Guess which medium has grown fastest over the last six years in terms of

advertising spend? Online, of course. Wrong. The US internet advertising

marketing was worth $6bn dollars in 2001. It looks likely that this market
will be worth around $20bn in 2007 – a very healthy aggregate growth rate
of 300%.1

But compare the growth of word of mouth marketing (admittedly probably a

discipline rather than a “medium”) over the same period. In 2001 the
market in the US was worth $76m. 2007 is likely to be worth $1.35bn2. As
Crocodile Dundee might say, “That is growth!”

Word of mouth has been in the news elsewhere. Grey London recently
bought a stake in Wildfire, a London-based word of mouth marketing
company.

What’s this all about (briefly)?

You could argue that brands are indistinguishable from mass media. Before
mass media, companies and the products they made of course had
reputations. And as such consumers, one assumes, talked about the
products. But “brands” – (loosely) a range of emotional & functional
associations made by consumers around a product, service or company –
could not exist without mass media. Advertising only became possible
because of mass media. And reputations only became “brands” once
companies sought to influence the former through advertising.

Since mass media gave birth to advertising much has changed in the world.
But two developments are most relevant. Firstly, advertising became a very,
very big business3. We are now immersed in advertising4 – no one should be
surprised if effectiveness decreases as the total volume of advertising
increases.

The second is more recent. Rising broadband penetration has led to

increasing use of social media. This has shifted the focus to the connections
between consumers and away from the connection between consumers and
mass media outlets or professionally produced content.

These two trends – the proliferation of advertising & growing use of social
media – are increasingly convincing marketers that their communications
can be powerfully augmented by getting consumers to pass their messages
on, or in any other way talk about their brand.

1
Statistics extrapolated from IAB/PWC report, June 07: http://tinyurl.com/2ogfbh
2
Statistics from report by PQ Media, Nov 07: http://tinyurl.com/37kvtr
3
PWC report of 2005 predicted that the global advertising market would be worth $500bn by the end
of 2010: http://en.wikipedia.org/wiki/Advertising
4
Estimates as to the number of advertising messages an individual is exposed to vary considerably. A
range of estimates for the US market, from 250 – 3000, plus the sources of these estimates is here:
http://answers.google.com/answers/threadview?id=56750
A number of the world’s best known brands have initiated word of mouth
marketing campaigns, among them: Nokia, American Express, Pfizer and
Kellog’s. However the large marketing budgets which these companies
command dwarfs that required to test word of mouth – global corporations
therefore have little reason not to experiment with word of mouth
marketing. The real tests are a) whether these companies maintain and
increase their commitment to word of mouth; and b) whether smaller
spending marketers see a reason to shift budget out of traditional
advertising channels. To do either of these, marketers will need to be clear
on what word of mouth can and can’t do.

If there’s one thing which all word of mouth marketing companies have to
hand it’s a stat showing that while, very few of us trust advertising, all of us
trust our friends and family to tell us about products or services5. No one is
doubting that endorsement, whether from a friend, colleague, a blogger or
a news network, is a powerful force in shaping the way we feel about
brands. But the story is not as simple as word of mouth companies make
out, for a number of reasons.

Firstly, and at the risk of making an argument over semantics, one can
question how much it matters that only 14% of consumers believe
advertising. Making a straight-forward product claim, which consumers can
believe or not believe, is, as I see it, less common now than implying an
emotional benefit. It is harder for consumers to believe or disbelieve
advertising in which the claims are implicit and emotional. This does not
necessarily however make that advertising any less effective.

Secondly, word of mouth marketers cannot6 argue that word of mouth did
not operate around brands before it became a marketing discipline. One
rejection of word of mouth marketing would state that companies should
simply focus on delivering products and services which generate positive
word of mouth without the involvement of the Marketing Department. First
Direct and Apple are two companies whose offering is sufficiently
differentiated to generate natural word of mouth. The problem with this
argument is that it could equally well be applied to advertising in general:
why do you need to advertise, using word of mouth or otherwise, when you
could just focus on creating a unique product or service? Arguing that word
of mouth should happen naturally only is, in other words, a little naïve.

A third issue which word of mouth marketing will need to confront is scale.
There is much you can accuse of the advertising industry of, but providing a
service which is not scalable is not among them. The work of a handful of
individuals in a single agency can be, and is, reproduced far and wide. This
is good for advertisers since it means they can spread the fixed costs of
producing advertising assets over the declining variable costs of
reproduction and media.

5
See Wildfire’s website: www.wildfirecompany.com/
6
(and do not)
Scale will be harder to achieve in word of mouth marketing. Word of mouth
marketing agents are in the main not paid, and even if they were it would
presumably not be possible to get volume reductions in the same that it is
when buying media. A related difficulty: if word of mouth agents are
unpaid, is there a natural ceiling to the number of agents a word of mouth
marketer will be able to recruit? I would argue that there must be, and that
this ceiling is probably rather low.

A second difficulty in achieving scale in word of mouth marketing relates to

effectiveness. Increasing pervasiveness is likely to lead to declining
effectiveness (sound familiar?) Indeed widespread use of word of mouth
marketing is likely to lead to cynicism more quickly than has been the case
with established advertising techniques. Who wants their acquaintances
dropping in references to brands into everyday conversations? And would
you be left with a good impression of the brand if they did and you knew
they were working on behalf of the brand?

A final problem for word of mouth marketers is messaging: not only can a
TV, print, radio or internet ad be reproduced at low cost, it also says exactly
what you want it to say. Thoughtful word of mouth marketers have realised
that if they tell their agents what to say, either these agents won’t say it, or
people the agent talks to will receive the brand message with
incomprehension or cynicism. Agents at Bzzagent, a US word of mouth
marketing company which has recently opened an office in the UK, are
asked simply to share their honest opinion about a product or service and
then asked to feedback on these conversations7. In other words, to get
people to talk about their offering, advertisers may have to forego control
of the message.

These points are not made because we don’t believe word of mouth
marketing has a role. But this role will be to work alongside more
conventional advertising techniques, not replace them. Word of mouth
marketing will be useful in reaching influential audiences, whose
endorsement is likely to improve sentiments towards the brand further
afield. It will be useful also in engaging with audiences which are hard to
reach through advertising in mass media. There are many other
circumstances in which word of mouth will have a role: product launches,
neutralising negative brand sentiment, for campaigns with a particular
geographical focus. Finally, some would argue that word of mouth marketing
is not just about “advertising” anyway; but rather that it’s a way for brands
to connect with consumers in order to get a clearer sense of what the latter
want.

There is much talk of the advertising industry’s need to keep up with

changing consumer behaviour. We certainly don’t disagree with this8. Word

7
Another issue, relevant for Bzzagent in particular but word of mouth companies whose work is done
offline in general, is simpler still. How do they know that their agents are doing anything, and not just
reporting back on entirely invented encounters?
8
They must change often, those who would be constant in happiness or wisdom - Confucius
of mouth will be one discipline which will benefit, but it will certainly not
the only one.

Sam Ashken, Dec 07

www.hyperhappen.com