The Power of Word of Mouth

I went to a good conference about Word of Mouth yesterday.  There was much to comment on such as how advertising agencies are really gettin g their act together on WOMM, how many good case studies are coming through now, and how the measurement people are really getting to grips with evaluation and even ROI.

Two things really stuck with me on the numerical side one to do with the surprisingly efficient "reach" of WOM; the other to do with comparing its ROI to more classical marketing approaches.

So, the data suggests that a well motivated, well equipped "advocate" (or whatever you want to call them) will spread the ("your") message to 100 people.  And one way or another this should increase trial, or re-purchase, or whatever you are trying to boost, with a pretty good ROI.

This "1 advocate reaches 100 customers" statistic seems to be a plausible benchmark (much like 1% of direct mail getting a response) or rule of thumb for the WOM industry.

Speakers from ChatThreads and Wildfire (both WOMM companies) both presented data from which the 1>100 stat could be derived from.

The maths goes something like this...

On average a "Generation 0" advocate (the people who the company contact directly) will pass the message on to 15 people (10-30 being a range across categories)

The average Generation 1 advocate (the 15 from above) will contact 3 further people each who in turn will contact one more person each (but then, on average, the whole thing peters out).

So 1 gets 15 who get 45 who get 45, or just over 100  in total. 

Word of Mouth is often seen as a rather mysterious and magical thing. These simple numbers show how it works (on average) ata  human scale.

If you then find out how many people convert to a sale, repeat purchase etc. and then work out your costs, revenues and profits you can then derive the rather nice sounding "profit per conversation" i.e. each of those 100 "passing ons" above net  you (say) 50p a time.

Nice work fellas.

The other interesting number was presented by DDB from the (rapidly becoming) legendary study by Les Binet and Peter Field.  This study looked at almost 1000 effectiveness award winning papers from the IPA and worked out what types of advertising campaign generated what sort of marketing effects.  DDB presented a chart showing how campaigns using the "persuasion" approach were consistently outperformed by those taking the "talk value" approach on effects such as sales, market share etc.

Well I guess what else would you expect people to say at a "Word of Mouth" Conference?  And the differences were not that decisive, to be harsh.

But the really striking number was that 35% of "talk value" campaigns had a "very large impact on profits" compared to only 13% of "persuasion" campaigns.  Or put another way, it suggests that old school thinking is only 1/3 as effective as new school thinking when it comes to ROI. 

Perhaps this "3 times more profitable" number is linked to the "reach one, reach 100" number. Whether it is something to do with the surprising efficiency of the reach of WOM or the trust that people put into recommendations vs sales pitches there is clearly something commercially powerful about "word of mouth".

And for those working in PR, feel free to vent a very loud "we told you so" at this point.

Comments

[Leslie Gaines-Ross]

Was referred to your post and thought I would mention that we have extensively explored Advocacy in the 21st century. We learned in our global survey of consumers that the average high intensity Advocate contacts 110 people when they have something to say about a product/service, brand, company or cause. That seems to fit with your mention of 1>100. The network of an Advocate is quite robust. Just wanted to share this with you. Best, lgr

[Ben Caspersz]

We told you so