Getting to the heart of WOM ROI
By Rajeev TalwarIn keeping with our ‘celebrating our staff’ brithday week, we’re handing over today’s post to one of our team you haven’t yet heard from: Rajeev Talwar, our rather fantastic Head of Social CRM, who is going to update us on the latest in WOM measurement and ROI… ^Molls
Image credit: www.flickr.com/photos/cambodia4kidsorg/
This week I’ve been reading a timely article from McKinsey about WOM measurement which includes some interesting statistics. The article introduces the concept of ‘WOM equity’ which is described as ‘an index of a brand’s power to generate messages that influence the consumer’s decision to purchase’, and which is represented as the number of WOM messages multiplied by the average sales impact.
I’ve extrapolated six key points from the study which I think are most helpful:
- Word of mouth is the primary factor behind 20-50% of all purchasing decisions and its influence is greatest when consumers are buying a product for the first time or when products are relatively expensive.
- A high-impact recommendation—from a trusted friend conveying a relevant message, for example—is up to 50 times more likely to trigger a purchase than a low-impact recommendation.
- About 8-10% of consumers are ‘influentials’. Influentials typically generate three times more word-of-mouth messages than non-influentials do, and each message has four times more impact on a recipient’s purchasing decision.
- Typically, messages passed within tight, trusted networks have less reach but greater impact than those circulated through dispersed communities.
- To turn consumers into an effective marketing vehicle (yuck), companies need to outperform on product and service attributes that have intrinsic word-of-mouth potential.
- Marketing induced consumer-to-consumer word of mouth generates more than twice the sales of paid advertising.
That’s pretty strong stuff, enough to make any brand owner sit up and take notice.
I was also glad to see that Miele gets a mention as one of the companies that generate successful buzz around new product launches. Having worked with Miele since 2008 we feel that they really do deserve props for the work they do.
However, although the above stats are great, I feel that we cannot use a single metric across all markets. And like may WOM studies, the article is heavily focussed towards an FMCG scenario and does not take into account other B2B or B2C scenarios.
So what are we doing to improve WOM measurement? Well, we’re currently working on a new ROI model.
Our Insights Manager Jacqui Hill explains that “the ROI model 1000heads is testing will give our clients a monetary figure representative of the value inherent in stimulating advocacy among consumers in the online environment. It will assign a pound sign to every single conversation we capture - and that value will be adjusted for sentiment, influence, trust, audience, reach and significantly, the heightened potential for long-term damage associated with detractor negativity.
1000heads’ research has established the ultimate value of a conversation to be based on the number of people who will take the intended action upon engaging with social media content. Without going into too much detail – X amount of consumers read a highly positive blog post about brand A, Y amount of consumers go out and actually buy one of Brand A’s products.
This will enable our clients to not only assess the return on their social media marketing activities and consumer engagement, but to refine their strategy, targeting resources at engaging communities/voices who offer the highest return on investment.
We’re currently testing the model across all of our clients’ online conversations and will formally introduce it once testing is complete.”
In other words? Watch this space!
