Unleashing the Power of Word of Mouth to Understand Markets 40 th CMAG Meeting March 14, 2008 © 2008 Keller Fay Group LLC Not to be quoted or distributed.

Unleashing the Power of Word of Mouth to Understand Markets

40th CMAG MeetingMarch 14, 2008

© 2008 Keller Fay Group LLCNot to be quoted or distributed without written permission

2www.kellerfay.com

Who We Are

• The first research-based marketing consultancy focused on word of mouth– Metrics: measuring brands’ word of

mouth and competitive context– Best practices: understanding the

dynamics of word of mouth– Implications: analyzing strategic

impact

• TalkTrack®: award winning study of word of mouth and its impact

The Keller Fay Group

2007 ARF INNOVATION GRAND AWARD WINNER

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3.5 billion word of mouth conversations each day in

America

Source: Keller Fay Group’s TalkTrack®

There’s a Lot of WOM Today

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Leading Marketers Are Getting on Board

“Marketing is becoming less about sending a message to consumers and more about conversing and co-creating experiences with consumers.”

“Make your consumer an advocate: Shift marketing objectives from sending a message to facilitating conversations with and between consumers.”

-- HD Marketing 2010, a study presented by the ANA and Booz Allen Hamilton in October 2007

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Word of Mouth Is Often Organic

“I make a lot of recommendations.”

“It’s a natural, serendipitous process.”

“Most ideas come out of conversations, with someone building on what’s just been said.”

“Someone will say they need a [window washer]. I say I’ve got a great [window washer].”

“Someone will overhear the conversation, then I’m giving three people the [window washer’s] name.”

-Sophie Glovier, Princeton, NJ From The Influentials (Free Press, 2003)

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Marketing Can Amplify Word of Mouth

1. Encouraging word of mouth within a marketing objective

2. Making it easy for consumers to spread the word about your brand

Word of mouth marketing:

Seeded on Wall Street

Users helping users

3. Making sure everything you do that touches the consumer is “TalkWorthy™”

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WOMM: Becoming Big Business

• Topped $1.0 B in 2007• Increasing at 30%+ per year• Forecast to hit $3.7 B in 2011• Fastest growing alternative media segment• One of the most influential ways to connect

with consumers

Source: PQ Media 2007-2011 WOM Marketing Forecast

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100

110

120

130

140

150

2003 2004 2005 2006

WOMWOM

TV AdvertisingTV Advertising

Index to All Communications Index to All Communications ContactsContacts

Source: SMG/100+ MCA Studies

Word of Mouth Is Gaining over Advertising(Effectiveness Through Time)

WOM Is Gaining Over Advertising(Effectiveness over Time)

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Marketing Success in a WOM Era

Key Questions

1.What’s your story? …why should consumers talk about your product?

2. Who will tell it?…who are your influencers?

3. How can you facilitate the conversation?…what tools can you create?

4. What’s the impact?…does WOM lead to positive outcomes for my brand?

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TalkTrack®: A Unique System for Monitoring WOM

• TalkTrack® is the only system that:– Measures all WOM: Face to face, phone, online– Measures both the “talkers” and “listeners” (the WOM audience)

• What “talkers” are saying • What “listeners” hear and do based on WOM

– Is representative of US population, with demographically balanced samples

• TalkTrack® monitors the quantity, quality, and drivers of all WOM– Consumers report all brands they talk about (open ended)

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TalkTrack® Methodology

• TalkTrack® data are collected through an online survey – Sample drawn from several of largest online consumer panels– Demographically balanced to US Census for ages 13 to 69

• TalkTrack® counts conversations with assistance of 24-hour diary– Respondents recruited to take notes on conversations in 15 “marketing

relevant” categories over next 24 hours– Re-contacted a day later to answer standardized questions about

brands/companies talked about during past 24 hours

• Sample sizes to support time series analysis– 700 respondents per week; 36,000 per year– Yielding 8,000 conversational brand mentions week; ~ 450,000 per year

America’s WOM Conversation:Surprising Insights from TalkTrack®

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Word of Mouth Is Mostly Face-to-Face

73% of marketing-related conversations

take place in-person

The remainder are:

1. Phone (17%)2. Email (3%)3. Instant or text message (3%)4. Online chatroom or blog (1%)5. Other (2%)

Base: Conversations (All Categories, n=256,370 conversations)Source: TalkTrack™, June 2006 through June 2007

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Word of Mouth Is Mostly Positive

63% of brand references in word of mouth

conversations are “mostly positive”

…seven times the rate of “mostly negative”

references (9%)

Implication: Don’t be afraid to engage in the conversation

Base: Brand Mentions (All Categories, n=176,622)Source: TalkTrack™, June 2006 through June 2007

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Word of Mouth Has Impact(% highly likely to agree/take action, 9/10 on 0-10 scale)

55%

49% 49%

34%

Credibility/Believability ofWhat Was Heard

Likely to Pass Along toOthers

Likely to Purchase Likely to Seek Information

Base: Brand mentions where someone else provided advice (All Categories, n=110,183) Figures represent percentage scoring a 9/10 on a 0 to 10 scale.

Source: TalkTrack™, June 2006 through June 2007

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Marketing & Media Are Key Part of WOM

Base: 176,428 brand mentions* Other includes sports arenas, concert arenas and events

Nearly 1 in 2 brand conversations refer to brand marketing or media

Promotion5%

No Media/Marketing Referenced

48%

Point of Sale6%

Websites (Company/Other)

4%

Editorial/Programs11%

Advertising17%

Other*1%

Direct mail/emailing3%

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Marketing & Media Play Key Role

50% of consumer brand conversations refer

to marketing or media

…led by television (15%)Internet (12%)

point of sale (8%)newspapers (7%)promotions (7%)

Marketing and media are tools for encouraging WOM Base: Brand Mentions (All Categories, n=175,205) Source: TalkTrack™, June 2006 through June 2007

America’s Technology Conversation

© 2008 Keller Fay Group LLCNot to be quoted or distributed without written permission

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40% Talk about Technology Daily (% of respondents having at least 1 conversation in category on given day)

22%

23%

25%

27%

28%

32%

36%

38%

40%

40%

42%

43%

46%

55%

57%

Household Products

Travel Services

Children's Products

Personal Care & Beauty

The Home

Financial Services

Automotive

Health & Healthcare

Technology

Shopping & Retail

Telecommunications

Sports, Recreation & Hobbies

Beverages

Media & Entertainment

Food & Dining

% Respondents Having Conversation in Category

2.4

Average DailyConversations*

Base: 36,511 respondents*Average daily conversations among those who had discussions about each categorySource: TalkTrack®, January through December 2007

2.8

2.3

2.7

2.5

2.5

2.4

2.1

2.0

2.0

2.0

2.2

2.6

1.9

1.8

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Base: Branded Technology Mentions (Total, n=23,782)Note: These mentions are categorized as “technology” by Keller Fay Group, regardless of what category a respondent places them in. Source: TalkTrack®, January through December 2007

Consumer Electronics

30%

Computer Software

9%

Cameras3%

Computer Hardware

38%

Video Gaming20%

Computer Hardware & Consumer Electronics Leading Topics of Tech WOM

(Percentage of Total Technology TalkShare™ for each brand category)• Video gaming (20%), computer software (9%), and cameras (3%) make up the remainder of word of

mouth in this category.

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Holiday Peak for Electronics & Gaming WOM (Percentage of technology brand mentions among all brand mentions)

Technology Brand Mentions as a Percentage of All Brand Mentions

(4 week rolling average of technology brand talk)

• Video gaming and consumer electronics WOM peaked during the December holidays.

• Recently, electronics WOM is making a modest rebound.

0.0%

1.0%

2.0%

3.0%

4.0%

2006W/EJul02

2006W/EJul16

2006W/EJul30

2006W/EAug13

2006W/EAug27

2006W/ESep10

2006W/ESep24

2006W/EOct08

2006W/EOct22

2006W/ENov05

2006W/ENov19

2006W/EDec03

2006W/EDec17

2006W/EDec31

2007W/EJan14

2007W/EJan28

2007W/EFeb11

2007W/EFeb25

2007W/EMar11

2007W/EMar25

2007W/EApr08

2007W/EApr22

2007W/EMay06

2007W/EMay20

Computer Hardware Consumer Electronics Video Gaming Computer Software Cameras

Base: All Categories Monthly Mentions (June, n=21,760; July, n=27,191; August, n=26,959; September, n=27,180; October, n=21,793; November, n=28,145; December, n=28,795; January, n=44,367; February, n=32,314; March, n=38,347; April, n=22,133; May, n=25,854)Source: TalkTrack™, June 5th 2006 through May 27th 2007

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Polarity of Word of Mouth by Category

Quality of WOM Varies Widely in Technology

-25%

-18%

-16%

-12%

-11%

-17%

-15%

-16%

-9%

-6%

-6%

-4%

-8%

-8%

48%

62%

68%

75%

77%

66%

65%

MixedNegative Positive

41

46

35

All Categories

Computer Hardware

Computer Software

Base: Branded Conversations (All Categories, n=133,304; Technology Category, n=10,803; Cameras, n=292; Video Gaming, n=1,175; Consumer Electronics, n=3,396; Computer Hardware, n=4,366; Computer Software, n=942) NOTE: Technology category results includes conversations/brands that respondents group in this category, whereas cameras,video gaming, consumer electronics, computer hardware/software may have been mentioned by respondents in any category.Source: TalkTrack®, January through December 2007)

57

Consumer Electronics

Cameras

Video Gaming

Technology Category

• Computer software and hardware fall below the average Net Advocacy. Although cameras are low in terms of quantity of WOM, they earn the highest Net Advocacy.

42

7

62

Net Advocacy (positive less mixed and negative talk)

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76%

17%

3% 2% 1% 2%

16%

4% 4%2% 1%

73%

Face-to-face Phone Email IM/Text message Onlinechatroom/blog

Other

All Categories Technology Category

Even Most Tech Conversations Face-to-Face(How word of mouth conversation was conducted)

Base: Conversations (All Categories, n=187,790; Technology Category, n=11,876)Note: Percentages may not sum to 100 due to rounding. Source: TalkTrack®, January through December 2007

• Tech WOM and usage seem to go hand-in-hand as online communication modes perform slightly better than the average for all categories.

Online (NET)

All Categories: 6%

Technology: 10%

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-29%

-24%

-20%

-18%

-20%

-16%

-25%

-15%

-8%

-9%

-7%

-6%

37%

49%

59%

62%

63%

68%

Polarity of Technology Word of Mouth

Online WOM Less Positive Than Offline

MixedNegative Positive

36

9

Computer HardwareOnline Conversations

Computer SoftwareOffline Conversations

Base: Branded Conversations – Offline/Online (Consumer Electronics, n=3,024 / 317; Computer Hardware, n=3,927 / 376; Consumer Electronics, n=3,024 / 317) Source: TalkTrack®, January through December 2007

31

Computer HardwareOffline Conversations

Consumer ElectronicsOffline Conversations

Consumer ElectronicsOnline Conversations

46

-17

35

Net Advocacy (positive less mixed and negative talk)

Computer SoftwareOnline Conversations

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Apple’s Online and Offline WOM Sometimes Similar, Other Times Different

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%

2.0%

2006

W/E

Jul

02

2006

W/E

Jul

23

2006

W/E

Aug

13

2006

W/E

Sep

03

2006

W/E

Sep

24

2006

W/E

Oct

15

2006

W/E

Nov

05

2006

W/E

Nov

26

2006

W/E

Dec

17

2007

W/E

Jan

07

2007

W/E

Jan

28

2007

W/E

Feb

18

2007

W/E

Mar

11

2007

W/E

Apr

01

2007

W/E

Apr

22

2007

W/E

May

13

2007

W/E

Jun

03

2007

W/E

Jun

24

2007

W/E

Jul

15

2007

W/E

Aug

05

2007

W/E

Aug

26

2007

W/E

Sep

16

2007

W/E

Oct

07

2007

W/E

Oct

28

2007

W/E

Nov

25

2007

W/E

Dec

16

2008

W/E

Jan

06

2008

W/E

Jan

27

Net Offline Net Online

Moving together

Moving independently

Base: Total Conversations 4 week average (Offline, n=15,416; Online, n=1,222)Source: TalkTrack®, July 2006 through December 2007

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Relationship Between Online & Offline WOM Also Varies for Dell

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%

2.0%Net Offline Net Online

Moving independentlyMoving together

Base: Total Conversations 4 week average (Offline, n=15,416; Online, n=1,222)Source: TalkTrack®, July 2006 through December 2007

27www.kellerfay.com

Microsoft’s Online WOM Is Far More Volatile than Its Offline WOM

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%

2.0%

2006

W/E

Jul

02

2006

W/E

Jul

23

2006

W/E

Aug

13

2006

W/E

Sep

03

2006

W/E

Sep

24

2006

W/E

Oct

15

2006

W/E

Nov

05

2006

W/E

Nov

26

2006

W/E

Dec

17

2007

W/E

Jan

07

2007

W/E

Jan

28

2007

W/E

Feb

18

2007

W/E

Mar

11

2007

W/E

Apr

01

2007

W/E

Apr

22

2007

W/E

May

13

2007

W/E

Jun

03

2007

W/E

Jun

24

2007

W/E

Jul

15

2007

W/E

Aug

05

2007

W/E

Aug

26

2007

W/E

Sep

16

2007

W/E

Oct

07

2007

W/E

Oct

28

2007

W/E

Nov

25

2007

W/E

Dec

16

2008

W/E

Jan

06

2008

W/E

Jan

27

Net Offline Net Online

Base: Total Conversations 4 week average (Offline, n=15,416; Online, n=1,222)Source: TalkTrack®, July 2006 through December 2007

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Online vs. Offline WOM

• Much more happens Offline• Offline and Online WOM are not the same

– Offline is more positive; online more negative– The two forms often follow different trajectories

• Yet, instinctively, we know the Internet is vital to word of mouth, particularly in the technology category

• Smart marketers will understand and seek to maximize WOM in both offline and online channels

29www.kellerfay.com

All Categories Technology

WOM

Percent of Brand Mentions Involving One or More References*

45% 51%

Television 14 11

Internet 11 20

Newspaper 6 6

In Store Display/Video 5 8

Direct Mail/E-Marketing 4 5

Magazine 4 6

Coupon/Circular 5 3

Radio 2 2

Product Package 3 4

Product Sample 3 3

Billboard Ad 1 1

Base: Brand Mentions (All Categories, n=132,421; Technology Category, n=12,395; Offline, n=11,230; Online, n=1,165) *Respondents are able to select up to two media/marketing references, so percentages do not add to the top summary row.Source: TalkTrack™, January through December 2007

The Internet’s Vital Role Is in Supplying Content to WOM

(% citing marketing or media source in conversation)

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All Categories Technology

Percent of Brand Mentions Involving One or More References*

45% 51%

Television Ad 9% 8

Television Program 6 3

Company Website 4 6

Internet Ad 3 6

Internet Blog or Chatroom 1 2

Online Consumer Reviews 1 4

Other Website 2 3

Newspaper Ad 4 4

Newspaper Article 2 2

Magazine Ad 2 4

Magazine Article 2 3

Radio Ad 1 1

Radio Program 1 1

Company Websites, Online Ads, Online Reviews Important in Driving Tech WOM

(% citing specific media element in conversation)

Internet

Television

Newspaper

Magazine

Radio

Base: Brand Mentions (All Categories, n=132,421; Technology Category, n=12,395; Offline, n=11,230; Online, n=1,165) *This table only includes media channels (e.g. excludes POS, promo, etc.). Media sums will not always add to the totals on the previous slide because respondents sometimes select more than 1 item in the same media group (radio ad & program). Source: TalkTrack®, January through December 2007

Who Are the WOM Leaders in Tech?

© 2008 Keller Fay Group LLCNot to be quoted or distributed without written permission

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Quantity of Word of Mouth

Dell Leads in Terms of WOM Volume(Technology brands with most mentions in TalkTrack® for 2007)

1. Dell Computers2. Sony3. Microsoft4. Apple Computer5. iPod6. HP7. Nintendo8. PlayStation9. Samsung10. Xbox

Base: Technology Brand Mentions (Total, n=28,503)Note: Brands are color coded to indicate which technology brand category they belong to.Source: TalkTrack®, January through December 2007

• Consumer electronics, computer hardware, and gaming are equally represented with three brands each in the Top 10.

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Quality of Word of Mouth

Cicso & Nintendo Lead in WOM Quality(Based on Net Advocacy: Positive less negative/mixed word of mouth for 2007)

Base: Branded Technology Conversations (Total, n=12,12,689)* (* Brands with 50 or more mentions)Note: Brands are color coded to indicate which technology brand category they belong to.Source: TalkTrack™, January through December 2007

1. Cisco/Linksys2. Nintendo3. Halo4. Kodak5. Canon6. Intel7. Creative Labs8. Xbox9. PlayStation10.iPod

• Camera brands, which do not even make it on the top 10 list in terms of quantity of word of mouth (previous slide) appear when looking at WOM Quality (as measured by Net Advocacy).

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In Summary

• WOM is a powerful driver of consumer technology• WOM works differently than you might expect

– Mostly offline – Mostly positive – Often driven by advertising and other marketing

• The Internet is key, but not the way you expected– Provides content to offline WOM– Must align offline and online marketing strategies– Need measurement approaches to capture both offline & online

• Your brand can be a WOM leader– Use marketing to drive higher levels of talk– Product quality and best customers key to high quality talk

Thank you!

© 2008 Keller Fay Group LLCNot to be quoted or distributed without written permission

[email protected]

36www.kellerfay.com

Ed Keller, CEO

• President of Word of Mouth Marketing Association (WOMMA)

• Has been called “the godfather of word of mouth marketing research”

• Former CEO of RoperASW, a top 20 market research firm

• Co-author of business bestseller The Influentials, a 2004 Berry-AMA Award finalist for most important marketing book of the year

• Two decades working with Influentials™ segment

• 25-year veteran of market research industry; board member Advertising Research Foundation (ARF); 2005-06 President of the Market Research Council

• Visiting Lecturer at University of Pennsylvania’s Annenberg School of Communication, Spring 2006

37www.kellerfay.com

Keller Fay Group

Keller Fay Group

65 Church Street

3rd Floor

New Brunswick, NJ 08901

732.846.6800 (Tel)

732.846.6900 (Fax)

Ed Keller, CEO, [email protected]

Brad Fay, COO, [email protected]

Bringing best-in-class tools to word of mouth strategy and measurement

The Keller Fay Group