mckinsey quarterly: a new way to measure word-of-mouth marketing guru marie palak shwetha

MCKINSEY QUARTERLY:A NEW WAY TO MEASURE WORD-OF-MOUTH MARKETING

GURU

MARIE

PALAK

SHWETHA

AGENDA

Introduction3 Types of Word of MouthMeasuring WOMImplications of WOMHarnessing 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

WOM used in 20 to 50% of

all the purchase decisions

FIRST PURCHASE

EXPENSIVE PURCHASE

(high involvement)

ONE TO MANY BASIS

NEW CHALLENGE FOR MARKETERS: UNDERSTAND AND 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

PerceptionsPurchase ratesMarket Shares

IMPORTANCE FOR COMPANIES TO

INVESTIGATE AND MANAGE WOM

Introduction3 Types of Word of MouthMeasuring WOMImplications of WOMHarnessing WOM

I. EXPERIENTIAL WORD OF MOUTH MARKETING

Product/Service fails to

meet expectations

Brand Sentiment/

Equity

Reduced brand receptiveness to

tradition marketing

Effect of positive word of

mouth from other sources

http://www.youtube.com/watch?v=TL62txWNFMY

Eg:- National Geographic: Augmented Reality

II. CONSEQUENTIAL WORD OF MOUTH MARKETING

Consumers directly exposed to traditional marketing campaigns

Stronger impact than direct advertisements

High 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

Introduction3 Types of Word of MouthMeasuring WOMImplications of WOMHarnessing WOM

MEASURING WOM

Number of recommendations or

dissuasions

Variability in power

WORD OF MOUTH EQUITYVolume

Impact

WOM

Equity

WOM

What?

Who?Where?

Volume Number of WOM messages

Impact Average Sales Impact

DRIVERS OF WORD OF MOUTH

What?• Content of the

message

Who? • Identity of the sender

Where? • Environment

+ Relevant key buying factor

- Irrelevant key buying factor

+ Influential

- Non-Influential

+ Close Network

- Large network

Introduction3 Types of Word of Mouth Measuring WOMImplications of WOMHarnessing WOM

IMPLICATIONS FOR MANAGERS

Flexibility

Performance not volume

Identify drivers of WOM

Insights!

Introduction3 Types of Word of Mouth Measuring WOMImplications of WOMHarnessing WOM

• 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

If I am happy I am likely to recommend and if I am unhappy, I am likely to

propagate a negative WOM

It can be a by-product

from traditional advertising

Consumers tend to trust

other consumers

than they trust brands

WOM directly driving or explaining sales drives of up to 20% to 50%.

HARNESSING WORD OF MOUTH

“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.”

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.

4 ESSENTIAL DRIVERS TO DETERMINE IF WOM IS IMPACTFUL

• http://www.youtube.com/watch?v=FKeeku0O4l8

• http://www.youtube.com/watch?v=Wp_i-Cq7ec8

2 characteristics that create 1. INTERACTIVITY Positive Word of Mouth 2. CREATIVITY

INTENTIONAL WOM CAMPAIGNS: Identifying influential individuals who become brand and 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.

Ex: Cadbury’s Gorilla Ad with the Iconic Phil Collins song. Result: 1. More than 6 million views on YouTube. 2. YOY sales of Cadbury increasing by more than 9%. 3. Brands positive perception among consumers increased by 20%.