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October 02, 2007

The value of Word of Mouth, and how to create it


I read an article in the October issue of HBR entitled “How Valuable is Word of Mouth?” and found it worth commenting on. 

Download R0710Jp2.pdf

I admittedly looked at the mathematical formulas within the exhibits and felt like the dumbest person on earth (sometimes it doesn’t take much). 

Through a regimented CRM test, they illustrated the value and importance of creating champions for brands.  They do an amazing job of quantifying the value of referrals and making the case that marketers should be looking for ways to create “brand champions” because the most efficient driver of revenue and profit comes people recommending brands to people.

They advocate using the “Customer Referral Value” (CRV) over “Customer Lifetime Value” (CLV) to determine whom to target with marketing messages and incentives.  It’s an approach that Fred Riechfeld lays out in his book “The Ultimate Question” where he advocates that the most valuable customer isn’t the one who buys the most, but the one who is the most influential on other potential customers.

But this rigorous quantitative analysis suggests a detrimental approach to creating brand champions.  It is my hope that marketers don’t read this and think that all they have to do is formulaically pay-off customers to recommend their brand.  While it may work in the short-term, it’s not a good practice for building advocacy, nor is it sustainable.  While I respect the CRM approach to targeting people that could become brand champions, we can’t take this micro-test that was done in a vacuum and apply it to how we market brands are a larger scale, like the article suggests.

Here’s 3 reasons why:


The most valuable brand champions aren’t purchased by discounts and incentives.  They aren’t “mercenaries” paid to do battle in the marketplace.  They are emotionally committed and motivated “nationalists” who believe in the brand they are promoting.  They have a relationship with it that is the basis for their advocacy.


The only way to create brand champions in a sustainable way is to EARN their advocacy.  And by this, I don’t mean buy it; I mean earn it by acting more like a friend then a salesperson.  By offering them incremental value, giving them something to believe in, inspiring them, helping them and being as committed to them as they are to you.


Buying advocacy is not sustainable. Training customers to act when paid is a dangerous business.  It becomes a self-fulfilling prophecy where customers only act when paid to act instead of acting on their own set of convictions and beliefs about a brand.

Don’t get me wrong, I applaud both the premise of the article and the way they measured CRV.  The premise of targeting people who have the greatest potential to be brand champions is right on.  In fact, it’s the same underlying premise about my earlier post “flipping the funnel upside down.” But I’m a practitioner with a POV grounded in both experience and research on the relationships between people and brands.

There are two, smaller things I also would challenge the authors to think about:

1) The value of a brand champion isn’t just in their direct referrals.  Much of their value is in their influence and positive presence in amidst the marketplace of perspective customers.  Word of Mouth is the most trusted source of marketing.  And with social media as an outlet, brand champions are given a much larger, more influential voice that creates a string of impressions that far surpasses that of advertising and direct marketing.  So it would be ideal to factor into the CRV, the voice a champion has in the marketplace.

2) Emotional attachment and commitment to brands are not the privilege of high-involvement categories as this article suggests.  While the relationships are different, emotional attachment and brand champions can be found within almost any category.   So while the article was based on the telecommunications and the financial category, I would suggest that the results would be similar for low involvement categories as well.

At 22squared, we fielded a research project designed to look at brand relationships across 22 different categories.  We included a) the number of strong and committed relationships a brand has with it’s customer base, b) the number of promoters a brand has among it’s customer base and c) the ability of the brand to maintain a strong relationship with its customers without letting it stagnate or terminate.  We call it the Friendship Factor.  When ranking the 128 brands we studied, both low involvement CPG brands and high involvement brands (automobiles and retail) were in the top 20 and were evenly distributed through the rest of the list.

My perspective in a nutshell:
Word of mouth is the most valuable way to market a brand.  The goal of marketing should be to create brand champions.  The best way to do that is for marketers to befriend consumers.

By Brandon Murphy


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