Arguably World’s Oldest Form of Marketing Is on the Rise as Advertisers Pour More Into Discipline

By Ryan McConnell

Published: November 15, 2007

NEW YORK (AdAge.com) — What’s consumer word-of-mouth advocacy worth to marketers? Try $1 billion.

That’s how much marketers spent on WOM — as it’s known to its practitioners — in 2006, according to an independent research report on the field that will be unveiled during a session at the annual Word-of-Mouth conference in Las Vegas today. The analysis, believed to be first in-depth look at word of mouth, reports that spending on the emerging discipline has increased from $76 million in 2001 to $981 million in 2006 and is expected to grow to approximately $3.7 billion by 2011.

“It’s starting to be recognized as an established industry,” said Leo Kivijarv, Ph.D., VP-research of PQ Media, which performed the analysis.

Meteoric rise
It’s been a meteoric rise of late for word-of-mouth marketing, defined by PQ Media as “supported by research and technology that encourages consumers to dialogue about products and services.” Still, the discipline accounted for just 0.4% of the share in the $254 billion marketing-services category, a grouping that includes direct marketing, branded entertainment and public relations, among others. If PQ Media’s analysis is correct, however, word-of-mouth marketing won’t stay small for long: The field grew 35.9% in 2006, far more than both the overall marketing-services category (7.7%) and the U.S. Gross Domestic Product (5.7%).

Though perhaps the world’s oldest form of transferring messages, word-of-mouth marketing began in earnest in the late 1990s, when brand marketers began grappling with the fragmented media and were actively seeking ways to break through the cluttered landscape. But it has taken off of late due to the industry’s focus on proving it provides a measurable return-on-investment for marketers.

“The new media industry axiom, ‘Only what gets measured gets bought,’ has led to a discernible shift in media spending from traditional to alternative advertising and marketing strategies,” Patrick Quinn, CEO of PQ Media, said in a statement. “The word-of-mouth marketing industry is capitalizing on this trend through its ability to provide ROI to brand marketers in a highly cost-effective platform.”

Research points to effectiveness
Equally important to the success of word-of-mouth marketing may be the research suggesting it is more effective than other forms of advertising. For instance, a recent Nielsen Global Survey of over 26,000 people found that nearly 78% of respondents trusted “recommendations from consumers,” a total 15% higher than the second-most credible source, newspapers. And this trust, according to Mr. Kivijarv, leads to more sales at the cash register.

“When you compare word-of-mouth as a strategy [to other methods], trusting a friend or influential person is the most determining factor when someone decides to purchase a product,” he said.

Wednesday, November 14, 2007 

By Cory Treffiletti

In marketing, there are certain rules that must be adhered to if you’re going to be judged successful, especially in a culture that is becoming so dependent on digital media! In digital media we witness consumers in a position of control and news travels fast, especially news regarding brands and products. According to an estimate I saw about a year ago, when consumers have a positive experience with a brand, they tell half as many as those consumers who have a negative experience with a brand (around 12 with a negative and around 7 with a positive experience). With all of this information, I find it disturbing and very surprising that in this digital economy, we tend to overlook one of the most fundamental elements of marketing: customer Service.

Don’t overlook these elements when you begin work for a client — or you might be doing them a real disservice. Then, no matter what you do to reach the target customer, the target customer will take a pass on the opportunity.

The New York Times - Hillary Chura

As the power of the Internet grows, businesses small and large find themselves confounded by disenchanted employees, suppliers and competitors who seek fertile ground to air grievances online.

Armed with little more than a Web connection and a keyboard, these detractors can do everything from irritate, via a scathing review, to causing serious business problems by using message boards to reveal company secrets or spread rumors of unethical behavior. They may also start a gripe site or register a Web address in their target’s name.

“There is all type of damage by miscreants on the Web to a business,” said Marc S. Friedman, chairman of the intellectual property practice at Sills Cummis Epstein & Gross in Manhattan. “The number of methods depends only on the creativity of the wrongdoer.”

For Katie Lambert, it was anonymous postings on AOL’s Yellow Pages about the gym she owns, Go Figure, in Westwood, Mass. The gym, the postings said, was overpriced, crowded and chaotic. Ms. Lambert didn’t learn of the comments until a member alerted her. When some loyal customers found out about the review, they went online and responded positively, but the detractor always shot back. Ms. Lambert said she tried to contact AOL but could never reach anyone who could remove the material.

“Anybody can write anything in the world, whether it’s true or not. It could be affecting my business right now,” Ms. Lambert said. She said she ultimately realized the postings came from a member who didn’t want to pay a $100 cancellation fee to get out of her contract. Ms. Lambert’s lawyer wrote the woman, asking that the false comments stop. They did, and Ms. Lambert said she learned that companies should periodically check what is being said about them online.

Business is not alone in such frustrations. Politicians like Hillary Rodham Clinton, authors like Patricia Cornwell as well as other public and private individuals find themselves in the cross hairs of commentators emboldened by the anonymity of cyberspace. But such postings can do more than just irritate; financial damages can reach millions of dollars or shut down a business entirely.

Remedies vary by case and by state, but lawyers, Internet specialists and others counsel that the best course with may be to ignore irritating posts because trying to squelch a malcontent can have unintended consequences.

“Your reaction often, if you’re a small business, is to get angry and to fire off a letter,” said Barry Werbin, an intellectual property lawyer at Herrick, Feinstein in New York. “Some big companies do it. More often than not, the person who posts the gripe site can’t wait to get that letter and post it.”

Sometimes, Mr. Werbin added, “it can worsen the damage because it just fuels the fire.”

Assuming that the posting activity is not illegal or defamatory and truly damages a business rather than just an ego, there may be better ways to respond. Scurrilous opinions often appear on Web sites including Yahoo message boards, AOL and MySpace. Those sites may remove objectionable material if asked but are not legally required to do so. Even if they do remove it, the damage may already have been done. Besides, even if the comments are taken down, a determined whiner can find any number of other venues. Other online review sites, like Yelp or TripAdvisor, are particularly influential.

“New consumer opinion gets posted about every five seconds,” said Rob Crumpler, chief executive of Buzz Logic, which helps businesses identify influential bloggers.

Samantha DiGennaro, who runs her own strategic communications consulting firm in New York, says many companies either run scared from electronic media or fail to realize how quickly negative comments can jet around the Internet.

“People think, ‘It’s only on the Web. It’s not that important.’ But it’s almost more important than a newspaper or something in print,” she said. “Things live in perpetuity on the Web.”

Some large marketers may blog or respond anonymously. Ms. DiGennaro said appropriate responses were not one size fits all and must be tailored to the particular case. If something merits being addressed, she said, it can better be done in the name of the company rather than hiding behind anonymous postings.

On the technical front, a search engine optimization expert can tweak a site so that it moves a positive posting higher in an Internet search, tending to bury the negative one. Shailen Lodhia, vice president for sales at Submit Express, an optimization firm in Burbank, Calif., estimated results could take three months to a year, and monthly retainers could exceed $3,000.

The best defense is a good offense. Useful practices include registering personalized e-mail addresses as well as gripe domain names — not with the intention of using them but to prevent others doing so. Registering common misspellings as well as derogatory domain names is a good precaution and so is covering extensions like .biz and .org. Costs are minimal, some lower than $50 a year.

Companies that sell products or services should trademark their name to prevent others from using it as a domain name without authorization, legal experts said. Executives may find their only recourse is to sue if someone registers their name as a U.R.L. and uses it to defame them, said Mr. Friedman of Sills Cummis Epstein & Gross. He said that few companies thought to buy potentially negative domain names. Debra Condren, a business psychologist and career adviser, said the occasional negative comment could actually lend credibility to a company rather than tarnish it. She said people expected to see a range of opinions, and if they saw only positive ones on a company blog, for example, they might suspect that negative feedback was being censored. A range of opinions seems authentic.

“Some people, for whatever reason, aren’t going to like or appreciate what you’re selling,” she said. “Accept this as normal, and you won’t stay awake at night letting a disgruntled client or a negative person who decided not to use your services bring you down with what will be transparently obvious to most people as sour grapes feedback.”

Angie Hicks, founder of Angie’s List, a member-generated ratings service where users report their positive or negative experiences with local contractors, said every company gets complaints at some time, but the way it responds can be more telling than the complaint itself.

“You can really see how that company is going to stand by their work based on how they handle problems that come up,” she said.

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