself’ what it can do for you. As such, (and as anything available in the public domain), it invites you to not only use it blindly, but also test, challenge or even improve it, if you are so inclined!

The main finding by the Journal of Marketing article is that NPS, for the industries covered, does not do a better job at predicting company growth than the NCSB (Norwegian Customer Satisfaction Barometer) or ACSI (American Customer Satisfaction Index).

As a result of this, let me present you with the following:

The Net Promoter Score One-Question – One-Answer FAQ:

Q: Is the NPS the ’single most reliable’ predictor of a company’s ability to grow?

A: Unlikely(!), but it may be a pretty ‘reliable single’ indicator (if one indicator means ‘one question’ here) of loyalty and advocacy, as well as a predictor of growth. If it were the single most reliable predictor of growth, the people behind NPS would, in my opinion, deserve a Nobel Prize in Economics! (Whether false claims have been made by Fred Reichheld, Bain & Company or Satmetrix about what NPS can do is a question that I would like to leave up to your own judgment, provided that you’ve read the NPS critiques and the original HBR article or ‘The Ultimate Question’.)

The ‘Advocacy Drives Growth’ project I’ve been involved in (often cited as ‘proof’ that NPS works in relation to business growth) has shown that NPS can be a statistically significant correlate of company performance. But it did not do a better job at that compared to our measure of negative word-of-mouth, another one-question indicator — at least for the companies and industries we surveyed in the UK.

This makes as much intuitive sense as the NPS itself, because, as I think most of us would agree (and as I mentioned in a previous blog),
1) the more we know (the more questions we ask), the better we usually are at predicting an outcome, and
2) knowing how people actually behave (e.g. re-purchase, recommend, bad-mouth) should do a better predictive job than knowing how people intend to behave.

There are some other important aspects relating to the universal vs particular utility of NPS that have to be (or are already in the process of being) investigated by researchers. This includes a better understanding of those taken-for-granted cut-off points for NPS promoters, passives and detractors, particularly problematic in cross-cultural NPS use.

Be that as it may, in my view (I am in part echoing others, such as Paul Marsden) the NPS is:
- a simple one-question attitudinal indicator of loyalty and advocacy that can be linked to growth
- a ‘reporting tool’ that ‘speaks the language of the boardroom’ and stands for (but does not explain!) one aspect of business health
- a score that can easily be communicated to your employees and customers and thereby increase accountability
- a simple way of benchmarking (assuming you have an unbiased and large enough sample to minimize your measurement error) against the competition, as well as segmenting your customers

A proper NPS audit, especially when it is conducted for the first time, should include one or two open-ended questions asking customers to explain their rating and suggest improvements to the product or service.

I agree with critics who say that the NPS is somewhat of a ‘black box’ and that some businesses have adopted it without truly knowing the science that is behind it. Hopefully, current discussions will encourage more transparency and an exchange of NPS best practices. For now, I am hesitant to discuss the benefits and limitations of NPS on a more technical (i.e. statistical) level, but would like to do this in a future blog entry.

Posted by Alain on July 18, 2007

I just got back from a short vacation and noticed that the Financial Times published an article on WOM entitled ‘How to work a rumour mill’.
The article features a sneak preview of a new article reporting WOM research by Prof Robert East at Kingston University.

The author of the FT article, Robert Matthews, writes that “marketing gurus have long claimed that consumers are more likely to bad-mouth unsatisfactory products and services than to recommend good ones.” East’s research dispels this myth, while also raising some other interesting questions. Let me list a few points brought up in the FT article and add a brief comment to each.

Point 1: In the Kingston University study, PWOM was more common than NWOM by a factor of 3 to 1.
My comment: This is similar to the results of the ‘Advocacy Drives Growth’ study I did at the LSE in 2005 with Paul Marsden. It further supports the hypothesis that first-hand comments about products and services are more likely to be positive than negative.

Point 2: Almost half of all NWOM comes from people who have abandoned a brand.
My comment: That’s very interesting – it would also be fascinating to find out more about the qualitative differences in NWOM between stayers and leavers. I suppose as far as the magnitude of NWOM is concerned it should be ‘stay and fray’ for the former and ‘churn and burn’ for the latter.

Point 3: Consumers who spread NWOM are also more like to say good things about a brand.
My comment: Indeed, that’s the idea behind opinion leadership research and marketing: for the most effective campaign, don’t ‘mass market’, target the right people with the right message.

Point 4: NWOM tends to “infect” even those who have never tried the brand, and, Robert East says, “when negative word of mouth escapes from the user base it really takes off.”
My comment: together with the first point, this nicely adds to ideas I expressed in an article on NWOM vs PWOM last year in the International Journal of Market Research: NWOM may be less frequent, but it probably has greater reach. It may not necessarily have a greater impact on individual purchase decisions, as I think Robert East maintains, but is likely to be more powerful across space and time. Perhaps this would partly explain the myth that people are more likely to comment on bad experiences with a brand? Another psychological factor may be people’s tendency to remember bad things—the so-called ‘negativity bias’…

I think this article is a good demonstration of key factors that allow us to understand WOM impact. Some basic variables are:
- frequency and content of WOM
- the types of people who spread WOM (e.g. influencers or opinion leaders vs others; customers vs non-customers, etc.)
- reach of WOM (how many people receive the WOM message)
The list could go on to include a characterization of WOM recipients (e.g. how easily are they influenced), the persuasiveness not only of the communicator (e.g. opinion leader) but also the message itself, etc. – I’ll leave these points to future blogs.

For now, let me ask the readers of my blog (are you out there somewhere?): what are your thoughts and experiences about NWOM vs PWOM? Do you think the myth has been dispelled?

Posted by Alain on July 3, 2007

In my last blog, I used a recent experience I had at Starbucks to illustrate how an unpleasant episode (a brand ‘transgression’) with a potential for negative word-of-mouth can be turned into positive word-of-mouth. I argued that it can be done by responding beyond the expected reparations for an unpleasant customer experience, while ideally also lowering the threshold of what constitutes a bad experience.

However, the likelihood of recommendations also depends on the quality of the emotional connection between the customer and the brand in the first place. This relationship flavours expectations and customer’s reactions to experiences. An appropriate comparison to WOM might be a tiramisu (the Italian dessert—I had one recently, hence the unlikely connection…). The customer-brand relationship is represented by the liquor-soaked biscuit base. It’s yummy. It can even be intoxicating. Tiramisu wouldn’t be tiramisu without this base. The rest of the dessert is merely “built” on top of it.

Enough of the pudding metaphors. What I am trying to say is that advertising and PR are important means of building relationships with consumers. We all know that, of course. But it’s about more than just good or bad relationships, it’s about the right relationship. My favourite study on brand relationship is one that was conducted at Stanford University and published three years ago in the Journal of Consumer Research.

In a nutshell, the experiment had participants sign up for a mock online service (online photography services, to be precise). One group of people were randomly assigned to be customers of a ‘sincere brand’ (manifested in the way the brand was presented, including the Web site, content and style of communication with customers, etc.). The other group was assigned to the ‘exciting’ brand. After signing up, people’s attitudes towards the brand were measured. Then the actual ‘experimental manipulation’ followed. It consisted of having participants believe that their online photo album had been accidentally deleted. After the incident, customers received an apology from customer services and a restoration of service. Customer attitudes were measured before the incident and then again before and after the apology.

As we would expect, results of the study show quite different outcomes for the exciting and sincere brands. Based on a measure that the researchers call ‘self-connection’ (the amount of connection felt between oneself as a person and the brand), the sincere brand could not recover from the incident. Not so for the exciting brand. In fact, after receiving an apology, customers of that brand had even higher levels of self-connection to the brand than before the transgression!
(In an experimental condition in which no transgression occurred, however, self-connection levels increased over time for the sincere brand, but decreased for the exciting brand.)

I believe that this experiment is a powerful illustration of how potentially negative WOM can be turned into something positive. In the case of the experimental example, had the customer service response gone beyond an apology and service restoration, it is likely that not just attitudes but recommendations would have been boosted.

Do you have any examples of a negative experience being turned into a recommendation?

Posted by Alain on June 13, 2007

How much energy is there in a carrot? A glance at a range of packaging and some websites says around 30 calories. But that’s not really my point. One energy level that isn’t so easy to discover, but that is becoming equally important to Britain’s shoppers, is the ‘embodied energy’ of said carrot.
Essentially, the embodied energy of a carrot (or a building, or this magazine or anything you can see) relates to the energy used to make it and deliver it to the end-user. Embodied energy, therefore, is the greenhouse gas emissions (mainly CO2) generated by that energy use; including those produced during manufacture, transportation, storage and sale.
In all honesty, I have no idea what the embodied energy of the average carrot is (it would, after all, take a colossal amount of research), but this doesn’t mean the issue isn’t of huge importance for Britain’s producers. Even though it would be near impossible to include an accurate embodied energy label on a carrot, many of Britain’s shoppers can quite easily identify if one carrot is ‘greener’ than another.
Transportation, or ‘food miles’, is one of the biggest contributors to embodied energy, and one of the first things savvy consumers look out for. According to a DEFRA survey published in August, over half of shoppers already “make an effort to buy things from local producers”, justifying the ongoing supermarket scramble to highlight their commitment to local sources.
Less publicised, but equally significant is packaging. Is the packaging recycled/recyclable? If so, the energy wasted in creating packaging from scratch is diminished and the carrot is looking greener. Loose carrots look greener still. But no-one seems to publicise the influences on embodied energy that aren’t as easy for consumers to see – the facts that could turn embodied energy into an effective marketing tool for any product, carrots included.
If a producer was to use renewable energy at the plant it uses to clean, pack and dispatch the carrot – publicising the fact effectively – then they could show another green light to shoppers, whilst enhancing the carrot’s attractiveness to retailers and helping to achieve government CO2 reduction targets in the process. Who is to stop a producer from converting a transport fleet to biodiesel, reducing the embodied emissions attributed to food miles? Put that on a (100% recycled) label and soon your carrots are being seen through green-tinted lenses. As you improve, calculate your CO2 savings and tell consumers. Seeking the advice of knowledgeable PR and communications consultants can really help to generate ideas of what to change how to unlock the commercial potential of going green.
The fact is that until producers and retailers become as environmentally savvy as consumers already are, ‘embodied energy’ will always be seen as an awkward buzzword, rather than the commercial opportunity it represents. I for one would buy green carrots.

Alex Myers is an experienced writer on climate change issues and a senior consultant at Kaizo PR, specialising in green communications strategy.