WOMMA Annual State of WOM Presentation

Annual State of Word of Mouth

Address 2009

Walter J. Carl, Ph.D. ChatThreads Corp.

Exponential Growth Of “Social Media”

WOM & Social Media: Clarifying the Relationship

•  Social media as sub-set of WOM. 1.  Online WOM activity. 2.  Digital venues where WOM occurs. 3.  Flexible and scalable set of tools to

achieve WOM marketing goals.

11 Core Entries:

-  Advocacy Measurement -  Conversation Volume / Share -  Cost Deflection -  Cost Per Conversion -  Influence -  Marketing Mix Modeling -  Ratings & Reviews -  Reach -  ROI of WOM -  Sentiment Analysis -  Value of a Conversation

Special Section on Social Media Success Metrics Frameworks: -  Conversation Impact™ of SM Campaigns -  Social Influence Marketing (SIM) Score -  Activities, Reach, Relevance, Outcome, and Worth (ARROW) Model

Case Studies: -  SM in Restaurant Business -  SM in Online Knitting Community -  SM on Facebook for “Smart Pen”

Scope of Topics Covered

Three Observations

#1: What You Can Measure ≠

What You Need To Measure

From “Test & Learn” to “Competitive Resource Allocation”

•  Page Views •  Volume of Posts •  People Reached •  Comments on Posts •  Sentiment Shifts •  Time Spent •  Number of Fans •  Etc.

≠ ROI

Proof of Business Performance, Then Optimization

Ways That WOM Adds Value

1.  Deflects costs 2.  Adds revenue 3.  Accelerates impact 4.  Amplifies impact of other media 5.  Offers learning and insight

-  Cost Deflection -  Value of a Conversation -  ROI

Three Observations

#2: Play the (Accountability) Game,

But Don’t Get Played

ROI Is A Short-Term Indicator (Or Is At Least Often Used This Way)…

“… customers acquired through marketing contribute more to the firm’s performance in the short run than customers acquired through WOM.” (Villanueva et al., 2008)

“… this firm can increase its short-term revenue more through MKT customer acquisition ($6,695) than through WOM customer acquisition ($5,631).” (Villanueva et al., 2008)

Villanueva, Julian, Shijin Yoo, and Dominique M. Hanssens. 2008. The impact of marketing- induced versus word of mouth customer acquisition on customer equity growth. Journal of Marketing Research 45(1): 48–59.

WOM Has Ongoing, Long-Term Value

“… WOM has a greater financial impact ($23,481 of present value) than MKT ($11,759 of present value).” (Villanueva et al., 2008)

“The primary reason for this difference is that customers acquired through WOM tend to stay longer as active customers and thus generate more value over time…” (Villanueva et al., 2008)

“… each customer acquired through MKT is expected to bring approximately 1.77 new customers throughout his or her lifetime, whereas a customer acquired through WOM is expected to bring 3.6 customers.” (Villanueva et al., 2008)

Villanueva, Julian, Shijin Yoo, and Dominique M. Hanssens. 2008. The impact of marketing- induced versus word of mouth customer acquisition on customer equity growth. Journal of Marketing Research 45(1): 48–59.

Three Observations

#3: Innovate Your

Research & Measurement As Well As Your Activation

Patterns You Need To See May Be Hidden From View

When WOM has a positive effect in year over year changes in business the impact can range from 2% to 7%, with ROIs as high as $5 for every dollar spent. (Marketing Management Analytics)

-  Marketing Mix Modeling -  Also see Definitive Social Media ROI link at: tinyurl.com/ waltersentme

Patterns You Need To See May Be Hidden From View

Brands that seed products even in random networks of people can increase customer equity by 17%. (Libai et al., 2009)

If Brand A can achieve first-mover advantage with their seeding program over its competitor(s) the gain in customer equity can be as high as 66%. (Libai et al., 2009)

By targeting influential customers, rather than just random customers, brands can increase that social value by 33% (Libai et al., 2009)

-  Agent-Based Modeling

Patterns You Need To See May Be Hidden From View

Building Customer Networks for Successful WOM Marketing

link at: tinyurl.com/ waltersentme

-  Agent-Based Modeling

Combining Empirical Data with Simulations

link at: tinyurl.com/ waltersentme

11 Core Entries:

-  Advocacy Measurement -  Conversation Volume / Share -  Cost Deflection -  Cost Per Conversion -  Influence -  Marketing Mix Modeling -  Ratings & Reviews -  Reach -  ROI of WOM -  Sentiment Analysis -  Value of a Conversation

Special Section on Social Media Success Metrics Frameworks: -  Conversation Impact™ of SM Campaigns -  Social Influence Marketing (SIM) Score -  Activities, Reach, Relevance, Outcome, and Worth (ARROW) Model

Case Studies: -  SM in Restaurant Business -  SM in Online Knitting Community -  SM on Facebook for “Smart Pen”

Learn More…

Three Observations #1:

What You Can Measure ≠ What You Need To Measure

#2: Play the (Accountability) Game,

But Don’t Get Played

#3: Innovate Your

Research & Measurement As Well As Your Activation

Walter J. Carl, Ph.D. ChatThreads Corp.

tinyurl.com/waltersentme