Word of Mouth – A Prescription for a Bad EEconomy

This economy is bad…like really bad…y y

It looks like we’re in the big R…g

Yikes, Advertising is taking it on the chin...

- Group M forecasts media spending down 3 2% in 2009- Group M forecasts media spending down 3.2% in 2009- Zenith Optimedia forecasts 5.7% down in 2009- Morgan Stanley could envision a +10% drop in spending depending on the economy

How will we carve up the media pie?...

Well, we’ll be eating less media:- 93% of CMOs believe the economy will have a significant/moderate impact on their budgetsy g p g- 70% of CMOs plan on reducing their marketing spending Source: Epsilon

The Long Slow Decline into Irrelevance

Perhaps a premature announcement, but why wait.

2009 Anticipated Declines:

- 15% Newspapers- 13% Consumer Magazines

10% T t i l R di- 10% Terrestrial Radio- 4% Network TV

Source: Jack Myers Media Report

Smart Marketers are Now Rethinking Traditionally H ld ViHeld Views...

Crisis requires radical shifts in thinkingq g

AnotherChangeChange

You Can BelieveBelieve

In Is C iComing

…

Here Comes the Next Wave of Marketing & MediaHere Comes the Next Wave of Marketing & Media…

The Fastest Growing Marketing/Media g gSegments

Expected 5 year Compound Annual Growth Rate

Word of Mouth 27%I t t/M bil 14%Internet/Mobile 14%Branded Entertainment 13%Custom Publishing 11%Out of Home 10%Out of Home 10%

Source: Veronis Suhler Stevenson

Word of Mouth is Catching On…in All Its Forms

Buzz Marketing Social MediaCustomer Collaboration Brand Communities

Influencer Marketing Influencer Marketing Social Networks Referral Programs

User Generated Content

Grassroots/CauseMarketing

ExperientialMarketing

Viral Marketing

Fact - Most Traditional Media is an Inefficient Cost…

…Word of Mouth is a Wise Investment

Advertising Attention Deficit Hurdles

3,000 ads get pushed at us each day - 6 times the volume vs. 40 years ago…the tougher it is to

breakthrough, the more we do and invest

Reason #1 – Word of Mouth Gets Noticed

‐ 4% any ad recall from last TV show watched(down from 34% in 1965)

‐ 93% of people believe word of mouth isthe most reliable way to find outwatched(down from 34% in 1965)  

Source: NBA

‐70% of people frequently consume 

the most reliable way to find out information about products and services (up +26 pts. Vs. 25 years ago)  

Source: NOP Worldmultiple media simultaneously   

Source: eMarketer

Source: NOP World

One-Way Communication HurdlesOne Way Communication Hurdles

Customers demand interaction and customization,Marketers require itMarketers require it

Reason #2 – Word of Mouth Taps The Values of New Customer Participation CultureNew, Customer Participation Culture

Mass Media Word of Mouth

Customers Now Want:FreedomCustomization 

Participation Values Grade2/102/10/

Participation Values Grade9/108/10/Scrutiny

IntegrityCollaborationE t t i t

3/102/101/108/10

9/109/1010/108/10Entertainment

SpeedInnovation

8/105/102/10

8/108/109/10

Evaluation Score 25/80 70/80

In a bad economy, marketing has to punch harderIn a bad economy, marketing has to punch harder and create action…

Reason #3 – Word of Mouth Stimulates Action

‐ 90% ‐ proportion of people who canskip ads, do skip ads

‐ 70% ‐ percentage of people affected byword of mouth conversations

‐ 37% buy it/try it

‐ 69% ‐ percentage of people who are interested in skipping ads completely         Source: Yankelovich

‐ 24% consider it‐ 9% avoid it

Source: Keller Fayp y

Lifetime customer value trumps short term lift

Reason #4 – Word of Mouth Has Longevity

‐ Over 30% of the broadcast content we see  ‐ Average people have 17 word of mouth conversations each dayin mass media is advertising or promotion

‐ How much is conscious? Low‐ How much is attentive/lean 

f d? L

conversations each day‐ How much is interactive? High‐ How much is spoken? High‐ How much is internalized? Highforward? Low

‐ How much is well‐received? Low‐ How much is retained? LowHow much is banked in

How much is internalized? High‐ How much is retained? High‐ How much is behaviour altering? 

High‐ How much is banked in memory? Virtually nil

High

‐Brand Communities don’t reach full maturity to 18 months

‐ 82% of community members refer more people to a brand after joining

Ad inflation is running wild

In a down economy, advertising is a tougher discretionary expense to justify

Reason #5 – Word of Mouth Costs Less Per Impact

Cost to Prod ce a National TV Ad Choose Your Flavour:‐ Cost to Produce a National TV Ad‐ $360,000

Min Media Cost to Air a National

Choose Your Flavour:‐ Year Round Community ‐ $100‐500k

‐ 26 week Word of Mouth Campaign ‐‐ Min. Media Cost to Air a National Campaign in Canada

‐ $1,200,000

p g$40‐150k

‐ Blog/Social Media Outreach $30‐100k

‐ Typical Research Cost Associated with TV‐Campaign

‐ $25,000 ‐ $100,000

g

‐ Advisory Panel ‐ $15‐75k

$25,000  $100,000‐ Buzz Marketing Tactic    $5‐100k

In a bad economy, few markets increase, it’s a battle for share growth

Reason #6 – Word of Mouth is a Competitive Advantage

‐ Canadian advertisers spend $19 billion ‐ Only 1‐2% of marketing budgets arep $on media ‐ $674 per adult

‐ Advertising is spent on very similar f TV 30 d d

currently spent directly on creating word of mouth

formats:  TV – 30 second adPrint – Full page, ½ pageWeb – Banner, SearchR di 30 60 d

‐Marketers are just beginning to activate word of mouth variants, but still low 

‐ Influencer programs  ‐ 22% of marketers executing Buzz/Stunts 15%Radio – 30, 60 seconds

‐ 10% ‐ Percentage of CFOs who believe marketers can assess impact of budget on

‐ Buzz/Stunts ‐ 15%‐ Branded Entertainment 14%

‐ A 7% increase in positive word of mouth marketers can assess impact of budget on sales

Source: Canadian Marketing Association, MMA

equates to 1% business growth  

Sources: VSS, Agent Wildfire, London School of Economics

In today’s connected economy, grassroots influence is key

Less than 10% of your customer base controls aLess than 10% of your customer base controls a big chunk of what the rest of us buy, think and do…

why not target them?!why not target them?!

Reason #7 – Word of Mouth Targets Influence

With rare e ception (i e maga ines) 70% of Wikipedia’s content is prod ced‐With rare exception (i.e. magazines), mainstream media has a tough time targeting audiences and specifically influencers

‐ 70% of Wikipedia’s content is produced by 1.7% of its audience

Top ranked Influencer belief “I loveinfluencers ‐ Top ranked Influencer belief – I love talking to others about things I’ve just discovered”

‐ Influencers are 2x more active, more conversational and/or more brand‐involved than the mainstream consumerinvolved than the mainstream consumer

Sources: Agent Wildfire, Keller Fay

Need for ROI for marketers in a bad economy is a mantramantra

Reason #8 – Word of Mouth is More Measurable and Linked to Growth

‐Mass media has challenges auditing its own traffic

‐Word of mouth activities have much better measurement ability because of their digital nature and opportunity to 

l h h / b‐Mass media weight cannot be linked to sales

mine relationship with customer/member

‐ The #1 factor linked to business growth i d f th f l

‐When measured, it only measures presumed eyeballs not real engagement

is word of mouth referral

‐Word of mouth measures the key business drivers of engagement andbusiness drivers of engagement and advocacy 

Sources: Agent Wildfire, Bain 

Trust has eroded in our institutions, a bad economy will accelerate this contempt

but we still trust our friends and “people like me”…but we still trust our friends and “people like me”Source: Edelman Trust Barometer

Reason #9 – Word of Mouth is More Trusted

⌧60% of people have a much more negative view of marketing and advertising than a few years ago

Word of mouth is the #1 trusted source, up 50% vs. a generation ago

advertising than a few years ago

⌧27% trust manufacturers61% of people claim to buy the same 

brands as their friends (+28 pts. Vs. 4 years ago)

⌧ 14% trust ads

⌧ 8% trust celebrities

years ago) 

90% trust their spouse⌧ 8% trust celebrities 

82% trust their friends

Sources: Yankelovich/Henley Centre Sources: Keller Fay/Yankelovich/Henley Centre

Who do you trust?

The Customer is the New BattlegroundThe Customer is the New BattlegroundPercentage of executives who 

believe the Customer Experience is the new battleground 

‐ 95%

Percentage that b li hbelieve they are 

delivering a positive customer experience 

80%‐ 80%

Percentage of their customers who agree

Word of Mouth gets you closer to your customer

customers who agree ‐ 8%

Word of Mouth gets you closer to your customer frontlines

Reason #10 – Word of Mouth is More Customer Centric

Entertainment ValueInformation Value

Entertainment ValueInformational Value

Mass Media Provides: WOM Provides:

Information ValueExplicit value (rewards)Intrinsic value (feeling of belonging)Extrinsic value (ego/reputation)g pExperiential value (immersion)Social value (making connections)Talent value (expressing skills/creativity)Service value (adds to the product)Collaborative value (1+1=3)

CEOs are Expecting More From their Marketers –Marketers need to be Leaner and Keener

Word of Mouth accommodates those needs

Reason #11 – Word of Mouth Simply Provides More

Comm nicationCommunication CommunicationAdvocacyAmbassadorshipBuzzInsightReal world feedbackS l tiSolutionsInnovationSupportOperational ImprovementsOperational ImprovementsUser Generated Content

Marketers want WOM for a variety or reasons

A l t l 19%

HardMeasure Referrals/Leads/Members 32%

Accelerate sales 19%

Deliver visitors/traffic  17%

Measure

Drive brand loyalty 32%

Provide learning 6%

SoftAwareness/Buzz 35%

Seed influencers 32%

T h h di 19%

Generate user generated content  19%

Get Insight /solutions 10%

SoftMeasure Launch a product 22%

Build a better customer experience 21%

Target tough to reach audience 19%

S t 6%

Participate in a conversation 26%

Support a cause 6%

Support a cause 6%

Enhance credibility 14%

Internal External

Source: Agent Wildfire   Question ‐What are the top 3 objectives for launching a word of mouth based initiative?

Don’t skate to where the puck is , skate to where it is going to be

Reason #12 – Word of Mouth is the Now & the Future

⌧ Canadian Marketers plan on spending /l i 2009

58% of marketers agree thatd f h i fl ill kmore/less in 2009:

More LessNewspaper      5%      32%Radio 5% 33%

word of mouth influence will overtaketraditional media influence within a generation

Radio    5%      33%TV 4%      37%Magazines        3%      39%Social Media 23% 16%

73% of marketers believe marketers will become much more important in an organization by leveraging word of mouthSocial Media   23%    16% organization by leveraging word of mouth strategies and tactics 

Source: Veritas Source: Agent Wildfire

A Palette of New Strategies & Tactics Await

h f f d f h ill i hWhat  forms of word of mouth will experience the most growth in the next few years ? (top 3 choices)

S i l di k ti 37%Social media marketing    37%Social network marketing  35%Mobile marketing    34%User generated Content 31%User‐generated Content  31%Influencer marketing    28%Brand communities   20%Customer forums 17%Customer forums    17%Branded entertainment   16%Cause‐related marketing  14%Brand microblogging 14%Brand microblogging  14%Buzz marketing  13%Corporate/brand blogging  11%

Source: Agent Wildfire

Recap – The 12 Reasons Why Word of Mouth (WOM)is Primed for this Economy

1 ) WOM Gets Noticed2)  WOM Taps Participation Values3)  WOM Stimulates Action4)  WOM has Longevity5)  WOM has Less Cost/More Value6)  WOM is a Competitive Advantage7)  WOM Targets Influence8)  WOM is More Measurable) d9)  WOM is More Trusted10) WOM is More Customer Centric11) WOM Provides More12) WOM i th F t12) WOM is the Future

…Don’t Despair

We plan, seed, incubate execute, measure, live and breathe the spectrum of word of mouthbreathe the spectrum of word of mouth

IntegratedBrand Community‐buildingAdvisory PanelInfluencer‐drivenInfluencer‐drivenChallenge/interventionReferral‐drivenGrassroots sponsorship/cause‐driven

Offline ExperientialBuzz/GuerrillaBuzz/Guerrilla

OnlineSocial Media Production/OutreachSocial Network Production/Outreach Viral Affiliate/Referral ‐drivenUser generated

44

User‐generated Advergaming

Let’s Start Your Next Brand Conversation…

Prakash Ranjan

prakash@id8labs.comprakash@id8labs.com

Phone: 09711990078

URL:  www.id8labs.com

45