Heard it through the grapevine

With so many media channels open to brands, it may not be a surprise that word-of mouth (WOM) is one of the most powerful tools to create demand and inform consumers. There is also good reason to believe that WOM has more influence today than previously.

So why, in our multi-channel environment, does the oldest communication form appear to be growing in importance? There are four key reasons: media fragmentation; a multiplicity of brands; a dramatic decline in trust of traditional authority figures and marcoms; and the internet.

But WOM happens in many different ways – chatting to friends, neighbours, colleagues, salespeople and experts; reviewing price comparison sites and blogs or chatting to online contacts. In fact the huge growth in consumer-generated media – social networking – has prompted many brands to move budgets into this area. Bowers & Wilkins new strategy (MW last week) and Apple Computer’s deal with Facebook.com to give members free music downloads are just two examples.

Despite the buzz around online WOM, new research from Millward Brown, measuring attitudes to different information sources among 1,000 UK consumers, reveals that online WOM or consumer-generated content is used relatively rarely to inform brand choice. It suggests that, while blogs and viral marketing remain vital components of any effective marcoms strategy, few people (just 10%) use informal sources of online information (chatrooms, blogs, online message boards and contacts) to guide their buying decisions. The majority of online shoppers (61%) still turn to friends, neighbours and colleagues for advice.

This is because personal contacts are considered to be far more convincing than online sources according to 52% of consumers. Personal recommendations beat company-led communications such as websites and salespeople (28%) and informal online sources (30%).

When it comes to advocating brands, 57% of recommendations come from personal contacts compared to 36% which originate online, 31% from independent reviews and the media and 38% from companies. However, personal contacts are also more likely to advise against choosing a particular brand, meaning marketers need to play closer attention to what consumers say about them on- and offline. This is the key area marketers need to focus on as social digital networking gathers pace.

This is as true for big-ticket items such as holidays and cars as it is for everyday purchases such as toilet cleaners and cold-and-flu remedies.

As a “useful source of de-branded information” on the other hand, independent reviews and the media remain most popular for 67% of consumers and online for 54% of consumers, compared to just 38% turning to personal contacts. Importantly, transmitters (those who know a lot and talk a lot about a market sector) are far more likely to use informal online sources and specialist press and these influential consumers need careful attention.

We could hypothesise that the power of online WOM is diminished by both receivers’ lack of knowledge about who is providing advice and providers’ lack of knowledge about those receiving it. So when can online WOM act as a sales driver? First, where brand experiences are shared among “brand fans”. Second, when the WOM receiver has reason to believe the advice offered is relevant and sincere, based on a belief that those involved in the conversation share certain values.

For example, advice offered about inhalers in a chatroom of asthma sufferers can more readily be judged as trustworthy than an anonymous post on a travel site.

Marketers using WOM strategies need to be sure their brand experience stands up to scrutiny – a great experience actually predisposes people to spread the word. But brands must beware of negative experiences as these travel quickly too – as Apple discovered when it had problems with its earphones, batteries and screens. It also needs to be genuine if consumers are to trust the advisor. If a brand is caught trying to fake WOM or using it to promote marketing, the backlash is invariably fierce.

While marketers should be doing all they can to leverage personal recommendation in building their brands, a WOM strategy focused exclusively online is not necessarily the answer. At the same time, brands that ignore online WOM could find themselves on the back foot due to the increasing ease with which virtual social networks can coalesce around an issue (like ipodnanoflaw.com).

Every brand should be monitoring what is said about them online because although these results show a relatively low level of importance for informal online sources, the situation is evolving rapidly and a large shift is expected the next time this research is undertaken.

Fergus Hampton, chief executive of Millward Brown Precis, contributed to this week’s Trends Insight

Mike Antliff, chief executive, DA Group
While interactive online communities gain power, it is clear that a new generation of services is required by marketers in an industry that is changing rapidly.

The research indicates that these informal online communities are still less important than word of mouth but they are built around trust.

These environments represent a captive audience – a potential goldmine if handled in the right manner – and advertisers are looking at content-led advertising, and the community brands need revenue streams.

The “community” consumer is in control, therefore advertisers need to be extremely creative, so that they connect positively with the audience without diluting the brand experience. While there is still a steep learning curve marketers are adjusting quickly.