measuring the role of wordof-mouth marketing

October 2007

In a recent national online study among 600 adult men and women, novaQuant explored the relative influence of word of mouth on decision making across a wide variety of consumer products and services, ranging from computers to cars, from dentists to mobile phone providers, from movies to soft drinks. The goal was to quantify, on a relative basis, which categories are most likely to benefit from marketing efforts to generate word of mouth.

The word-of-mouth index by category
At first glance, the results showing which product or service decisions are most impacted by word of mouth seem intuitive. Namely, claimed word-of-mouth influence indexes high for: • High-tech and/or expensive products, such as computers, digital cameras, cars • Local services which involve a personal relationship, such as dentists and real estate agents • Decisions that are related to a new experience such as choosing a sit-down restaurant or seeing a movie Conversely, more everyday products and services, such as soft drinks and grocery stores, tend to be less impacted by word of mouth on a day to day basis. Word-of-Mouth Influence Index

Computer M ovie Digital camera Sit-down restaurant Dentist M obile phone service Real estate agent TV Car or truck Plumber Auto insurance Printer Internet service Hotel Take-out food Bank account Book Cold remedy Clothing store Airline flight Denim jeans Car rental Athletic shoes Online shopping Coffee Shampoo Ice cream Toothpaste Grocery store Website for ne ws Soft drink

180 171 162 162 157 155 149 142 133 133 131 131 120 106 103 97 93 86 80 79 73 73 71 67 54 51 49 46 41 37 23

Above average

Below average

Note: Percent at least somewhat influenced by other people’s opinions (top 3 box on 5-point scale) divided by the average for all 31 items

Report on W ord-of-Mouth Marketing

October 2007

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need for word of mouth is linked to experience with a brand/product category
The products and services where word-of-mouth impact is low for the most recent brand purchase usually registered significantly higher word-of-mouth impact the first time that same brand was chosen. For example, only 7% claim that their most recent purchase of a soft drink was influenced by word of mouth. However, there are still 25% of respondents who claim word of mouth had an impact the first time they bought that particular brand of soft drink. So given that the first time a brand is purchased has an impact on all future purchases for that same brand, the absolute effect of word of mouth on small everyday purchases can still be substantial. Cold remedies are another interesting example. Twenty-seven percent claim some word-of-mouth impact on the brand they chose for their most recent purchase, but more than half (55%) say that word of mouth had an influence the first time they purchased that brand. Word-of-Mouth Influence for First versus Most Recent Purchase
Computer Digital camera Mobile phone service Real estate agent Car or truck Printer Internet service Hotel Bank account Cold remedy Clothing store Denim jeans Ice cream

56% 51% 49% 47% 42% 41% 38% 33% 31% 27% 25% 23% 15%

74% 67% 65% 67% 63% 62% 55% 55%
First time Most recent time

53% 55% 46% 45% 40% 29%

Website for news 12% Soft drink

7%

25%

Note: Top 3 box on 5-point scale; asked about 15 of the original 31 items; those whose most recent decision was the first time that decision was made are included in both subgroups above.

Report on W ord-of-Mouth Marketing

October 2007

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word of mouth can come from people you know and people you don’t know
friends and families are most common source of information
People are more likely to be influenced by product or service opinions from friends, family and other people they know than from people that they don’t know (such as experts, customers online, etc.) The digital camera is the only product where the influence of word of mouth from people not known is actually higher. Brand decisions regarding technology products tend to be the most impacted by opinions from people not previously known. Selecting a mobile phone carrier seems to be somewhat of an anomaly – which may have to do with local coverage/ performance issues and the growth of the friends and family promotional packages being offered.

but a clear need for expert and customer opinions for big decisions still exists
Even though people clearly place higher value on the opinions of people they know and trust, the impact of other people/sources is still often substantial across a wide range of categories. The most notable exceptions are for personal-taste items such as ice cream, soft drinks, and denim jeans, where opinions from people not known are clearly less influential. The results also reinforce that people rely heavily on friends and family for insights on local services such as real estate agents and banks. Presumably the fact that these services are local and may require a more personal touch suggests that opinions from friends and family are highly relevant.

Word-of-Mouth Influence
Real estate agent Mobile phone service Clothing store Bank account Ice cream Internet service Computer Car or truck Denim jeans Cold remedy Printer Hotel Soft drink Digital camera Website for news
31% 7% 35% 8% 26% 52% 10% 14% 4% 25% 58% 53% 28% 34% 78% 77% 73% 71% 70% 70% 69% 68%

People Know People Don't Know

65% 63% 59% 58% 56% 62% 53% 56%

Note: Among those who received opinions about that decision; Asked of “short list” of 15 products/services only.

Report on W ord-of-Mouth Marketing

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traditional, personal forms of word of mouth are still the most common forms
Despite the prevalence of e-mail and instant messaging usage, the vast majority of opinions are from people personally known, such as family and friends, and are received verbally - in-person or over the phone (98%). Opinions from people not known, on the other hand, are primarily received on the Internet (78%), especially from online customer reviews and surfing the web.

How Received Opinions

People They Know
In-Person/By Phone (net) In-person By phone Net: Internet/Text E-mail Instant message Text message 98% 94% 51% 36% 32% 9% 4%

People They Don’t Know
In-Person/By Phone (net) In-person By phone Internet/Text (net) Customer reviews online Surfing the web Expert websites Online publications E-mail Online discussion boards Blogs Instant message Text message Traditional Media (net) Newspapers or magazines TV or radio 28% 24% 8% 78% 51% 42% 37% 27% 19% 16% 7% 1% 1% 45% 33% 29%

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a key segment of experts: “The Pros”
There are essentially two kinds of “unknown” people who influence product and service decisions: Pros (experts and other professionals in relevant fields) and Joes (regular individuals such as those who write customer reviews online). Pros have more influence on almost all products and services in the survey, especially the higher ticket items (such as a vehicle or computer) or where health is concerned (such as a cold remedy). Joes are more influential when it comes to hotels and clothing stores.

Word-of-Mouth Influence from People They Don’t Know: Professionals (Pros) versus Individuals (Joes)

Car or truck Computer Digital camera Printer Mobile phone service Cold remedy Website for news Internet service Real estate agent Hotel Bank account Denim jeans Clothing store Ice cream Soft drink
6%

20% 29% 33% 22% 19% 27% 22% 17% 13% 11% 20% 19% 18% 16% 24% 11% 5% 4% 5% 3% 8% 2% 3% 2%

50% 49% 47% 44%

Pros Joes

6%
Note: Among those who received opinions about that decision

Report on W ord-of-Mouth Marketing

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a key demographic: consumers age 18-34
While this study focuses on the relative importance of word of mouth across categories, the results also highlight the key differences by age in terms of the influence of word of mouth. Younger respondents (ages 18-34) are consistently more influenced by word of mouth than their older counterparts (ages 35-64) – especially for cars/trucks and auto insurance. This could be due to the fact that they have less experience with certain types of purchases given their life stage. Interestingly, they were equally influenced for items like computers and printers. Word-of-Mouth Influence by Age
Car or truck Movie Auto insurance Dentist Computer Real estate agent Digital camera Sit-down restaurant Mobile phone service TV Plumber Internet service Take-out food Hotel Bank account Printer Cold remedy Clothing store Book Denim jeans Athletic shoes Airline flight Car rental Shampoo Grocery store Coffee Online shopping Ice cream Toothpaste Website for news Soft drink
11% 12% 9% 4% 17% 14% 10% 6% 12% 19% 17% 16% 21% 20% 21% 18% 25% 33% 27% 28% 25% 41% 41% 40% 44% 48% 49% 46% 33% 46% 56% 32% 50% 63% 61% 60% 59% 58% 56% 56% 54% 53% 52% 50% 47% 45% 44% 43% 41% 40% 40% 38% 35% 35% 34% 31% 28% 26% 26% 26% 24% 20%

18-34 35-64

Note: Top 3 box on 5-point scale

Report on W ord-of-Mouth Marketing

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younger consumers take to technology for word-ofmouth communication
Younger consumers (ages 18-34), who we assume to be generally more tech savvy than their older counterparts, are more likely to use technology to solicit word-of-mouth recommendations. Instant messaging with friends and family for word-of-mouth information is the most noteworthy gap. How Received Word of Mouth from People Know – by Age
Net: In-Person/By Phone In-person

98% 98% 93% 94% 58% 48% 45% 31% 36% 30% 18% 4% 9% 2%
18-34 35-64

By phone

Net: Internet/Text

E-mail

Instant message

Text message

How Received Word of Mouth from People Don’t Know – by Age
Net: Internet/Text Customer reviews online Surfing the web Expert websites Online publications E-mail Online discussion boards
11% 14% 39% 34% 24% 19% 19% 33% 18-34 27% 35-64 48% 56% 50% 43% 77% 82%

Blogs 4% Instant message Text message Net: Traditional Media Newspapers or magazines TV or radio Net: In-Person/By Phone In-person By phone
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1% 1% 1% 0% 37% 48% 28% 36% 24% 31% 30% 27% 27% 22% 7%

9%

October 2007

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highlights for marketers
personal, one-to-one methods still dominate the communication of word of mouth
Even amidst the exploding presence of social networking, blogs and user-generated content and even for decisions where expert opinions are clearly needed, most word of mouth comes from friends and family or other known people and most of it is done in-person. Giving consumers easy ways to spread the word to their friends and family, both in-person and online, will be an increasingly important element of fueling word of mouth.

categories where purchases are costly and infrequent should command more word-of-mouth marketing efforts
Brand decisions for high tech and/or big tickets products like cars, computers, digital cameras and printers are among the most influenced by word of mouth, both the first and most recent time the brand is selected. Since these types of products are continually being updated and purchases are not made that often, consumers need education and will seek it out from many sources – both from people they know and don’t know and from both professionals/experts and other consumers.

professional “experts” are especially sought for advice on high ticket items
This underscores the importance of having a good brand story to tell these potential influencers in certain categories such as automotive or home technology.

local and/or personal services are highly influenced by friends and family
Choosing a mobile phone service provider, real estate agent or dentist are also decisions that are highly influenced by word of mouth. However, in these cases, the word of mouth is much more likely to come from friends and family. Perhaps both the personal and sometimes local nature of these services makes the advice from people they know and trust far more relevant and valuable. It’s also possible that people feel they will get a better deal or enhanced service if they “know” someone that is already connected to the service provider.

Report on W ord-of-Mouth Marketing

October 2007

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highlights for marketers (continued)

decisions of personal style and taste are less influenced by the opinions of others, except for the first time!
When it comes to choosing a brand for items driven by personal taste or style, such as ice cream, a soft drink, jeans or a clothing store, the impact of word of mouth is markedly lower than for other categories. However, there is much more impact on these decisions for the first time the particular brand is selected (in some cases, more than twice as much), suggesting that the “first time” word of mouth is critical for these products. Understandably, when consumers do get word of mouth for these decisions, it is primarily coming from people they know, likely those whose taste or style matches their own.

Word-of-mouth opinions are more highly sought by younger consumers who are also active users of communication technology
Younger consumers (18-34 years old) are typically more influenced by word of mouth than older consumers (age 35-64) and are more likely to turn to online methods to get that information. Greater interest in the opinions of others may be a general characteristic of the more youthful segment, many of whom will have had less experience with some types of purchases. High interest in word of mouth among younger consumers may also derive from more access to and greater comfort with a wider range of sources such as the Internet, emailing, and text messaging.

Report on W ord-of-Mouth Marketing

October 2007

Copyright © novaQuant Inc.

Page 9

methodology and additional insights
Data in this summary are from an online survey fielded by novaQuant Inc. Respondents age 1864 were asked to rate a random subset of 31 product or service decisions that they have made in terms of how much other people’s opinions influenced their most recent decision. Respondents are considered to have been influenced by word of mouth for a given product or service if they report being at least “somewhat” influenced by other people’s opinions for a given decision (top 3 box on a 5-point scale). Some key questions were limited to a total of 15 product or service decisions for a more detailed exploration of the word-of-mouth experience. Respondents were specifically instructed to include both positive and negative opinions from people such as friends and family, people online, and experts (however they define them) – but to NOT include opinions from sales people or the company selling the product or service.

about novaQuant
novaQuant is a full service marketing research consultancy. We provide the innovative research expertise, the active listening, and the thinking needed to deliver marketing and business insights that provide real solutions for our clients. Please visit us at www.novaQuant.com.

Report on W ord-of-Mouth Marketing

October 2007

Copyright © novaQuant Inc.

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