Michael Skapinker’s article in the FT entitled ‘You can handle the web without an adviser’ has an interesting take on how the web influences brands. It seems to me that his argument that he can recall only “four web-based consumer campaigns that had real impact” misses the point about the huge impact the Internet is having on brands. It is less about changes in business decisions such as the return of the Wispa, and more about the pervasive availability of online whispers which accumulate into a very persuasive reason for people to take action. For me it is the decisions of individuals on a daily basis influenced by the likes of content on www.tripadvisor.com  and consumer reviews on www.amazon.co.uk that brands need to monitor and influence. Too often the focus is on  ‘tell’ campaigns above the line when active dialogue online could develop a more rounded and balanced set of consumer perceptions and recommendations.

It was a great pleasure to attend the Marketing Week Word of Mouth Conference’s afternoon session yesterday, with roundtable discussions on the topics of WOM marketing ethics, measurement and the ‘Next Big Thing’.

Ethics in WOM marketing have recently become a key area of debate. The starting point for the discussion was the American Word of Mouth Marketing Association’s (WOMMA) Ethics Code or Honesty ROI:

- Honesty of Relationship: You say who you’re speaking for
- Honesty of Opinion: You say what you believe
- Honesty of Identity: You never obscure your identity 

This code is particularly important for campaigns involving WOM agents, consumers who are incentivised to spread the word about a brand. Both roundtable participants and delegates agreed that ethics are crucial in WOM marketing, because WOM itself is built on trust. The lack of trust in traditional marketing evident among consumers of today underscores the importance of ethics and trust even more. WOM marketers better practice what they preach or deal with the consequences.

However, practical issues were also raised. For example, the natural contexts in which buzz agent chat about brands often arises is bound to certain rules of conversation that can make disclosure difficult or awkward (‘yeah, I really like this new drink – by the way, I’m a buzz agent…’). Viral marketing campaigns were also addressed. How does proper disclosure work for viral communications? Do companies clearly need to state who is behind them? Does it even matter?

More generally, participants and delegates questioned the need for strict rules imposed by an industry body versus letting an invisible hand take care of business, including the possible backlash of engaging in unethical campaigning: what goes around comes around. The compromise: neither strict rules nor no rules at all, but best practice guidelines…

The following discussion on WOM Measurement was not only about how-to’s, but perhaps more importantly why measurement is important.

BzzAgent CEO Dave Balter emphasized that measurement is crucial in selling WOM campaigns to clients who want to know their ROI. He implied—and I would agree with his view—that the future success and growth of WOM marketing will strongly (if not almost exclusively) depend on ROI measurement as its backbone. Balter used the example of a test and control study for a BzzAgent campaign that showed 26% sales uplift in 4 test cities compared to 8% in 4 control cities.

Clickadvisor and Brand Genetics director Dr Paul Marsden discussed how WOM campaigns initially have to be based on a measurement of the importance of WOM in a particular category. The next question is how much WOM can impact on the specific objectives of a campaign. Although the effectiveness of WOM can be measured on the basis of its reach, it is ultimately a means to the economic end of sales uplift.

Finally, there would be no proper marketing conference without a discussion of trends or the ‘Next Big Thing’. As we would expect, Web 2.0 and online social networking took centre stage. One interesting point that was raised was about the strength of weak ties. According to network theory, ‘weak ties’ (e.g. acquaintances or distant relationships) are key in spreading information from network clusters defined by strong ties to other tight clusters. Although information spreads more quickly within clusters made up of strong ties, weak ties are crucial for greater reach of WOM between clusters. And such weak ties are exactly what we have disproportionately represented in the online world!

Other topics that were debated: the need for a shift from individual WOM campaigns to ongoing conversations between companies and customers/consumers, as well as the importance of corporate reputation in the amplification of buzz. The latter may be an interesting variable to consider when assessing potential campaign impacts. For companies with bad reputations (e.g. based on unethical business practices), for example, negative events occur against the backdrop of their existing history and image. In a sense, reputation can be seen as an amplifying variable that moderates/mediates between an event and the generated WOM.

All in all, an informative and inspiring conference day.

If you’d like to learn more about the conference, visit:
http://www.centaurconferences.co.uk/conference.aspx?conferenceid=77572a97-cf03-496b-94fb-891438396463

A new Nielsen study with consumers from almost 50 countries shows cross-national levels of trust and reliance on different sources of information, including word-of-mouth recommendations.

The following are the top and bottom five countries based on levels of trust in advertising: 

Philippines  67%
Brazil  67%
Mexico  66%
South Africa  64%
Taiwan  63%
     
Latvia 38%
Germany  35%
Lithuania  34%
Italy  32%
Denmark  28%

A Herald Tribune article concludes the following:

The picture is not all doom and gloom for marketers or for media owners reliant on advertising, however. The study showed, for instance, that consumers in developing markets still have relatively high levels of trust in advertising, even if their counterparts in developed countries are more cynical. In the Philippines and Brazil, for instance, 67 percent of consumers said they generally trusted advertising.

This is a quite interesting theory. As a researcher, I would love to have the entire data set available and test whether countries’ level of development (e.g. based on GDP per capita, literacy, etc.) or post-industrialization (e.g. relative size of service vs manufacturing in the economy, Internet connectivity, etc.) correlates with trust in advertising. As my previous post on the role of WOM in China showed, there may be other cultural and economic variables that have to be taken into account.

Tradeoffs between trust in advertising and reliance on WOM are not a zero-sum game. Reliance on recommendations seems to have a strong cultural component, as shown by the following top five countries, all of which are Asian (and commonly considered more collectivist or interdependent in self-orientation):

Hong Kong  93%
Taiwan  91%
Indonesia  89%
India  87%
South Korea  87%

Note that none of the bottom five countries about reliance on recommendations are from the top five ‘trust in advertising’ list:

Hungary  68%
Latvia  68%
Lithuania  64%
Italy  64%
Denmark  62%

On the contrary, four of these (Latvia, Lithuania, Italy, Denmark) actually represent countries with consumers who are most cynical about advertising, perhaps indicating that people there generally have low trust in external sources of information.

Nielsen generated the following global ranking for consumer trust in different sources of information. Not surprisingly, recommendations from consumers and newspapers rank very high, whereas online banner ads and mobile phone text ads are the least trusted:

Recommendations from consumers 78%
Newspapers 63%
Consumer opinions posted online 61%
Brand websites 60%
Television 56%
Magazines 56%
Radio 54%
Brand sponsorships 49%
Email I signed up for 49%
Ads before movies 38%
Search engine ads 34%
Online banner ads 26%
Text ads on mobile phones 18%

If you haven’t read it already, I would recommend a look at the Harvard Business Review’s publication of Breakthrough Ideas for 2007. It’s a fascinating array of short essays covering insights and developments in business and science, ranging from unconscious decision making to user-centred innovation.

One of the essays is about the so-called ‘conflicted consumer’, UK consultant Karen Fraser’s description of a segment of people who are “apparently loyal customers who have ethical concerns about your company and are poised to switch as soon as a viable alternative emerges. In other words,” Fraser continues, “they buy your product but they’d rather not.”

The data for this was obtained in a UK survey of 1,300 consumers. According to the research, almost one-quarter of respondents said that they are currently buying goods or services from a company with an ethical reputation that they perceived as poor or very poor.

The implication is that conflicted consumers may abandon a brand as soon as a more ethical alternative becomes available. However, none of the articles I’ve seen on the conflicted consumer has actually mentioned what proportion of consumers say that they would actually do this switch if alternatives were available. As researchers in customer loyalty and disloyalty are well aware, staying or leaving behaviour is the result of many complex factors.

Loyalty despite a belief in a company’s lack of ethics is important if this leads to what is commonly called ‘cognitive dissonance’ (a simple but powerful social psychological concept developed by a man called Leon Festinger in the 1950s). Cognitive dissonance arises when our beliefs (e.g. perception of unethical business) and actual behaviour (e.g. continuing to be a customer) lead to a tension, which can be resolved only by either readjusting one’s beliefs or changing one’s behaviour. If an alternative business comes along that offers the possibility to switch, the conflicted consumer may just do it (Nike suffers from one of the worst ethical reputations, but no pun intended here!)

Unfortunately, the prediction of behaviour from beliefs and attitudes is difficult and has occupied the brains of many social and consumer psychologists over the last few decades. The Theory of Reasoned Behaviour, for example, considers beliefs, along with evaluations of those beliefs and subjective norms, all to be determinants of behavioural intentions, which may then cause actual behaviour. The reason why this is such an important theory is because consumption is perhaps a prime example of the gulf that sometimes lies between what we think we should do and what we actually will do (take healthy eating, for example).

Nonetheless, with rising awareness of ethical issues, and the more social norms and expectations change, the larger the segment of conflicted consumers will grow and the greater the dissonance experienced by existing consumers. It is inevitable that many will soon take advantage of the emerging, more ethical, product landscape.

According to coverage of the ‘conflicted consumer’ in World Business, the 10 companies with the worst ethical ratings include fast food chains (McDonald’s, Burger King), budget airlines (Ryanair, easyJet), financial service providers (Barclays Bank, American Express), along with Nike, Shell, BSkyB and Camelot. I’m sure many of them took Karen Fraser’s research to heart and are now engaged in ethical business research and the development of strategies to avoid the loss of customers.

The top 10 ethical business table is composed mainly of retailers (The Body Shop, M&S, Boots, The Coop, Sainsbury’s, Tesco, Waitrose), along with Kellogg’s, Google and the BBC.

It would be interesting to see the degree to which ethical reputation increasingly affects those companies’ ability to win new customers. As Karen Fraser (quoted in the World Business article) notes: “Mud sticks! It takes time to change a reputation. Companies should also know that throwing money at a campaign can be counterproductive if consumers don’t believe what you’re saying. And in an age of digital communications, companies do face increased scrutiny.” Consumers would rather trust others like themselves and share their feelings widely online.

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