How New Model of Word of Mouth Drives Sales
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Holmes Report

How New Model of Word of Mouth Drives Sales

Contrary to conventional marketing wisdom, your brand is not the product of all the things you say about yourself. It is not determined by your advertising or your marketing, or even by the work of your public relations department.

Paul Holmes

Contrary to conventional marketing wisdom, your brand is not the product of all the things you say about yourself. It is not determined by your advertising or your marketing, or even by the work of your public relations department. Your brand is the product of all the experiences consumers and other stakeholders have with your products and services, and of all the conversations they have with each other about those experiences.

Some marketers would prefer to ignore those conversations. Earlier this year, marketing consultant Jack Trout, writing in Forbes, dismissed the idea that word-of-mouth was the “next big thing” in advertising, arguing that “There’s no way to control that word-of-mouth. Do I want to give up control and let consumers take over my campaign?”

In his book Grapevine: The New Art of Word-of-Mouth Marketing, Dave Balter provides a strong, compelling response to Trout’s criticisms. He makes the point (obvious to many of us, though not to some old-school marketers) that consumers talk about products and services and brands whether companies encourage it or not. And since they are taking place anyway, smart marketers should be participating in those conversations.

And he makes a convincing argument, based on his experience as founder of word-of-mouth marketing pioneer BzzAgent, that those conversations can be instigated and influenced by the company even if they cannot be controlled—and that in any case, total control may not be quite as powerful and important as mainstream marketers think.

“Everybody talks about products and services, and they talk about them all the time,” say Balter and his co-author John Butman early in Grapevine. “Word-of-mouth is not about identifying a small subgroup of highly influential or well-connected people to talk up a product or service. It’s not about mavens or celebrities or people with specialist knowledge. It’s about everybody.”

When Balter launched BzzAgent, he says, “we didn’t understand this. We thought that word-of-mouth was created by in-the-know, early-adopting, technically focused 18-to-24 year old coastal hipsters.” Balter’s plan was to build a network of the super-cool and super-connected to spread the word about super-cool products.

But when Balter invited people to sign up to become BzzAgents, the people who responded came from a broad cross-section of the population: they weren’t all young (35 percent of them were over 35); they lived in cities and towns and rural areas all across America; and they weren’t all guys (70 percent of them were women).

“Most important, they were not all graphic designers or techno-geeks or marketing mavens or web junkies or glad-handers and networkers,” says Balter. “They were housewives and students, senior-level executives, teachers, and dairy department managers. We really do have a paroled felon. Teenage stoners. Religious zealots.”

When a client comes to BzzAgent, the company asks for volunteers from among its agents, and creates slots for a certain number of them, based on criteria established in advance with the client. The agents are then provided with materials—often including a free sample—that help them understand the product or service and thus talk about it to their friends and colleagues.

“They don’t hide the fact that they are BzzAgents,” says Balter. “In fact, they often talk about being a BzzAgent as much as they talk about the product itself.”

Every time they have a conversation about the product, they send the company a report. The company then analyzes the report and shares information with the client.

In 2005, Balter developed a word-of-mouth study in partnership with Walter Carl, assistant professor in the department of communications studies at Northeastern University. The survey found that everyday people (those not associated with BzzAgent in any way) referenced a product, service or brand in about 14 percent of their social interactions each week. BzzAgents were even more focused on products and services, referencing them in about 25 percent of their interactions.

“And what’s comfortingly old-fashioned about these word-of-mouth interactions,” says Balter, “is that the vast majority of them take place face-to-face. Even with our 40 million blog readers in the United States and trillions of e-mails sent a year, 80 percent of word-of-mouth occurs offline… [in] real-time; real people talking to each other in the real world.”

Their motivations are diverse. In fact, Balter says there are six major reasons why people create word-of-mouth about products:
• Helping and educating: “This is the reason most people would like to think they engage in word-of-mouth interactions about products and services,” he says. “There are plenty of people, in plenty of situations, who really do create word-of-mouth because they want to help others make good decisions.”
• Proving Knowledge: “In our constant battle to keep up our self-image, and to ensure that others see us in the way we would like to be seen, we share information as a way of proving our worth.”
• Finding Common Ground: “When you meet someone new, it rarely takes more than a few minutes to stumble onto some product or service you both can discuss. It’s a low-stress way to find similar likes and dislikes.”
• Validating Our Own Opinion: “We bring up the product just to check to see if we’ve missed something or if our information is correct. We want someone else to confirm that we’re right.”
• Pride: “I have been surprised at how many people feel proud about the brands and product they have included in their lives. And it’s not just that they are showing them off, like status symbols, and basking in their reflected glory. No, they are genuinely proud about their choices…. Sometimes we’re proud we were able to navigate through a maze of choices and come out with a winner. Sometimes we’re pleased we made a purchase that makes our family feel safe or look good.”
• Sharing: “People… like to share ideas, opinions, and information. There is no self-serving motive or expected result. When a product or service really makes us feel good or bad or angry or mystified, it’s natural to want to share that feeling with someone else.”

Smart companies can harness the power of these people. Word-of-mouth marketing, Balter says, “is about companies allowing everyday people into their process, giving them more interaction with the product, recognizing them more, and listening to them better, as opposed to traditional marketing, which treats consumers like targets and messages like darts.”

In BzzAgent’s lexicon, the individuals who first share their opinions with others are known as “generation zero.” The company chooses those individuals on a case-by-case basis based on certain characteristics or demographics, and then allows them to experience the product and “help[s] them communicate the experience more effectively.”

Says Balter, “We help them form an opinion—which doesn’t always have to be positive—and enable them to talk consistently about it with others.”

That may mean providing them with free samples, or even a junket: ACIS, the educational tour operator, offered BzzAgents a free trip to Prague.

The company’s research shows that each participant has an average of five to seven interactions about the product or service over the course of a 12-week campaign. “That may be fewer than expected,” says Balter. “But these people have lives. They do not spend every waking moment Bzzing products. And they wait for appropriate moments to do so. Marketers may want there to be more interactions, but more may not bring about any greater result. Five or six or seven genuine, honest word-of-mouth interactions may be more powerful than five hundred advertising impressions.”

What Balter understands is that all conversation takes place a long a continuum with control at one end and credibility at the other. The more a message is controlled, the less credible it becomes. The only way to ensure total credibility is to surrender all control.

“To realize the power of this medium, the communication must not be controlled or managed,” Balter insists. “This is a scary thought for the marketer. How can we ensure that the Gen-1s [those with whom the BzzAgents interact] don’t screw up the message? How can we be sure that they’ll talk to the right people? How can we know what the hell is going on out there?”

The answer, according to Balter, is that the whole process has integrity. “We make sure that our original communication with the Gen-0s is entirely genuine, honest and worth talking about. If we do that, the communication between Gen-0s and the Gen-1s will also be based on honest opinions as opposed to marketing taglines. If a Gen-0-to-Gen-1 interaction is credible, then the interactions that follow from it are likely to be credible as well.

“However, if the original interaction is disingenuous, incredible, dishonest, phony or deceptive, then all the interactions that spring from it will be just as deceptive. But consumers will seek out the truth. If it doesn’t jibe with what they’re hearing, all word-of-mouth about that particular product will then be suspect.”

Basically, word-of-mouth marketing harnesses the power of conversation, and the stories people tell each other about the products and services they use.

“Word-of-mouth is product storytelling,” says Balter. “It is not about people passing along marketing messages. People tell stories about products. The stories are made up from their own experiences and those of others. The marketing messages get woven into the word-of-mouth stories, but they get changed in the process. Everything about the product—the marketing of the product and the company that offers it—is storytelling material.”

Yet marketers are often uncomfortable with the stories consumers tell, because they are not the carefully crafted narratives that marketers prefer.

“Consumers talk about products all the time, but they don’t talk about them in the way that marketers do,” Balter says. “Consumers tell stories about products and services, stories based on their own experienced and the experiences of other people.

“They also tell stories about everything that surrounds the product, including the marketing campaign, the company, what David Letterman said, Martha’s opinion, how the box looked when UPS delivered it, and what happened when they opened it. Plus any other bits of material that come to mind and can be included to make the story more interesting. Positive, negative. Accurate, inaccurate. Truth or damn lies. It’s all grist for the word-of-mouth mill.”

By contrast, when marketers tell stories about their product, the messages are al consistent—but they are consistently perfect, in a way that makes them incredible.

Balter says that when he asks marketers what stories customers are telling about their products “I often get back blank stares. Or they smile as if they have just been waiting for the question, drag out a PowerPoint deck the size of the Beijing phone book, and walk me through their research data on the Perfect Target Consumer, proving they know everything about the PTC including household income, what shoes they wear, their ‘mood’ color, and their current psychographic state.

“But not the stories they’re telling.”

But when marketers listen to word-of-mouth stories, he says, they often learn things about the product—about its features or how it is used or why people like it—that could be useful in refining their own marketing messages, defining the target consumer, and even improving the product itself.

For example, when BzzAgent ran a campaign for Kellogg’s Smorz, a breakfast cereal designed primarily for kids, it received a lot of reports about adults who ate Smorz “at different times or in unexpected places. We learned that Smorz was seen as a snack food of choice for thirty-something because it provided quick energy when they were hiking or sporting.”

So far, there’s nothing in Grapevine that a savvy public relations person would find either controversial or surprising. But over the course of hundreds of word-of-mouth campaigns, Balter has learned some interesting truths, some of which challenge the conventional wisdom.

For example, “word-of-mouth from celebrities, mavens, connectors, alphas, hubs, transmitters, trendsetters, whatever-you-want-to-call-thems is always good,” says Balter. “But it’s no more powerful or influential than word-of-mouth from that guy with the weird headphones who was sitting next to you on the train that gal you dated over one summer…. Mavens and high-profile influentials are effective in specific ways and in particular categories, but most of the time, everyday people are better.”

Similarly, he says, it’s not always the most evangelical brand loyalists who make the best word-of-mouth subjects.

In 2003, BzzAgent partnered with David Godes of Harvard Business School and Dina Mayzalin of the School of Management at Yale to create a study to discover which of a company’s customers were most influential in word-of-mouth campaigns.

Working with a chain of brewery restaurants, the company tracked all the conversations its agents—drawn from the company’s loyalty program mailing list—initiated. The campaign was a success, increasing sales by around $1.2 million over the length of the campaign. But the most intriguing insight was that the heaviest customers, the most loyal and enthusiastic, were not the ones who drove the increase.

Godes theorized that those customers had done all their talking earlier in the relationship with the company, that they had already been buzzing about the product before BzzAgent came along. But Balter suspects another reason: the most loyal customer “doesn’t really want to tell others about it, because he feels some ownership of the brand. He’s a product narcissist. He feels that he has become an important member of an exclusive club…. So the heavy loyals, in a formalized word-of-mouth campaign, may not be your best participants….

“The light loyals,” on the other hand, “are happy to buy a product and patronize a company, but they don’t spend their days pondering the brand. These people… are the ones who are most likely to generate positive word-of-mouth. They have networks that can be influenced and are seen as believers but not evangelists. Evangelists can be so overwhelming in expressing their opinions that they can turn people off. The light loyals are the consumers who should be embraced through dialogue, rather than just through promotional offers, discounts, and rebates.

“They can be very valuable and become true insiders who are willing to listen and then share opinions both with the company and with other consumers.”

But perhaps the most startling learning from BzzAgent’s first few years in the word-of-mouth business concerns what Balter describes as “the weird value of negativity.”

“It’s a fundamental rule of marketing,” he says, “that the messages abut a product or service must always be 100 percent positive.” That’s one reason why traditional marketers are suspicious of word-of-mouth: they can’t control the message; they worry that some of the buzz they generate will be inconsistent with their positioning; that some of the people they want to spread the message may actually generate negative buzz.

Balter believes their concern is misplaced. “In the world of word-of-mouth, negativity can have wonderfully weird and even dramatically positive effects. Negative word-of-mouth is what adds credibility to a product. Everybody knows that few products are 100 percent perfect, nor do they expect them to be. As much as customers would like to believe in the marketing fantasy, they seek out word-of-mouth to find out the truths.”

Negative word-of-mouth is also a valuable source of customer intelligence for the product, brand, or company, an early warning system about potential problems.

And, as public relations people know all too well, “the way a company responds to negative word-of-mouth can create positive word-of mouth.” He cites a study showing that half of all negative word-of-mouth is generated when consumers feel a sense of injustice about the way a company responded—or failed to respond—to a complaint. “In fact, I’d say that companies with mediocre products and amazing customer service have less negative word-of-mouth than companies with great produces and crummy customer service.”

As an example, he points to Apple, which received numerous complaints about the short life of its iPod battery, which could not be replaced. It began with a customer who launched his own website,, and expanded to include plenty of mainstream media coverage, until Apple fixed both the battery problem and its service policy, and sent the website author a new iPod.

Says Balter, “Apple turned around a potentially ugly situation by listening to the negative feedback about the battery and responding to it quickly and effectively.”

Finally, negative word-of-mouth—particularly if it becomes particularly hostile—can prompt typically quiet advocates to speak up about their affection for a product. When BzzAgent launched a campaign for a new home coffeemaker, there were numerous complaints about the design. That criticism prompted many users to defend the product.

“The negative word-of-mouth was bringing out the quiet advocates, the people who liked (and in some cases were passionate about) the product, but who hadn’t yet talked it up. They were people who might not be particularly vocal by nature, or might not have articulated their opinion to themselves. Only when they felt that the product was being wronged did their opinion become clear and then they became motivated to offer their point of view.”

Moreover, these quiet advocates can have particular power. “They don’t speak up as often as brand evangelists. But when they do talk they may exert more influence… because the evangelist is always trying to get others to join the cult of the product, which can be off-putting. The quiet advocates have a simpler goal in mind: they just want to set the record straight. Other people respond positively to that.”

By now, the reader should be thoroughly convinced that Trout’s criticism of word-of-mouth—that it cannot be managed—is not only erroneous but also largely irrelevant. But Balter also responds to another criticism, which is that word-of-mouth cannot be measured effectively as other elements of the marketing mix, particularly advertising.

He acknowledges that there are elements of word-of-mouth that cannot be measured. “You can measure the first interaction. Through feedback from your consumers you can get a gauge of how many individuals have actually begun talking about the products. But after that, authentic word-of-mouth travels its own grapevine. After the first generation of consumers starts telling stories… there is no way to track how many interactions take place or how many people have been involved.”

It is, however, possible to measure the impact of word-of-mouth on sales, and BzzAgent has done so, working with Wharton School Publishing on a study across 10 cities. In five of those cities, a product was introduced using traditional advertising and PR techniques; in the other five, 1,500 volunteers were recruited to start a word-of-mouth campaign. Sales were 66 percent higher, on average, in cities where the word-of-mouth campaign was part of the mix.

Finally, Balter also responds to some of the criticisms of word-of-mouth marketing offered by those outside the marketing discipline, who are concerned not that it might be ineffective but rather that it might be too effective, an subliminal and surreptitious way of planting product message in consumers’ brains, insidious and deceptive. 

“Word-of-mouth marketing is not the same as buzz marketing or viral marketing and it has nothing to do with shill marketing—which involves people being paid to recommend a product without disclosing their relationship with the marketers,” Balter says. “These methods are designed to create noise in the marketplace on the theory that if enough people hear the noise, they’ll talk about it…. Word-of-mouth is the honest, genuine sharing or real opinions and information about products and services. It can be stimulated and accelerated, but it can’t be controlled.”

Indeed, Balter is pretty clear about what word-of-mouth is not. He’s scornful, for example, of the kind of “stunt” that marketing executives talk about in terms of the “buzz” they generate—like Pontiac’s decision to give away its G6s to every member of the Oprah Winfrey audience.

“As credible as Oprah may be, and ad incredible as the giveaway actually was, the buzz generated by the event drove hardly any word-of-mouth about the G6 itself,” says Balter. The stunt got more attention than the product. “Six months after the event, the G6 was selling fewer cars per month than the car it was intended to replace, the Grand Am….

“The loud noise of Oprah’s buzz didn’t suddenly prevent people from forming their own opinions about the car,” but before making a decision they wanted more than buzz, so they sought feedback from other real consumers, “from their friends, their family, strangers—anyone who could tell them what the real experience was like. They went searching for word-of-mouth. When they found it, they factored it into their purchase decision.”

The lesson: “The irony is that a single everyday person’s review—at no cost—can be more influential than $8million of advertising.”

But Balter reserves his most extreme distaste for what he calls “shill” marketing, which involves paying people to impersonate genuine enthusiasts for a product or service. An early example involved scooter maker Vespa, which recruited “a squadron of yuppie hipsters” who rode around on Vespa scooters and approached target consumers of the opposite gender, chatting about several subjects—including their ride—and even giving out their phone numbers.

Except the phone numbers led not to a hot date but to an automated Vespa hotline. Says Balter: “Some of the more even tempered [targets], especially those who already have a girlfriend or boyfriend (or both) find the hoax slightly amusing. Many others are annoyed, angered, embarrassed or even ashamed they have been so easily duped.”

His conclusion: “Without transparency, these attempts to create word-of-mouth are fruitless. Over time, the consumer gets hip to them and is able to easily spot the phony Vespa driver… The press finds it less and less interesting as a new take on marketing and will gradually find more news value in the negative results.”

I’m inclined to agree with Balter. I think there is an important dividing line between earned word-of-mouth and paid word-of-mouth, and I believe the latter has the potential to undermine the credibility and therefore the value of the former.

The unique benefit of word-of-mouth, at a time when traditional authoritative sources of information are no longer trusted, at a time when many consumers and increasingly immune to the charms of advertising and suspicious of other forms of promotion, is that ordinary people—friends and family and colleagues are the most trusted sources of information. But how quickly that could change if we had to ask ourselves, every time a friend or colleague mentioned a new product or service, whether he or she was in the pay of the company.

And that’s where I have some issues not with Balter’s book, which provides a great many useful insights into an approach to marketing that is still in its infancy, but with his company, which seems to me to hover in an uncomfortable middle ground between what he calls “shill” marketing and genuinely earned word-of-mouth.

Because while BzzAgent is to be applauded for the emphasis it places on transparency, and while its agents appear to be genuinely excited about the products they recommend and prompted to act by their desire to appear helpful and informed rather than by any crass commercial motive, there seems to me to be something forced—perhaps even inauthentic—about the company’s approach.

William Gibson, author of Pattern Recognition and the father of the “cyberpunk “school of science fiction, has been fiercely critical: “There are tens of thousands of these agents out there,” he wrote on his blog after learning of BzzAgent’s activities. “Ordinary people, not necessarily trendsetters or celebrities, who are living breather advertisements… and proud of it. We don’t know, for example, when someone is being helpful or informative, or even friendly, or when they have a hidden agenda; when they’re slipping a bit of product placement into the conversation and when they’re just engaging in the occasional mention of a book or brand as part of normal everyday life.

“In this world, which is our world, no one is to be trusted. No one’s word, on this stuff at least, is to be taken at face value.”

Balter responds, reasonably enough, that there’s no deception involved, that there is “full transparency and the system is based on the honest sharing of genuine opinions, word-of-mouth can be harnessed without it becoming a nightmare word of paranoid fantasies…. People talk about products all the time. Everybody does it and everybody knows it.  Does the fact that they’re consciously helping the company through the sharing of their honest opinion make them untrustworthy?”

The answer is no. But it does make the word-of-mouth they generate seem less spontaneous and somehow less authentic.

Truly spontaneous word-of-mouth—the kind I believe public relations people should be focused on—should follow the same approach PR people have historically followed in dealing with the media: identify individuals or groups with influence; tell them the company’s story (or the story of the product or service); then let them go out and tell that story to the wider community.

That small quibble aside, even those PR people hoping to follow that approach to word-of-mouth will learn a lot from Grapevine.

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