MCKINSEY QUARTERLY A NEW WAY TO MEASURE WORDOFMOUTH

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

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

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

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

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

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

I. EXPERIENTIAL WORD OF MOUTH MARKETING Product/Service fails to meet expectations Brand Sentiment/ Equity Eg: - National Geographic: Augmented Reality http: //www. youtube. com/watch? v=TL 62 tx. WNFMY Reduced brand receptiveness to tradition marketing Effect of positive word of mouth from other sources

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

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

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

MEASURING WOM Number of recommendations or dissuasions Variability in power

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

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

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

IMPLICATIONS FOR MANAGERS Flexibility Performance not volume Identify drivers of WOM Insights!

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

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

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

• http: //www. youtube. com/watch? v=FKeeku 0 O 4 l 8 • http: //www. youtube. com/watch? v=Wp_i-Cq 7 ec 8

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