Paul Holmes 24 Oct 2007 // 11:00PM GMT
By Crispin Manners
Jim Stengel, the global marketing officer of Proctor & Gamble is reported to have said that word of mouth is the new gold standard in marketing. This was no idle statement. He has backed it up with possibly the most systematic investment in consumer advocacy in the world: the consumer engagement panels called Tremor and VocalPoint. The latter is now said to have almost 600,000 members (specifically mothers) who regularly respond to online research about new products. That’s more than the population of the cities of Manchester in the U.K. or Vilnius engaging in online research every month.
Has P&G persisted with an expensive experiment because Stengel is consumed by missionary zeal? Not a bit of it. P&G continues to pursue an active advocacy strategy because it has been good for its business. Indeed, it has been reported that products launched via VocalPoint deliver sales that are between 10 percent and 30 percent higher than products launched by traditional marketing techniques.
Why is that?
The power of personal recommendations.
Maybe because people now have access to consumer generated content, they have replaced their traditional sources of product information with information from people they trust: people like them, people they know or people who they know share the same interests as them. Recent research underlines this point. Retailers in the U.S., the U.K. and Europe say the following happened after putting customer-created reviews on their websites:
• 77 percent reported site traffic increases
• 56 percent reported improved conversion rates (= rate of site visits to actual purchases)
• 42 percent reported higher average order values
So if a consumer generated review can have this impact, think how much more powerful a personal recommendation can be if it comes from someone you know and trust. This is the secret of P&G’s approach: its engagement model encourages personal recommendations on a mass scale.
Is it intuition or science?
There is plenty of support for the notion that personal recommendations can make a huge difference to business. In fact Fred Reichheld’s Net Promoter methodology, developed at Bain & Company in partnership with Satmetrix Systems, shows that the balance of an organisation’s recommendability can predict its future growth potential.
At its simplest Net Promoter shows that the more “Promoters” an organisation has the better it will perform. The reason for this is equally simple; a promoter is someone who actively recommends a product or service because it has exceeded his or her expectations.
I’ve been working with Net Promoter Scores since 1995—an early adopter and now a confirmed promoter. I like its simplicity. It is a metric that requires just one question to be answered. It creates a snapshot of your organization’s recommendability, the difference between your positive and negative word of mouth. The better the score, the more likely you are to perform well. Reichheld, and NPS, have been criticised for using the metric as a predictor of future growth potential, although work at the London School of Economics has confirmed the link.
In my opinion, this “predictor” quality can be a distraction because some organisations may stop at this simplistic level. It is better to use the metric to identify the causes of detraction and promotion and to adjust both your operations and your marketing accordingly so that both are pointed at increasing advocacy levels by creating more promoters and reducing the numbers of detractors.
This is the real strength of what Reichheld created. If organisations ask their customers these profound questions on a regular basis and then act on the answers, they can deliver a sustainable impact on the bottom line by increasing their levels of customer advocacy.
Advocacy in the Google Age
If online content generated by consumers/customers is so important to an organisation’s performance, then it is logical to see how Google now has a huge influence in the advocacy game. That’s why we created the Kaizo Advocacy Index.
The Kaizo Advocacy Index is a metric that combines the power of “thin-slicing” (as discussed in Malcolm Gladwell’s book Blink), the logic of the Net Promoter Score, and the importance of the Internet. By recognizing online content is a key source of brand reputation, word-of-mouth and ultimately consumer decision-making, the ondex metric uses a unique sampling methodology that is about relevance rather than randomness.
What makes “thin-slicing” in the Google age so valuable?
One answer would be that it acknowledges that only a tiny fraction of the abundance of online information is really used. People have a three-way sifting process. First they sift for relevance; second they sift on the basis of trust (where the source is one they feel they can trust—and consumer generated content is preferred to marketing content); and third they sift on the basis of ease of access: how many of us go past the first page on Google, never mind the third?
More importantly, by harnessing Google’s power, the Kaizo Advocacy Index recognizes that we are now in a Web 2.0 world, where online content increasingly drives offline conversations and personal recommendations.
The reality is that many people will be making purchasing decisions based on what the see online. The Internet is the “rock and chisel” of the digital age, where information—positive and negative—has the potential to last forever. The upside is that while Web content cannot e controlled, it can be influenced and stimulated.
The idea driving the Kaizo Advocacy Index is the need to help organisations and businesses:
• Value and protect their online reputation
• Plan for the reputational risks and benefits of word of mouse
• Engage with online influencers to stimulate and influence the right kind of online content
The Index provides a balance sheet of a brand’s online reputation and recommendability. By also accounting for neutral content, it isn’t just a black-and-white snapshot. Rather, it squeezes out content that will be ignored and focuses on the information that would be deemed to be a positive or negative recommendation.
The Kaizo Advocacy Index tracked leading brands in five sectors and identified winners and losers in the online advocacy game.
Do personal recommendations attract better customers than traditional marketing techniques?
On the one hand, the answer is a resounding “no!” Don’t forget personal recommendations can, and often are, negative. These are the recommendations of detractors, people who have had their expectations missed by the product or service. I am sure we can all think of occasions when we have negatively recommended when let down in this way.
On the other hand, it is an unequivocal “yes.”
Earlier this year, Kaizo developed and launched the U.K.’s first, and now largest, online advocacy panel for the Simple brand www.simplycity.me.uk. It is a VocalPoint with increased interaction and the ability to capture consumer reviews and other content. Already several thousand people have joined and actively engage each month.
While the Proctor & Gamble experience is persuasive, what we were recommending to Accantia Health & Beauty, the owner of the Simple brand, represented a huge change in its approach to consumers. It meant that the company would bring consumers “inside” its business, treating them as brand advisers and effectively giving them a say in the future direction of the brand and its products. This was no trivial brand or business decision and the directors Accantia decided to embrace this breakthrough innovation when we uncovered two key facts that showed how the move to direct consumer engagement would pay off for the brand.
The first critical fact is that Simple is already a brand that has high promoter rates and is growing strongly through word of mouth recommendations. In the last year the Simple brand has been growing at over two and a half times the market rate and is now number one in four out of eight facial skincare sectors, despite being a relative minnow compared to P&G and Unilever.
We ran an NPS audit and discovered that 41 percent of Simple users are promoters (producing an NPS of 20 percent, since 21 percent are detractors). We also discovered that, coincidentally, 41 percent of consumers discover the brand through personal recommendation, over three times the number by the next most effective marketing method.
But the clincher was uncovered when we cross-correlated promoters with the people who arrived through a personal recommendation Promoter rates increased by over 50 percent to 65 percent and detractor levels were almost eliminated, falling to just 2 percent—therefore producing a threefold increase in NPS to 63 percent.
The conclusions are obvious. People who are recommended become positive recommenders—a positive advocacy reinforcement loop that cannot be ignored by brands or businesses. This effect is not limited to Simple. We have seen it many times before and since as we assess an organisation’s fit with an advocacy strategy.
So should advocacy programmes replace traditional marketing and communications?
In my view the issue is not one of replacement but an urgent need for brands to embrace advocacy as an integral part of the communications and marketing mix. Web 2.0 has made it possible for consumers to influence a brand’s performance on a massive scale. Rather than being passengers in this recommendability revolution, organisations have a golden opportunity to focus on those customers who have the greatest potential to exceed expectations and thus drive recommendations.
So advocacy is not about winning any customer but the right customer. A well-constructed advocacy programme can have a pivotal role in attracting and retaining these “best-fit” customers.
Crispin Manners is founder and director of innovation at Kaizo, one of the U.K.’s leading public relations and word-of-mouth consultancies.