July 16, 2008
Word-of-Mouth: 50 cents a Chat?
By Tom Ryan
Two groups – BzzAgent, a Boston-based WOM agency, and ChatThreads, a Boston research group – have calculated that word-of-mouth conversations for brands are worth around 50 cents each. But nobody seems to agree on the right way to measure WOM. The main challenge is measuring the true value of viral media.
“I don’t know if we’ll come up with a single standard or there’s two or three different ways,” Ed Keller, president and CEO at the Keller Fay Group and head of the Word of Mouth Marketing Association, told Brandweek. “By the end of the year, marketers will have a better way about it.”
The industry is hoping to come up with a standard equal to the TV network’s CPM (cost per thousand).
“It’s a very hot topic,” says David Bank, an RBC Capital Markets analyst. “I might think I’m paying X amount for a CPM, but if virality is 30 times that, I’m paying so much less. If you have a 27 times virality rate, you really paid a 27th of that.”
According to the Brandweek article, BzzAgent had the simplest formula for measuring the success of a WOM campaign: dividing sales by total conversations.
Procter & Gamble’s Tremor unit measures success of a WOM effort by comparing areas where a campaign has run with places it hasn’t.
More complicated was ChatThreads, which took into account reach, purchase behavior and other factors including marketing program costs. Under its six-week campaign, 1,867 participants talked to an average of 16.4 conversational partners regarding a “lower-involvement CPG product.” Eighty-three percent of those partners then spoke with an average of 1.94 others. In sum, of the 747,537 people that the campaign reached, 146,545 units were estimated to have been purchased. Even then, Walter Carl, an assistant professor at Northeastern University and chief researcher of ChatThreads, said the company’s 50 cents outcome clearly wasn’t definitive.
“Almost all the inputs are variable,” says Mr. Carl. “We’ve seen different values per conversation, but we haven’t done enough campaigns to say what the average is.”
Net Promoter, a system created by Satmetrix, gauges a WOM program’s success by looking at how many consumers would recommend the brand or product to a friend. The company believes this system is more a measurement of “pure word-of-mouth” than the effects of a campaign. Says Deborah Eastman, CMO at Satmetrix, “Word-of-mouth is something that’s earned,” Eastman said. “We believe that paying people to deliver word-of-mouth is not the right model.”
Discussion questions: Do you think word-of-mouth can be measured? What do you think are the challenges of doing so? What needs to be taken into account?
BrainTrust
Recent Discussions
Discussion Questions
Poll
The world is filled with marketing companies attempting any measurement under the sun to quantify the value of the services they offer. Eric Schmidt of Google famously called marketing “the last bastion of unaccountable corporate spend in America.” The lack of accountability doesn’t come from lack of trying. Media and consulting companies have long used second-derivative measures like “unaided awareness” or suspect inferential modeling techniques like “media mix modeling” to try to isolate the impact of specific marketing activities on revenue and profit. “50 cents a chat” is just another similar attempt.
I can think of two-and-a-half areas where the impact of marketing on retail sales has been measured in a compelling way, enabling companies to scientifically improve their effectiveness. One is direct mail, where test and control approaches are regularly employed. The second is internet, where Google Analytics leads the way in proving effectiveness. The “half” is that a few leading retailers and marketers have begun to employ test-and-control approaches to measure the true sales impact of inserts, ROP, radio, and TV. “WOM” as a design form of marketing, while fine as a small part of the strategy, will never rise to that level of accountability.
If part of marketing is letting people know about a product or service, then WOM is certainly marketing. Measuring it, however, is extremely difficult. Unless people are followed and all their conversations recorded, measurement relies on people reporting their conversations which has a lot of built in bias. Maybe some type of triangulation would work: self-reports, compared city sales, same store sales compared to another time period.
Someone created a nice Press Release and some news service picked it up as filler and here we are writing about it. Yes it would be great to be able to put a value on word of mouth but here we basically have another survey putting itself out as research.
Wily Warren Thayer should be elected the Mayor of the town, WOM.
We are a nation of very inventive people that too often invent endless solutions to things that benefit only the inventors.
What’s all this about “bird of mouth?” And why should we care, anyway? To begin with, birds don’t really have mouths, they have beaks! And if you’re going to try to make sense of what they’re saying all the time, well, you’re a birdbrain. Another thing about “bird of mouth.” Sometimes I wonder if…. What? What? Oh, “word of mouth?” Oh, I see.
Never mind!
(this isn’t April fool, is it?)
This is where I take more of a “retailer,” rather than a “marketer” stance. Yes, brand engagement is important, and yes, there is a lot of controversy over whether WOM can get over the need for building engagement “genuinely” when the people who are talking about the brand are getting paid for it. But ultimately, did it sell more stuff? Because as a retailer, and really, as a manufacturer too, that’s what is ultimately the most important thing to measure.
From a client-relationship billing perspective, this is silly. WOM campaigns should be viewed as “projects” and billed a such. To break them down individually puts agencies in the same boat as the CPM nightmare they’re in currently with TV networks.
From a retail perspective, positive WOM is a goal that doesn’t get enough attention. Focus on the customer experience, every customer experience, and WOM will take care of itself. One positive WOM unit may be valued at 50 cents. But customer experience is priceless.
First off, I do not believe any form of marketing (WOM is a form of marketing) where it is 100% dependent on the actions of people can be effectively measured. The fact that these firms are even trying to do so looks to me like a way for them to create some kind of new chargeable service.
Second, is anyone taking into account the ratio between negative and positive word of mouth? Studies have shown that people will share a negative experience with three times as many people as they would a positive one. I would be more interested in finding out how that impacts a business.
As much as marketers would like to have an intimate knowledge of everything we say, do, and think, the fact is that it is impossible. For many people, attitudes towards specific products and services can change daily, influenced by a countless number of internal and external factors.
At least that’s what 3 out of 5 people have told me.
Uh, these companies already have created a service that they charge for–see BzzAgent. That’s why they’re trying to assign a value to it, so they can have some sort of transaction-based fee instead of an agency-style fee based on labor hours.
It seems, though, that the piece confuses the value of a conversation with how to charge for it. TV charges CPMs but that’s not how the value of a campaign is measured. It’s a simple proxy for paying for targeted reach and frequency. The advertiser then determines the value of that audience relative to its own goals. CPMs are really calculated relative to each other–how much more valuable to you is my audience than the baseline spot market buy–and it’s a supply-and-demand system. The WOM guys seem to be looking for some sort of value-based pricing, which I think may be impractical. As noted above, too many variables to come up with standard pricing based on value to the client.
Of course, the business could try to increase the direct measurability of the medium. Give the “agents” coupons (you knew I would get that in there) to give to people they talk to and direct measure the resulting sales, for example.
WOM has always been present, by default or by design. But we haven’t paid for it in the same manner as other media…nor would I want to.
It will be difficult to isolate WOM, why not measure pre and post brand awareness and recognition instead? And even then, the results will be affected by other paid–and measurable, media.
In a marketing plan, WOM should remain in the Public Relations column of marketing. In the marketing toolbox, there are more reliable and measurable media vehicles.
For some categories, such as movies and fashion, word of mouth is critical. For some retailers, like Costco, it’s also a sales builder. But most retailers and most brands in most categories get nothing from it, because (1) they’re me-too bores and (2) they’re mediocre performers and (3) folks don’t usually talk much about mediocre me-too bores. They talk about what’s terrific and what’s awful.
In Europe, our company is conducting research into how to accurately measure WOM in social media in terms of ROI. It is, we continue to agree, a definite time and money saver when used accurately. But the industry, the audience, and the linguistic and geographical market can play a role in the measurement. Our research looks into the entertainment industry, automotives, pharmaceuticals, even politics and more. As we specialise in monitoring and measuring the buzz in several languages, it is interesting to see the difference with respect to regions and linguistics, something our American counterparts may have an interest in as well, considering the international currency that brands, products and services carry these days. (www.attentio.com)
More Discussions
As Boomers ‘Age Out of Peak Purchasing,’ How Can National Brands Retain Interest With Gen Z?
According to a recent First Insight study titled “Is Gen Z Still Choosing Your Brand,” while…Is Supply Chain Volatility Here To Stay?
Can we expect an ongoing volatility to remain in terms of retail supply chain?Has Same-Day Delivery Become an Expectation Across Retail?
Are expectations around retail delivery speed in flux?
The world is filled with marketing companies attempting any measurement under the sun to quantify the value of the services they offer. Eric Schmidt of Google famously called marketing “the last bastion of unaccountable corporate spend in America.” The lack of accountability doesn’t come from lack of trying. Media and consulting companies have long used second-derivative measures like “unaided awareness” or suspect inferential modeling techniques like “media mix modeling” to try to isolate the impact of specific marketing activities on revenue and profit. “50 cents a chat” is just another similar attempt.
I can think of two-and-a-half areas where the impact of marketing on retail sales has been measured in a compelling way, enabling companies to scientifically improve their effectiveness. One is direct mail, where test and control approaches are regularly employed. The second is internet, where Google Analytics leads the way in proving effectiveness. The “half” is that a few leading retailers and marketers have begun to employ test-and-control approaches to measure the true sales impact of inserts, ROP, radio, and TV. “WOM” as a design form of marketing, while fine as a small part of the strategy, will never rise to that level of accountability.
If part of marketing is letting people know about a product or service, then WOM is certainly marketing. Measuring it, however, is extremely difficult. Unless people are followed and all their conversations recorded, measurement relies on people reporting their conversations which has a lot of built in bias. Maybe some type of triangulation would work: self-reports, compared city sales, same store sales compared to another time period.
Someone created a nice Press Release and some news service picked it up as filler and here we are writing about it. Yes it would be great to be able to put a value on word of mouth but here we basically have another survey putting itself out as research.
Wily Warren Thayer should be elected the Mayor of the town, WOM.
We are a nation of very inventive people that too often invent endless solutions to things that benefit only the inventors.
What’s all this about “bird of mouth?” And why should we care, anyway? To begin with, birds don’t really have mouths, they have beaks! And if you’re going to try to make sense of what they’re saying all the time, well, you’re a birdbrain. Another thing about “bird of mouth.” Sometimes I wonder if…. What? What? Oh, “word of mouth?” Oh, I see.
Never mind!
(this isn’t April fool, is it?)
This is where I take more of a “retailer,” rather than a “marketer” stance. Yes, brand engagement is important, and yes, there is a lot of controversy over whether WOM can get over the need for building engagement “genuinely” when the people who are talking about the brand are getting paid for it. But ultimately, did it sell more stuff? Because as a retailer, and really, as a manufacturer too, that’s what is ultimately the most important thing to measure.
From a client-relationship billing perspective, this is silly. WOM campaigns should be viewed as “projects” and billed a such. To break them down individually puts agencies in the same boat as the CPM nightmare they’re in currently with TV networks.
From a retail perspective, positive WOM is a goal that doesn’t get enough attention. Focus on the customer experience, every customer experience, and WOM will take care of itself. One positive WOM unit may be valued at 50 cents. But customer experience is priceless.
First off, I do not believe any form of marketing (WOM is a form of marketing) where it is 100% dependent on the actions of people can be effectively measured. The fact that these firms are even trying to do so looks to me like a way for them to create some kind of new chargeable service.
Second, is anyone taking into account the ratio between negative and positive word of mouth? Studies have shown that people will share a negative experience with three times as many people as they would a positive one. I would be more interested in finding out how that impacts a business.
As much as marketers would like to have an intimate knowledge of everything we say, do, and think, the fact is that it is impossible. For many people, attitudes towards specific products and services can change daily, influenced by a countless number of internal and external factors.
At least that’s what 3 out of 5 people have told me.
Uh, these companies already have created a service that they charge for–see BzzAgent. That’s why they’re trying to assign a value to it, so they can have some sort of transaction-based fee instead of an agency-style fee based on labor hours.
It seems, though, that the piece confuses the value of a conversation with how to charge for it. TV charges CPMs but that’s not how the value of a campaign is measured. It’s a simple proxy for paying for targeted reach and frequency. The advertiser then determines the value of that audience relative to its own goals. CPMs are really calculated relative to each other–how much more valuable to you is my audience than the baseline spot market buy–and it’s a supply-and-demand system. The WOM guys seem to be looking for some sort of value-based pricing, which I think may be impractical. As noted above, too many variables to come up with standard pricing based on value to the client.
Of course, the business could try to increase the direct measurability of the medium. Give the “agents” coupons (you knew I would get that in there) to give to people they talk to and direct measure the resulting sales, for example.
WOM has always been present, by default or by design. But we haven’t paid for it in the same manner as other media…nor would I want to.
It will be difficult to isolate WOM, why not measure pre and post brand awareness and recognition instead? And even then, the results will be affected by other paid–and measurable, media.
In a marketing plan, WOM should remain in the Public Relations column of marketing. In the marketing toolbox, there are more reliable and measurable media vehicles.
For some categories, such as movies and fashion, word of mouth is critical. For some retailers, like Costco, it’s also a sales builder. But most retailers and most brands in most categories get nothing from it, because (1) they’re me-too bores and (2) they’re mediocre performers and (3) folks don’t usually talk much about mediocre me-too bores. They talk about what’s terrific and what’s awful.
In Europe, our company is conducting research into how to accurately measure WOM in social media in terms of ROI. It is, we continue to agree, a definite time and money saver when used accurately. But the industry, the audience, and the linguistic and geographical market can play a role in the measurement. Our research looks into the entertainment industry, automotives, pharmaceuticals, even politics and more. As we specialise in monitoring and measuring the buzz in several languages, it is interesting to see the difference with respect to regions and linguistics, something our American counterparts may have an interest in as well, considering the international currency that brands, products and services carry these days. (www.attentio.com)