RETURN ONWORD OF MOUTH

WOMMA SUMMITNovember 18, 2014

RESEARCH TEAM

SPONSORS

“Nothing’s more valuable

than a recommendation

from a friend.”

John CostelloCMO, Dunkin Donuts

IMPORTANCE OF THE STUDY

Watershed Moment in Word of Mouth

• Era of management and measurement of

WOM

• Ability to read ROI of WOM and interactions

with other media in the marketing mix

• Begin to understand the full impact of a

complex network of effects

LEARNINGS FROM THE PROCESS

• WOM ROI varies by brand

• Online & Offline interactions are complex

• Sophisticated analytic approach is required

• Data exists to fuel the model; however…

– we had just enough data to make it work

– need tightly aligned and granular brand

conversations data by market

• Push beyond paid/owned/earned

– size/directions of effects

• Continue addressing online WOM

“impressions” universe issue

• Elevate role of creative strength of copy

• Complete the picture with brand attitude data

RECOMMENDATIONS

RETURN ONWORD OF MOUTH

BACKGROUND

• Consistent measurement of WOM is lacking

• WOM is believed to be a strong business

driver

• Little evidence exists of WOM’s impact

• Proving the Return on WOM return is the

largest obstacle to pursuing a WOM and

social media strategy

OBJECTIVES

• Help the industry understand the optimal role

of WOMM in the marketing plan; guiding

smarter ‘social’ strategy

• Produce a best practice and good example

of how to include WOM in marketing mix

modeling; encouraging more evaluation of

WOM’s value

PROCESS: GOALS

• How much does WOM impact the businesses?

• Does WOM amplify marketing, and if so by how

much?

• Are there differences in the impacts of Online

and Offline WOM?

• What are best practices for measuring WOM?

• What is the value of WOM?

PROCESS: DATA COLLECTION

• Extensive data collection effort

• Two-three years of detailed weekly data for:– Business performance KPI (e.g. sales)

– Online & Offline WOM

– Paid media by channel

– Promotional activity

– Other external & internal factors

• AP scored the data on several dimensions to ensure it was robust for modeling

PROCESS: ANALYTIC MODELING

SALES

WORD OF

MOUTH

SEARCH

Promo-

tions

TV

PR

Online

Display

Sponsor-

ships

Analytic Partners used adaptive Structural Equation Modeling (SEM)

BRAND

WEBSITE

INSIGHTS &

LEARNINGS

WOM had a significant impact across all participants

While both Online and Offline WOM was strong, Offline WOM had 2X the impact

WOM plays both a direct and indirect role in driving business performance

WOM has a direct and amplifying impact on business performance

About one-third of the sales impact is attributable to WOM

acting as an “amplifier” to paid media, such as television

Relative to other media, WOM has a more immediate impact on performance

Offline and Online WOM has a stronger immediate impact

on business performance versus TV advertising

Relative to other media, WOM has a more immediate impact on performance

Offline and Online WOM has a stronger immediate impact

on business performance versus TV advertising

1 WOM impression is highly impactful when compared to 1 Paid Media impression

An offline WOM impression drives at least 5 times more

sales than a paid advertising impression, and much more

(as much as 100 times more) for higher-consideration categories

NOTE: A similar finding for Online WOM requires more comprehensive data on impressions and/or mentions, which are not yet publicly available.

KEY INSIGHTS | SUMMARY

• WOM Drives 13% of sales, on average

• Offline produces 2/3 of the impact; Online 1/3

• WOM Amplifies the Effect of Paid Media

• WOM has a more immediate impact vs.

traditional advertising

• 1 Offline WOM Impression > 1 Paid Media

Impression

GUIDELINES | Measuring WOM in Models