Electronic Word of Mouth – a New Marketing Tool?

A Practical Approach to the Opportunities and Perils of Consumer Generated Online Content
by Lars Heyne (October 2009)

LARS HEYNE

Strategische Planung, Text & Konzeption Grafenberger Allee 104, D-40237 Düsseldorf; Telefon +49 (0) 157.74703198

This master-thesis has been written at the FOM Fachhochschule für Oekonomie & Management (University of Applied Sciences) in Neuss in spring of 2009. It got a 1.3 mark. I’d like to thank Prof. Dr. Soumit Sain and Prof. Dr. Dr. Peter Kürble for their assistance, all participants of the online survey for their participation and my dear friends Jan & Nancy for their proof-reading and Susi for her patience.

© Lars Heyne 2009 No part of this thesis may be reproduced, stored in a retrieval system or transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without prior written permission of the author.

LARS HEYNE

Strategische Planung, Text & Konzeption Grafenberger Allee 104, D-40237 Düsseldorf; Telefon +49 (0) 157.74703198

T ABLE OF C ONTENTS

Table of Contents ................................................................................................................................... I Tables ...................................................................................................................................................... IV Figures .................................................................................................................................................... VI List of Abbreviations ......................................................................................................................... IX 1. Introduction ....................................................................................................................................... 1 1.1 Problem Definition .................................................................................................................... 1 1.1.1 The Traditional Marketing Model is Obsolete ........................................................ 1 1.1.2 Consumers Become Boss ................................................................................................ 6 1.1.3 Word of Mouth Could be the Solution ....................................................................... 9 1.2 Objectives .................................................................................................................................. 14 1.3 Methodology ............................................................................................................................. 15 2. Word of Mouth and eWOM........................................................................................................ 16 2.1 Word of Mouth ......................................................................................................................... 16 2.2 Electronic Word of Mouth (eWOM)................................................................................. 18 2.2.1 Definition ........................................................................................................................... 19 2.2.2 Transferability of WOM Insights and eWOM Specifics .................................... 20 2.3 Is eWOM-Marketing Possible at All? ............................................................................... 23 3. Marketing in a New Environment .......................................................................................... 27 3.1 A New Marketing Environment ........................................................................................ 27 3.2 Targeting Consumers in the New Marketing Environment ................................... 30 3.2.1 Behavioural Characterization (Social Technographics Profile) ................... 33 3.2.2 Demographics of the Most Frequent Contributors............................................ 33 3.3 Activating Consumers in the New Marketing Environment .................................. 34 3.3.1 Motivation to Post eWOM (Communicator)......................................................... 34 I

3.3.2 Motivation to Read eWOM (Receiver) .................................................................... 37 3.4 The Technologies of the New Marketing Environment ........................................... 39 4. Strategies to Amplify eWOM..................................................................................................... 41 4.1 Developing a Strategy ........................................................................................................... 42 4.2 Listening ..................................................................................................................................... 43 4.3 Talking ........................................................................................................................................ 46 4.3.1 Posting Viral Videos ....................................................................................................... 48 4.3.2 Engaging in Social Networks and Social Media Sites ........................................ 51 4.3.3 Joining the Blogosphere ............................................................................................... 53 4.3.4 Creating a Community .................................................................................................. 57 4.3.5 General Remarks About Talking ............................................................................... 59 4.4 Energizing .................................................................................................................................. 61 4.4.1 Energizing Online Communities ............................................................................... 62 4.4.2 Energizing Critics (Ratings and Reviews) ............................................................. 63 4.5 Final Remarks on eWOM Marketing ............................................................................... 67 5. Actions on Negative eWOM and Unethical Tactics .......................................................... 77 5.1 Negative (e)WOM ................................................................................................................... 77 5.2 Strategies on Negative eWOM ........................................................................................... 79 5.3 Unethical WOM Tactics ........................................................................................................ 86 6. Results ............................................................................................................................................... 90 6.1 How to Stimulate eWOM ...................................................................................................... 90 6.2 How to Deal with Negative eWOM ................................................................................... 92 6.3 Opportunities and Perils of Consumer Generated Content.................................... 93 6.4 Insights From the Online Survey ...................................................................................... 94 7. Conclusion ....................................................................................................................................... 95 7.1 The Real Importance of Offline WOM Compared to eWOM ................................... 95 7.1.1 Is The Real Action is Offline? ...................................................................................... 95 II

7.1.2 Discussion .......................................................................................................................... 97 7.2 Next Steps for eWOM marketing ................................................................................... 105 7.2.1 Supporting (Creating Communities to Connect People) .............................. 105 7.2.2 Embracing (Crowdsourcing) ................................................................................... 109 7.3 Final Recommendations ................................................................................................... 112 Appendix 2 – Blogging Policy by Sun Microsystems ......................................................... 113 Literature ........................................................................................................................................... 116 ITM-Checklist ................................................................................................................................... 125

III

T ABLES

Table 1: Consequences of the Democratization of Content ............................................... 8 Table 2: A Major Shift in Trust has Taken Place ..................................................................... 9 Table 3: The CRV – an Forgotten Asset ................................................................................... 13 Table 4: Endogenous and Exogenous WOM .......................................................................... 25 Table 5: Types of WOM Marketing (Excerpt) ....................................................................... 26 Table 6: The Social Technographics Profile .......................................................................... 33 Table 7: Reasons for eWOM Communication ....................................................................... 34 Table 8: eWOM Motive Influence (Factor-Score Regression Results) ........................ 37 Table 9: Hennig-Thurau & Walsh – Motives for eWOM-Usage ...................................... 37 Table 10: Motives for Reading Online Articulations .......................................................... 39 Table 11: The Four Basic Aims of WOM Marketing ........................................................... 41 Table 12: Synopsis of WOM Marketing Actions ................................................................... 42 Table 13: Strategy Planning with the POST-Method ......................................................... 43 Table 14: Solving Problems Resulting from the Marketing Funnel ............................. 48 Table 15: Start-up and Ongoing Costs for Blogging ........................................................... 56 Table 16: Benefit Analysis for Blogging (Annual) ............................................................... 57 Table 17: Strategies to Optimize Social Media ..................................................................... 61 Table 18 : The ROI of Ratings and Reviews ........................................................................... 67 Table 19: Unethical WOM Marketing Tactics ....................................................................... 86 Table 20: The WOMMA’s Honesty ROI .................................................................................... 88 Table 21: Importance of WOM Communication Channels in 2006 .............................. 95 Table 22: Influence of User-Generated Content Sites in 2006 ....................................... 96 Table 23: Online Communication Tool Usage by Age........................................................ 97 IV

Table 24: eWOM Marketing Does Not Stop on Energizing ........................................... 105 Table 25: The ROI of a Community Support Forum ........................................................ 109

V

F IGURES

Figure 1: Prime Time TV in the U.S. – Viewers Down, Spending Up ............................... 3 Figure 2: Empowers Consumers to Block and Skip Ads: TiVo DVR ................................ 4 Figure 3: São Paulo Before and After the Ad Ban ................................................................... 5 Figure 4: Agency- and Person of the Year ................................................................................. 7 Figure 5: Influence of Various Sources of Information on Purchasing ....................... 10 Figure 6: Consumer Trust in Purchase Decision Drivers ................................................. 10 Figure 7: The Traditional Marketing Funnel ........................................................................ 11 Figure 8: 3-Year Growth Shows that WOM Pays Off for Enterprise ............................ 12 Figure 9: The Bain Net-Promoter Score ................................................................................. 13 Figure 10: WOM Clusters in a Suburban Area ...................................................................... 16 Figure 11: Bionade – a Success-Story Built on WOM......................................................... 17 Figure 12: WOM Formation (Theory of the Two-Step Flow of Communication)... 23 Figure 13: A 66% Increase in Sales Due to WOM Support .............................................. 24 Figure 14: The Traditional Marketing Environment ......................................................... 27 Figure 15: The Social Marketing Environment .................................................................... 28 Figure 16: Participation Inequality According to the 90-9-1 Rule ............................... 31 Figure 17: How Web Users Participate in Online Communities ................................... 31 Figure 18: MFCs Compared to Overall Users ........................................................................ 33 Figure 19: Amazon.com – Evaluation of Ratings on their Helpfulness....................... 35 Figure 20: Standard Search Tools for Listening .................................................................. 44 Figure 21: Vendors of Private Communities ......................................................................... 44 Figure 22: Brand Monitoring Vendors .................................................................................... 45 Figure 23: eWOM Influence within the Marketing Funnel .............................................. 46 VI

Figure 24: The Impact of eWOM in the Consumer Decision Making Process .......... 47 Figure 25: Screenshots from the Volkswagen Terrorist Commercial ......................... 49 Figure 26: Screenshots from Blendtec’s “Will It Blend?” ................................................. 50 Figure 27: Ernst & Young Careers on Facebook .................................................................. 53 Figure 28: Sun CEO Jonathan Schwartz's Blog ..................................................................... 55 Figure 29: Procter & Gamble's Beinggirl.com ...................................................................... 58 Figure 30: Buyer vs. Referral Economics (Apple Computers) ....................................... 62 Figure 31: Consumer Opinion Site Epinions.com ............................................................... 64 Figure 32: Example for an Amazon.com Customer Review ............................................ 65 Figure 33: Dove’s Campaign for Real Beauty........................................................................ 70 Figure 34: Screenshots from Dove's Evolution Spot.......................................................... 71 Figure 35: Screenshots from Dove's Onslaught Spot......................................................... 72 Figure 36: Screenshots from “A Message From Unilever”............................................... 73 Figure 37: Greenpeace’s Onslaught(er) Viral Against Deforestation .......................... 74 Figure 38: Comparison of Popularity (Views)...................................................................... 75 Figure 39: Kellogg's Lego Fun Snacks...................................................................................... 78 Figure 40: Hate Page Walmartsucks.org ................................................................................ 79 Figure 41: Spreading of nWOM (Kryptonite Case) ............................................................. 80 Figure 42: The Streisand Effect on the HD-DVD Processing Key .................................. 82 Figure 43: SWOT-Analysis of eWOM Marketing.................................................................. 94 Figure 44: Influence of User-Generated Content by Product category ..................... 96 Figure 45: Online Talkers by Age and Gender ...................................................................... 98 Figure 46: Growth of Social Networking Sites From 2006-2008.................................. 99 Figure 47: Intended Mobile Internet Usage Change ....................................................... 101 Figure 49: eWOM Influence on Movie Selection in 2006 and 2008 .......................... 102 Figure 48: The iPhone – Key to the Mobile Internet .................................................... 102 VII

Figure 50: Web Influence by Product or Service Category .......................................... 103 Figure 51: Rapid Growth of eWOM Influence Between 2006 and 2008 ................. 104 Figure 52: Users Help Users on Simyo ................................................................................. 106 Figure 53: Simyo Partner Profile and Questionnaire ..................................................... 108 Figure 54: Walther’s Saftblog .................................................................................................. 111 Figure 55: Zappos’ Turnover Since 2000 ............................................................................ 126 Figure 56: Screenshot From Mary-woodbridge.co.uk ................................................... 128

VIII

L IST OF A BBREVIATIONS

AACS ADSL AVI B B2B bn C C2B C2C CEO CLV comm. CPG CRM CRV DMCA DVR E&Y e.g. EDGE et al. etc. eWOM

Advanced Access Content System Asymmetric Digital Subscriber Line Audio Video Interleave business business to business billion consumer consumer to business consumer to consumer chief executive officer customer lifetime value community/(-ies) consumer packaged goods customer relationship management customer referral value Digital Millennium Copyright Act Digital Video Recorder Ernst & Young, New York (USA) for example Enhanced Data Rates for GSM Evolution and others et cetera electronic word of mouth

IX

FLV hp HP HSDPA i.e. MFC MP3 MPG N n/a neg. NPS nWOM P&G p. PDA pos. pp. PR pWOM Q ROI RSS

Flash Video horse power Hewlett-Packard, Palo Alto (USA) High-Speed Downlink Packet Access id est (that is) most frequent contributor computer audio format (from MPEG, Moving Image Expert Group) Media Planning Group, now Havas Media unknown number=x (math.) not applicable negative Net-Promoter Score negative word of mouth Procter & Gamble, Cincinnati (USA) page personal data assistant positive pages public relations positive word of mouth financial quarter return on investment depends on version: Rich Site Summary (RSS 0.9x), RDF Site Summary (RSS 0.9 & 1.0), or Really Simple Syndication (RSS 2.0)

sth. SUV

something sports utility vehicle X

TiVo transp. U.S. UCLA UGC UK UMTS USA USD VTabakG WOM WOMMA www

Television Input/Video Output; DVR brand, Alviso (USA) transparent United States of America University of California, Los Angeles (USA) user-generated content United Kingdom (Great Britain) Universal Mobile Telecommunications System United States of America U.S. dollars Vorläufiges Tabakgesetz word of mouth Word of Mouth Marketing Organisation, Chicago (USA) world wide web

XI

If you’re a marketing person reading this, I’ve gotta say I don’t envy you. You guys have it rough these days. We really don’t trust you and we do our best to resist you. You interrupt us all the time. You keep making us sit through five minutes of ads before the trailers (which are also ads) before the movie starts. You’ve plastered our roads with billboards, you’ve filled our inboxes with spam and our browsers with pop-ups. And lately, you’ve started making me watch short films while I try to pee at a bar. You go to all these lights to get my attention and for what? The sad truth is that even when you break through and get me to notice and then remember your message,

I DON’T TRUST YOU.

XII

What if instead of wasting all that time and effort on being ad eighty-seven of a total of two thousand in the newspaper, you could get your product into my friend’s hands? Give them a chance to check it out, decide what they think about it, and then pass on the good news to the rest of us. I’d get less noise in my life and more news I can use, and you’d get a sales force hundreds of thousands of people strong who are all working for no commission and who are all individually tailoring your sales pitch for a specific prospect. Think about how crazy this is: Marketing teams are spending lots and lots of cash on a losing battle to try to get my attention while my friends are selling me products for free.

FOR FREE!
Tim Maly, consumer1

1

in Balter 2008, preface p.x

XIII

1. I NTRODUCTION
1.1 P ROBLEM D EFINITION
Tim Maly is representative of a vast majority of normal consumers. And even as a non-professional, he is able to summarize some of the problems of today’s marketing landscape which has rapidly changed during the last years.

1.1.1 T H E T R ADI T I O N AL M A R K ET I N G M O D E L

IS

O B SO L E T E

The traditional marketing model is being challenged. The effectiveness of mass advertising, the most important marketing tool, is declining rapidly. It is suffering from audience fragmentation, ad clutter, consumer annoyance and the avoidance of advertising. And even if the message gets through, people do not believe it, because a shift in trust has taken place. Off course, there are exceptions to the rule. Some traditional advertising campaigns built around mass media still work. But they are a few. The majority does not pay off and it is getting more and more difficult to achieve marketing goals (Marsden 2007, p.xix). Advertising, and subsequently marketing, is facing a major shift due to various, closely connected reasons: I N C RE AS E D M AR K E TI N G L I TE R A CY Consumers are showing an increased marketing literacy. The advertisingexperienced consumer is shifting from a passive receiver to an active player. The result is that only advertising that is explicitly welcomed, is going to succeed (Planetactive, 2006, p.9). Consumers are becoming more and more cynical, sceptical and marketing-savvy (Rosen 2007, p.ix) and as a consequence, they are increasingly dismissing traditional marketing campaigns as biased propaganda. Ultimately, consumers do not trust advertising messages no longer and turn to more reliable sources of advice instead (Sernovitz 2006, p.52; Marsden 2007, p.xx). A D V E R TI S I N G C L U T TE R People in the United States (U.S.) are exposed to about 3,000 advertising messages a day (Marsden 2007, p.xix). This acute advertising clutter makes it difficult for

1

traditional advertising campaigns to break through and catch the consumers’ attention. Markets are saturated with information and products; making it increasingly difficult for consumers to know and process all alternatives (HennigThurau/Walsh 2003, p.53). Court et al. found that 65 percent of consumers feel constantly bombarded with too much advertising and 54 percent of consumers say that they refuse to buy products that overwhelm them with too much advertising (Court et al. 2005, p.39). According to Rosen, noise (ad clutter) and scepticism (increased marketing literacy) are the major forces that cause marketers to look for alternative ways of marketing (Rosen 2007, p.ix). M E D I A F R A G M E N T A TI O N & C H A N G I N G C O N S UM E R B E H AV I O UR The acceleration of media fragmentation and proliferation make it difficult to reach the target groups through traditional marketing campaigns (Marsden 2007, p.xxi). In other words, fragmented and proliferated media channels and a change in consumer behaviour clearly expose the limits of traditional marketing (Court et al. 2005, p.40). Within this context, there are three phenomena to be discussed: • more media within single channels (e.g. the increase in TV stations or specialized magazine titles) • new (digital) channels apart from traditional media as print, TV, or radio (e.g. consumer opinion websites, podcasts or the mobile internet) • shrinking media audience (e.g. caused by multitasking or disinterest) The almost-universal audience that was assembled by television and other traditional mass media is fragmenting at an accelerating rate. The traditional 30-second commercial is increasingly losing its importance, causing an enormous reallocation of budgets. Consequently, these changes will speed up the development of new media and media concepts (Planetactive 2006, p.9). One example for these changes is the U.S. TV environment: In the 1960s, there were three TV channels in the US. With a single commercial aired simultaneously, an advertiser could reach 80 percent of U.S. women (Bianco 2004; Sernovitz 2006, p.42). In 1994, the average number of TV stations an U.S. household could receive was 27. According to Nielsen Media Research, this number has risen to 100 TV channels today (Bianco et al. 2004). All together, there are more than 1,600 broadcast and cable TV outlets in the U.S. today. McKinsey consultants are convinced that similar trends are under

2

way in Europe as well (Court et al. 2005, p.39). As a result, it is estimated that TV advertising in 2010 is only 35 percent as effective as it was in 1990. This makes it increasingly difficult and costly to reach the consumer. As the following graph indicates, in 1994, companies paid $ 5 billion2 to reach 45 million viewers; today, companies spend $ 7 billion to reach only 25m viewers (Court et al. 2005, p.40):
F IGURE 1: P RIME T IME TV IN THE U.S. – V IEWERS D OWN , S PENDING U P 3

The media proliferation within traditional channels does not only affect TV, but also various print media such as newspapers, specialized magazines and radio stations. Quite a new trend that adversely affects media fragmentation within the single channels is the proliferation of new digital and wireless communication channels, such as PDAs and mobile phone screens (Bianco et al. 2004). Another phenomenon mentioned by Court et al. (2005, p.39) is multitasking that results in decreased attention. People do no longer concentrate on only one kind of media: While surfing the web, an average U.S. teenager is engaged in two or more activities. Moreover, these findings apply also for 80% of businesspeople multitask, resulting again in decreased attention. Apart from multitasking, the close connection of device, channel and content is increasingly disintegrating and results in the consumer deciding what he is watching, when, where and on what device (Planetactive 2006, p.9). A D B L O CK I N G T E CH N O L O G Y Another challenge to the traditional marketing model is consumer-empowering ad blocking technology. This, Bianco et al. (2004) say, is the digital device that mass advertisers and TV executives fear most at the moment. The TiVo DVR, for exam2 3

$ = always USD from Court et al. 2005, p.41

3

ple, allows consumers to skip or avoid unwanted marketing messages and interruptive advertising (Marsden 2007, p.xxi).
F IGURE 2: E MPOWERS C ONSUMERS TO B LOCK AND S KIP A DS : T I V O DVR 4

For 2008, DVRs with integrated ad skipping technology are estimated to have a market share of 80%, giving consumers control over their viewing experience. A study by Havas’ media planning group, MPG, reported the following findings: • 90% of the respondents skip commercials on recorded programs • 84% of the respondents skip commercials when watching live TV Moreover, although only 5 percent of the respondents claimed that they would buy a DVR because it allows them to skip ads, this feature ranks as the device's second most important feature (MPG 2004). Lyra Research found additionally that many DVR users actually delay their live viewing to skip and avoid commercials and save time (Lyra 2004). This phenomenon is called time shifting and it means watching a program when it is wanted rather than when it is scheduled and skipping the commercials (Bianco et al. 2004). Even though these figures come from the U.S., digital television makes this trend highly likely in Europe, too. In Germany, telecommunications company T-home is already promoting this feature, calling it “The television that waits for you”.5 L E G AL R E S T RI C TI O N S
AN D

A D V E R TI S I N G B A N S

Legal restrictions on advertising are also increasingly limiting the marketing tools. One example give the European Law and the German VTabakG.6 As of January 1st 2007 there is a legal ban against advertising for tobacco products in newspapers, magazines and/or on the internet. Furthermore, sponsoring (e.g. concerts or For4 5 6

from http://dynamic.tivo.com/resources/images/series3/Series3HD_only_lf2_300rgb1.jpg original: “Das Fernsehen, das auf Sie wartet” available from: http://bundesrecht.juris.de/bundesrecht/lmg_1974/gesamt.pdf , based on the directive 2003/33/EC of the European Parliament and of the Council from May 26th 2003 and the §§ 21a, 22, and 22a of the German VTabakG

4

mula 1) is also forbidden, and since 1975 there is an ad ban on TV and radio commercials. Only billboards, outdoor media and cinema commercials are currently allowed. Another interesting example of the phenomenon comes from Brazil. In 2007, São Paulo’s major Gilberto Kassab banned outdoor advertising after he was fed up with the visual pollution caused by the city’s 8,000 billboard sites. The ban included all forms of outdoor advertising. São Paulo’s outdoor media owners' association (Sepex) warned that 20,000 people would lose their jobs and predicted a $ 133 million loss in advertising revenue for the town (Rother 2006; Burgoyne 2007).
F IGURE 3: S ÃO P AULO B EFORE AND A FTER THE A D B AN 7

P O O R E F F E C TI V E N E S S

OF

A D V E R TI S I N G

All the influences mentioned above contribute to a poor effectiveness of advertising, the most important marketing tool. According to PricewaterhouseCoopers, worldwide marketing spent $ 400bn in 2006 (Li/Bernoff 2008, p.101). But the actual return on investment (ROI) for advertising is an alarming 4 percent. Copernicus research has found that 84% of all marketing programmes are decidedly second-rate. Also it was found that most acquisition efforts fail to reach breakeven and that most sales promotions are unprofitable. A Deutsche Bank study of packaged goods brands from 2004 found that just 18% of televisions advertising campaigns generate a positive ROI in the short term (Clancy/Stone 2005, p.1). The failure rate of product innovations is also alarming. A recent survey by ACNielsen and Ernst & Young puts the failure rate of new U.S. consumer products at 95 percent, while Copernicus estimates that at most 10 percent of new products suc7

magazine scan, source unknown

5

ceed (Clancy/Stone 2005, p.1). For Germany, research institute Gesellschaft für Konsumforschung (GfK) found that: • 80% of all newly introduced products fail; and • 20,000 products leave the market shortly after their introduction This means € 10 billion are wasted each year. These numbers also cover seasonal offers and new designs, but if at least only ten percent of the newly introduced products were real innovations, there is still € 1billion wasted (Grauel 2006, p.16). Increasing the advertising expenditures to increase the effectiveness of marketing is not the solution: According to UCLA marketing professor Dominique Hanssens, the doubling of advertising expenditures for established products only increases sales by just 1 to 2 percent (Clancy/Stone 2005, p.1). ONLINE SURVEY According to the online survey, only 46 percent of the questioned marketing decision makers are satisfied with the efficiency of their traditional advertising activities.8

James R. Stengel, Global Marketing Officer at Procter & Gamble, summarized these developments in one sentence: “The traditional marketing model we all grew up with is obsolete.” 9

1.1.2 C O N S U M ER S B E CO M E B O SS The second threat for marketing are the effects of digital convergence. The digital technologies that give consumers more control over the time they spend on media, are responsible for the simultaneous audience fragmentation and the proliferation of channels discussed above (Court et al. 2005, p.37). New personal communication platforms such as blogs, online reviews and social networks are increasing the velocity, reach and utility of WOM (Marsden 2007, p.xx). Their effects are • democratization of web and information; • consumer-generated content and media; and • consumer-generated advertising
8 9

compare Appendix, Questions A-1 cited in Ramsey 2004, p.2

6

D E M O C R A TI Z A TI O N

OF

WEB

AN D I N F O R M A TI O N

The web 2.0 that is usable by and accessible to each and everyone at any time, has turned the internet social (Sernovitz 2006, p.40). Consumers are connecting the themselves on social networks such as Facebook or MySpace, creating content and en, tertainment like never before (e.g. on YouTube or Flickr) and turn and turning the web into a more and more infinite collection of knowledge. This way, social media transform people from content readers to publishers. The democratization of the web is a shift from broadcasting to a many many-to-many system that is rooted in the communimany cation between publishers, people, and peers, using the wisdom of crowds to connect and share information (Ogilvy 2008, pp.6-7). Therefore it is not amazing that Advertising Age and Time Magazine put “The consumer” and “You.” on their covers:
F IGURE 4: A GENCY - AND P ERSON OF THE Y EAR 10

Apart from the web, information has also been democratized. Currently everyone can gain an edge of information, which is again contributing to increased marke information, marketing literacy. The wisdom of crowds that was described above, is retrievable for everyone. The internet with its search engines enables the consumer to get access to any information he or she needs, quickly and easily (Ogilvy 2008, p.8). The internet provides access even on restricted data and negative consumer opinions. es Today, brands are constantly under community surveillance and wrong moves are likely to remain in the public record for forever. C O N S UM E R - G E N E R AT E D C O N TE N T
AN D

MEDIA

The democratization of information and the web also have an effect on the content industry. Today, broadband connections make it possible to distribute high quality

10

Ad Age, issue January 8, 2007; and Time Magazine, issue December 25, 2006/January 1, 2007

7

audio or video content over the internet. The major changes enable consumers not only to create, but also to spread their creations to the online community (Ogilvy 2008, p.9) – “Broadcast yourself!”, as YouTube puts it. The democratization of content has also democratized media. Many websites are organized by a single person, not multi-national media enterprises. Amateurs and semi-professionals can easily spread their opinions and even compete with mainstream media sites in attention and impact (Ogilvy 2008, p.12). For example, in websites such as rocketboom.com or current.tv, users provide most of the content.
T ABLE 1: C ONSEQUENCES OF THE D EMOCRATIZATION OF C ONTENT 11
Old media (=mass & closed) Capital costs Customer acquisition/retention costs Content creation costs Advertising revenues Distribution lock out Profits huge huge mostly big huge major huge New media (=micro & open) limited limited big to small moderate no healthy

C O N S UM E R - G E N E R AT E D A D V E R TI S I N G Advertising has also been democratized. Sometimes consumers are invited to create their own ads. One example is Chevrolet’s www.chevyapprentice.com where it gave people the chance to create their own commercial for the new Tahoe SUV. In doing so, people could choose from pre-produced video material and insert their own text. Unfortunately, many people used the spot-creator to express their antipathy for the ecologically harmful SUV (Paukert 2006). Consumer comments and reviews arguably have a stronger impact than consumer generated ads. This unedited content gets more attention than traditional media and in effect squeezes out advertising, media and journalism. In essence, people express which brands they prefer and which they do not. This information is valuable because people like to listen to their peers, people like themselves (Sernovitz 2006, pp.40-41). This means that a shift in trust has taken place, from traditional institutions and marketing messages to the opinions of family, friends and ac-

11

Ogilvy 2008, p.9; from my personal perspective, moderate advertising revenues and healthy profits are questionable

8

quaintances (Ogilvy 2008, pp.15, 4). These opinions are highly relevant and substitute real advertising.
T ABLE 2: A M AJOR S HIFT IN T RUST HAS T AKEN P LACE 12
The age of deference (old): Leaders Elders Experts Celebrities Alternative opinions Friends and family The man on the street Most trusted source The age of reference (new): The man on the street Friends and family Alternative opinions Celebrities Experts Elders Leaders

Least trusted source

The online world allows and in some cases, empowers people to voice their dissatisfaction and to expose dishonesty. Simply put, no marketer can ignore these comments (Sernovitz 2006, pp.51, 42). Referring to all these shifts, Kevin Roberts, Chief Executive of advertising network Saatchi & Saatchi, said: “For the first time the consumer is boss, which is fascinatingly frightening, scary and terrifying, because everything we used to do, everything we used to know, will no longer work” (cited in Marsden 2007, p.xviii).

1.1.3 W O R D

OF

M O UT H C O U L D

BE THE

S O L UT I O N

Among marketers, there is much frustration and little agreement about what to do next in light of the abovementioned shifts and changes. In this situation, Marsden refers back to the oldest media available to marketers: WOM connections between people. As for its relevancy now, WOM has become more important in influencing people’s buying behaviour than ever before (Marsden 2007, p.xx). ONLINE SURVEY The online survey showed that 79% of marketing decision makers can imagine integrating WOM into their marketing activities. 54%, slightly more than a half, believe that WOM is not a fad, but going to become a lasting marketing discipline.

Friends, family and acquaintances are important and influential sources of opinion and information about products and services for their purchase decisions. These contacts are the most effective drivers for changes in opinion and decision making
12

Ogilvy 2008, p.4

9

(Thorson/Rodgers 2006), more important than advertising or personal selling, and more powerful than the effects of all marketing-generated sources of information combined (Schindler/Bickart 2005, p.37). A study by Rubicon Consulting on different purchase drivers showed that online reviews and comments rank second after traditional WOM. This means that online communities exert a huge impact on most web users and make eWOM more important than printed reviews or advice from salespeople (Rubicon 2008, pp.2, 11):
F IGURE 5: I NFLUENCE OF V ARIOUS S OURCES OF I NFORMATION ON P URCHASING 13

This is congruent with the results of a survey by the Nielsen Company that examined consumer trust in different sources of information. WOM, eWOM and newspapers are again amongst the first three:
F IGURE 6: C ONSUMER T RUST IN P URCHASE D ECISION D RIVERS 14 Consumer recommendations Newspapers Online consumer opinions Brand websites Magazines TV Radio 0 10 20 30 40 50 56 56 54 60 70 80 90 63 61 60 78

13 14

from Rubicon 2008, p.11; full column = 100%; dark green line separates the first two highest ratings from the rest from Nielsen 2007, p.1

10

WOM I M P AC T

ON

M A RK E TI N G

Many marketing variables for advertising are positively related to word of mouth (Nyilasi 2007, pp.169-170), e.g. • brand awareness • positive attitude changes towards brands • initial and long-term product judgements • brand evaluations • product and service quality expectations • purchase intentions WOM affects especially the two most important marketing objectives awareness and preferences. It might raise the consumers’ awareness for a product or service they were not aware before, for example. It might also persuade them by increasing the expected utility they have assigned to a certain product (Godes/Mayzlin 2008, p.4). The impact of WOM on marketing is even more interesting if we consider the ad clutter, the changing consumer behaviour, e.g. in terms of temporal attention, and the shift in trust from institutions to friends and acquaintances: In theory, marketing is driving the customer from the left end of the so-called marketing funnel through the funnel’s different stages to the right end. In this model, traditional advertising is the most important tool to convert prospects into buyers:
F IGURE 7: T HE T RADITIONAL M ARKETING F UNNEL 15

But with thousands of products trying to get consumers’ attention, advertising is not longer as effective as it used to be. Further down in the funnel, regarding consideration and preferences, advertising hardly works at all, because WOM has become the decisive factor with the strongest influence on purchase decisions. As a
15

Li/Bernoff 2008, p.101

11

consequence, marketers do no longer determine the way consumers shop, nor do they lead the conversation (Li/Bernoff 2008, pp.102, 101). WOM does. WOM P AY S O F F
FOR A

C O M P AN Y

Andy Sernovitz (2006, p.58) lists some advantages of WOM due to its believability: • reduced customer acquisition costs • advertising for free • increased return from traditional advertising • more productive salespeople The effectiveness of positive WOM is backed by Bain analyst Frederick Reichheld. Reichheld developed the Net-Promoter Score (NPS), a WOM metric that can predict profitable company growth. The willingness to recommend to a friend or colleague is the strongest sign of customer loyalty and correlates directly with differences in growth rates among competitors (Reichheld 2003, p.48). The following example provides the comparison between Enterprise car rental with its competitors:
F IGURE 8: 3-Y EAR G ROWTH S HOWS THAT WOM P AYS O FF FOR E NTERPRISE

Reichheld’s NPS is based on the question “How likely is it that you would recommend [company X ] to a friend or colleague?” Respondents can rate their likelihood on a scale from zero to ten. Ten means extremely likely to recommend, five neutral, and zero not likely at all. A survey showed that there are three groups of customers, promoters with the highest rates of repurchase and referral (ratings of nine or

12

ten), the passively satisfied (ratings of seven or eight) and detractors who scored from zero to six (Reichheld 2003, p.50-51):
F IGURE 9: T HE B AIN N ET -P ROMOTER S CORE 16

The NPS is the percentage of promoters minus the percentage of detractors. In 2003, U.S. companies had an average NPS of 16 percent, while high-growth companies had a NPS of up to 80 percent. In the case of Enterprise car rental, the survey showed that customers with a rating of ten were three times more likely to come back than those who gave a rating of “only” nine (Reichheld 2003, pp.53-54). T H E V AL UE
OF A

C US T O M E R

IS

M O RE

TH AN H I S

L I F E TI M E V AL UE

Traditional customer lifetime value (CLV) calculation considers direct purchases only. This implies that a brand’s most loyal buyers are also the most valuable asset. But in fact, today’s marketing has also to consider WOM referrals to determine the correct value (Godes & Mayzlin 2008, p.6; Zunke 2008, pp.23-24). This approach comes from Kumar et al. and is based on the so-called Customer Referral Value (CRV) that was originally intended to provide marketers with a selection metric for allocating marketing resources. In contrast to the CLV, the CRV includes also the value of the referred customers’ purchases. Kumar et al.’s survey showed that it is not necessarily the highly loyal customers that generate a high CRV, but quite contrary less loyal customers (Godes/Mayzlin 2008, pp.2-3):
T ABLE 3: T HE CRV – AN F ORGOTTEN A SSET 17
Decile of Customers CLV in $ CRV in $ Total (Rank) Loyalty 1st 1,933 40 1,973 (1) high loyalty 2nd 1,067 52 1,119 3rd 633 90 723 4th 360 750 910 5th 313 930 1,243 (3) 6th 230 1,020 1,250 (2) 7th 190 870 1,060 8th 160 96 256 9th 137 65 202 10th 120 46 166 low loyalty

16 17

Marsden/Samson 2006, p.46 average for every decile after one year of the campaign, values from Kumar et al. 2007, p.143

13

Kumar et al. (2007, p.146) admit that the CRV is not a relevant metric for every business and put restrictions on many B2B markets. It is also difficult to determine the CRV if there is only little attachment to a product, e.g. for many fast-moving consumer goods (where it is difficult to track customers’ behaviour).

1.2 O BJECTIVES
On the one hand, there is currently a major shift in marketing. While the traditional (mass) marketing model is losing effectiveness and efficiency, the consumer is empowered by the almost infinite prospects of digital technology. This power shift with its easy-to-use applications makes opinion-sharing easier than ever before. On the other hand, there is proof for the effectiveness of WOM. It drives business growth, and companies that stimulate high levels of positive (e)WOM in their markets grow faster. Additionally, consumers trust the sources of eWOM more than advertising. At the same time, new technologies exert a significant impact in boosting the power, reach and speed of consumers’ WOM (Rosen 2007, p.ix). THE IDEA People do not trust traditional advertising – and turn for WOM as the most trustworthy source of advice. They are fed up with advertising clutter – and turn for WOM to collect input on their purchase decision. They do not welcome most marketing messages, because it interrupts them – and turn for WOM, because it is wanted, relevant, and fits their needs. What if marketers could combine the consumers’ infinite abilities on the internet with the power of WOM? What, if marketing could stimulate people to promote their product or service for free instead of relying on traditional advertising? AIM
O F TH E

M AS TE R -T H E S I S

It becomes obvious that the power of WOM connections, the infinite prospects of the further evolving internet, and people’s desire to connect provide promising options for marketing in a “post-advertising-era”. But it is questionable how marketing could use these developments. Because of this, the aim of this thesis is to deliver a practical approach to the opportunities and perils of consumer-generated online content and to develop two strategies for marketing:

14

1. how to stimulate and promote positive WOM on the internet; and 2. how to meet negative WOM and deal with it

1.3 M ETHODOLOGY
The master-thesis consists of three parts to answer the questions posed above. First, the thesis is going to explain (e)WOM basics to provide the reader with the necessary knowledge about the topic. For this, the work defines relevant terms and explains basic principles. This includes the description of eWOM specifics and (e)WOM examples for a better practical understanding. Second, to answer the questions posed above, the thesis refers to recent eWOM examples and compares them with scientific literature. The most important titles used for this part are the standard work on WOM marketing, Word of Mouth Marketing by Andy Sernovitz, former CEO of the WOMMA, Connected Marketing, a selection of articles on the topic edited by Kirby & Marsden, and groundswell, a book by Li & Bernoff on user generated content and “marketing”. Apart from this, articles from the Harvard Business Review, Advances in Consumer Research, or the Journal of Interactive Marketing, for example, are referred to. The aim of this part of the thesis is to develop a guideline for the daily marketing work. To evaluate the theoretical part and compare it with daily marketing experience, the results of an online survey on eWOM with 24 respondents will be applied on the findings where it is appropriate (see Appendix 1 for details about the procedure, the questions, the timing and the participants).

15

2. W ORD OF M OUTH AND E WOM
2.1 W ORD
OF

M OUTH

One of the first and most impressive examples of WOM has been recorded by William H. Whyte in 1954. Whyte analysed the spreading of air conditioners in a suburban area. In his study he describes a powerful communication network within a homogeneous Philadelphia neighbourhood. When Whyte analyzed aerial shots of Philadelphia, he discovered clusters of air conditioners. The reason for this, he found later, were small WOM networks among the neighbours (referenced in Grossbart et al. 1978; Rosen 2002, pp.123-124).
F IGURE 10: WOM C LUSTERS IN A S UBURBAN A REA 18

A recent example for WOM from Germany is Bionade, an organic soft-drink. Its story started in 1995. In the first years, sales were poor (Dahm 2003, p.20). There was no sales force, no advertising or money to list the product at supermarkets (Vossen 2007, p.41). This changed in 1997 when a retailer introduced the drink to a trendy audience. Without additional advertising, the drink was promoted barely with WOM (Vossen 2007, p.41; Riering 2006). In 2003, the company had its first budget of € 100,000 for guerrilla marketing activities (Hirn 2003), and in 2006, they engaged in an advertising agency. Sales grew from 1m bottles in 1999 to an estimated 300m in 2010:

18

taken from Grossbart et al. 1978, schematic illustration for illustrative purposes only

16

F IGURE 11: B IONADE – A S UCCESS -S TORY B UILT ON WOM 19

But what is WOM exactly? Paul Marsden simply defines WOM as product talk between people (Marsden 2007, p.xvi). Emanuel Rosen and Sabrina Helm deliver some more scientific definitions. According to Rosen, word of mouth is any oral communication about products with friends, family, and colleagues in the context of consumer behaviour (Rosen 2002, p.266). Helm, referring to Tax et al., defines WOM as informal communication, both positive and negative, between individuals about characteristics of a supplier and/or his products, and services (Helm 2000, p.158). This is congruent with Nyilasy who quotes Johan Arndt’s definition from 1969 that is summarizing several other approaches. According to these, WOM is oral, person-to-person communication between a receiver and a communicator whom the receiver perceives as non-commercial, concerning a brand, a product or a service (Nyilasy 2007, p.164). Summarized, the latter definitions consist of three essential parts: 1. interpersonal communication with a 2. commercial content as part of a 3. non-commercial conversation These elements can also be found in the American Word of Mouth Marketing Association’s definition (WOMMA 2006, p.4): • the voice of the customer • a natural, genuine, honest process
19

(= interpersonal communication) (= non-commercial-conversation)

based on data from Riering (2006), Hirn (2003), Vossen (2007, p.41); missing data indicate interpolated values

17

• people seeking advice from each other

(= non-commercial-conversation)

• consumers talking about products, services, (= commercial content) • or brands that they have experienced These requirements will be examined in detail in the following paragraphs to give a better understanding of their importance for distinguishing WOM from other types of marketing communication. First, word of mouth requires some kind of interpersonal communication to distinguish it from impersonal mass communication such as advertising. Interpersonal communication sets WOM apart from other impersonal channels such as 3rd party sources of consumer information (Nyilasy 2007, p.164), e.g. Stiftung Warentest. Second, according to Nyilasy, the code of communication is language. Other less tangible kinds of non-verbal communication do not qualify for the label word of mouth. They can accompany WOM, but are not essential to it (Nyilasy 2007, p.164). WOM also requires a message about commercial entities, e.g. a product, brand or service (Rosen 2002, p.266; Helm 2000, p.15). WOM can also refer to product categories in general or advertising. It’s just a technical term appropriate for marketing, consumer behaviour and mass media. Because of this, the commercial content is a necessary restriction to distinguish WOM from other non-commercial, interpersonal communication as hearsay or rumours (Nyilasy 2007, p.164). Within the communication process, the communicator must not be motivated commercially, even though the content of WOM is commercial. The communicator must talk voluntarily and it is sufficient that the communicator is perceived to be unbiased and not commercially motivated (Nyilasy 2007, pp.164-165).

2.2 E LECTRONIC W ORD

OF

M OUTH ( E WOM)

Digital convergence and the development of the internet have led to new forms of WOM communication (Granitz/Ward 1996, p.161; Bickart/Schindler 2005, p.35). This new phenomenon is called online WOM, internet WOM, word of mouse, word of modem or, abbreviated for electronic WOM, eWOM (Helm 2000, p.159; Sansoni 1999, p.118). For the purpose of the thesis, eWOM will be used.

18

The advent of web 2.0 technologies has allowed traditional WOM reach inconceivable dimensions and has made it an even more powerful force (Zunke 2008, p.22) due to the distinct characteristics of online communication, e.g. its availability to other consumers for an indefinite period of time. The Internet has extended the consumers’ options for gathering unbiased product information from other consumers and has and continues to provide the opportunity to offer consumptionrelated advice by engaging in eWOM (Hennig-Thurau et al. 2004, p.39).

2.2.1 D E FI N I T I O N For Sabrina Helm, eWOM stands for a customer’s boundless dialogue with a potentially unlimited number of other internet users (Helm 2000, p.159). Bernd Stauss conceptualizes eWOM as internet customer communication that occurs when customers report or interact about consumption-relevant circumstances on the internet (Stauss 2000, p.243). Hennig-Thurau et al. describe it as any positive or negative statement made by potential, actual, or former customers about a product or company, which is made available to a multitude of people and institutions via the internet (Hennig-Thurau et al. 2004, p.39). These definitions are not as precise as Arndt’s refined definition for offline WOM, but are all about product-talk between people. The difference to offline WOM is the use of the internet as communication platform instead of oral communication: • oral communication = traditional, offline WOM

• communication via the internet = eWOM eWOM can take place everywhere on the web where people communicate: According to Hennig-Thurau et al. (2004, pp.39-40), online opinion platforms are the most widely used of the existing eWOM formats. Other places are review sites, shops with a rating function (e.g. Amazon.com), discussion forums, emails, chat rooms or also boycott websites, news groups and consumer websites (Schindler/Bickart 2005, pp.37-38; Hennig-Thurau et al. 2004, p.39). The latest places where eWOM can occur are blogs, user-generated content sites as YouTube or Flickr, or social networking and community sites (Li/Bernoff 2008, p.21).

19

2.2.2 T R AN SF E R A BI LI T Y

OF

WOM I N SI G HT S

AN D E WOM

S P E CI FI C S

Traditional WOM and eWOM are conceptually very close, but not the same. Therefore, it is questionable whether WOM insights can be transferred on eWOM without limitations. Hennig-Thurau & Walsh (2003, p.61) approve the transferability for the special case that negative articulations influence consumer behaviour more strongly than positive articulations. Apart from that, Hennig-Thurau et al. also support the transferability of consumer motives for traditional WOM on eWOM (Hennig-Thurau et al. 2004, p.40). For Pollach, eWOM is traditional WOM conversation that moved to the internet with the advent of computer-mediated communication (Pollach 2006, p.1). For her, this suggests the conclusion of a full transferability. Other voices approve the transferability, too, and subsume online articulations under the general concept of WOM communication.
E WOM

S PE CI F I CS

Despite the conceptual similarity, eWOM shows some specifics compared to offline WOM which result from the nature of the internet as a communication platform. Major differences are • broad accessibility • temporal consistency and referability • anonymity • the strength of ties between communicator and receiver • the proliferation Compared to WOM, eWOM shows an extremely high accessibility. As mentioned above, the internet allows a boundless dialogue with a potentially unlimited number of other internet users (Stauss 1997, p.28). The power shift caused by web 2.0 technologies with its easy-to-use applications such as blogs, but also e-mail and the internet itself, make the sharing of eWOM information and opinions easier than ever before (Allsop et al. 2007, p.398). From a communicator perspective, everyone can participate. Consumers can easily publish their opinions and provide their feelings, thoughts, and viewpoints on products or services to a large public (Schindler/Bickart 2005, p.35). And, from a receiver perspective, more and more information can be found on the web. A good example for this is consumer opinion

20

sites such as German Ciao.de or retail sites as Amazon.com with their customer ratings. In contrast to WOM, eWOM is accessible to an unlimited number of people for a long time. This phenomenon is called temporal consistency and makes eWOM highly referable. Product failures, for example, become part of the public record and stay accessible for an indefinite period of time. This allows eWOM to influence an unlimited number of receivers beyond the original target of the comment (Granitz/Ward 1996, p.161; Schindler/Bickart 2005, p.39) and multiplies the effects of eWOM (Helm 2000, p.159). The indestructibility of eWOM should be kept in mind, especially in the cases of negative or (intentional) false eWOM. The referability has also an effect on weak-tie communication because it is increasing the possibility of a weak-tie event (Schindler/Bickart 2005, p.39), as we will see below. The eWOM communicator’s identity often remains unknown or hides behind a nickname in many eWOM events. This anonymity has three dimensions. First, from a socio-cognitive point of view, everyone can join in on the internet dialogue. Even a complete stranger can break into the discussion of the community. Anonymity is in contrast to face-to-face groups, not considered to be impolite, but normal as most participants are unknown to each other (Granitz/Ward 1996, p.161). The second dimension of anonymity is authenticity. Anonymity allows the communicator to present his or her opinion unfiltered and regardless of offending sensibilities. The result is that ratings and discussions can be more positive or negative than in a real face-to-face situation. Additionally, the participant’s identity is not constrained by circumstances of his background, appearance, status, neighbourhood or workplace (Schindler/Bickart 2005, p.37). The last aspect of anonymity is protection: Insiders can spread their experiences and knowledge regardless of civil liabilities or industrial law consequences. Another big difference between traditional WOM and eWOM is the strength of ties between communicator and receiver. The Theory of Strong Ties says that the persuasiveness of WOM is a result of the primary (strong tie) group the receiver is in: Family and friends are perceived as more trustworthy and credible than other impersonal sources of information (Nyilasi 2007, p.170). If an offline WOM event occurs, it tends to be between close friends and relatives rather than acquaintances.

21

The stronger a relationship between the members of a certain social network, the more likely that these strong-tie relationships will be used for WOM communication. Weak ties to less-known acquaintances are particularly important only in serving as bridges across groups of strong ties (Granovetter 1973, p.1364; Nyilasi 2007, p.169; Schindler/Bickart 2005, p.37). For eWOM, this is different. Granitz & Ward (1996, p.161) note that the social ties that exist are hardly worthy of the name or are at least of a different character than in face-to-face communities. The exchange of opinions and information happens between people who had or have no prior relationship. As a consequence, the Theory of Strong Ties seemingly cannot explain the persuasiveness of eWOM that shows mainly weak ties. Literature believes that in this context weak tie online sources are still perceived to be more trustworthy and credible than other weak tie (offline) sources, e.g. advertising or shop assistants. It is also possible that they convince due to the diversity of information, the broader input into decision making or the access to professional expertise (Nielsen 2007, p.4). For eWOM, weak ties provide several advantages to consumers (Schindler/Bickart 2005, p.37): • online information is more diverse than that obtained via strong ties and allows more potential input into a decision, even extraordinary knowledge (Hennig-Thurau/Walsh 2003, p.51) • online information enables consumers to obtain higher quality input into a decision because it provides access to people with greater expertise But weak-tie sources also bear a major disadvantage: Since the communicators are unknown to the reader, it might be difficult to assess the eWOM quality or a person’s expertise and background on a specific topic (Schindler/Bickart 2005, p.37). There are also differences between the proliferation of WOM and eWOM. According to Katz & Lazarfeld’s 1955 Theory of the Two-Step Flow of Communication, academic literature assumed for a long time that marketing messages were not directly effective, but channelled through opinion leaders or influentials, which account for about 10 percent of the overall population (Nyilasi 2007, p.172):

22

F IGURE 12: WOM F ORMATION (T HEORY OF THE T WO -S TEP F LOW OF C OMMUNICATION ) 20

Marketing has embraced the Two-Step Flow of Communication because the theory suggested that they could find and influence a few individuals to let them do the work for them (Watts 2007, p.4). The Two-Step Flow of Communication sounds plausible and intuitively compelling because it seems so clear and easy to explain – and saleable, to get the right people talking (Balter 2008, p.91; Watts 2007, p.4). But the theory was largely untested and has never been empirically studied (Watts/Dodds 2007, p.443; Watts 2007, p.4). There are no demographic nor psychographic or sociologic variables correlated with opinion leadership (Nyilasi 2007, p.172). Moreover, further research showed that there is no two-, but a multistep flow of communication. In reality, 90 percent of recommendation chains reach over more than one step, and at least four individuals are involved in 38 percent of the chains (Watts/Dodds 2007, p.443). The idea of the influentials became the Influential Hypothesis (Watts/Dodds 2007, p.442), because the widespread dissemination of WOM is not caused by a few influentials but by a critical mass of easily influenced people, each of whom adopts a trend after he or she has been exposed to another person (Watts 2007, p.4). For eWOM, this is different (compare 3.2 for a detailed explanation). The assumption that there is a group of e-fluentials (Burson-Marsteller 2001) still seems to be valid for eWOM and has recently been proved by Rubicon Consulting (Rubicon 2008, p.7).

2.3 I S E WOM-M ARKET ING P OSSIBLE

AT

A LL ?

Per definition, WOM is unbiased, non-commercial C2C communication. Because of this, Nyilasi questions “word of mouth advertising”. He calls it a misnomer, because
20

based on Richins/Root-Shaffer 1988, p.32

23

the term implies that WOM could be intentional and part of a marketing plan, although WOM is a naturally occurring phenomenon of consumer behaviour. Because of this, Nyilasi claims that WOM may not be generated by the efforts of marketers (Nyilasy 2007, p.165). Li & Bernoff (2008, p.131) agree that WOM cannot be faked but say that it can be encouraged. Surveys have confirmed that marketing can influence people’s eWOM activities. Additionally, the surveys showed that eWOM can also be orchestrated to drive sales. The surveys have been done only for WOM, but due to their similarity, the results should be transferable to eWOM as well. Godes & Mayzlin (2008, abstract, pp.2, 11) examined the effectiveness of firmcreated WOM and the possibility of a proactive management of inter-personal communication. The results of their empirical field test were as follows: • companies can create exogenous WOM among non-customers and • exogenous WOM has a significant and measurable effect on sales This means that WOM can be under marketing control and, as a consequence, orchestrated by marketing to drive sales. The effectiveness of WOM has also been proved by WOM marketing agency BzzAgent. The agency ran a WOM campaign for their client Wharton School Publishing in ten comparable cities. Of these, only five were covered with WOM support. After the campaign had ended, the comparison between the WOM cities’ and the control cities’ figures showed a difference of 66% in sales (Balter 2008, p.165):
F IGURE 13: A 66% I NCREASE IN S ALES D UE TO WOM S UPPORT 21 Cities without WOM support Cities with WOM support 0 20 40 60 80 100 120 140 160 180

It has also been shown that WOM communication continues while there are no more marketing actions. The long-term effectiveness of WOM has been recorded by BzzAgent, too, for a Lee One True Fit jeans campaign. Feedback received half a
21

based on Balter 2008, p.165

24

year after the WOM campaign had ended, showed that from 1,000 participants 50% had bought at least one additional pair of jeans. Of these, again, • 16% had bought three additional pairs • 39% had bought two additional pairs • 31% had bought one additional pair Altogether, 83% were still talking about the jeans. This shows that WOM has not only the long-term capability to increase sales, but also a long-term capability to change perceptions (Balter 2008, pp.165-166). In light of these findings, it could be stated that it is possible to run an amplified WOM campaign. There are two kinds of WOM: organic WOM, as the WOMMA calls it (or endogenous WOM, as termed by Godes & Mayzlin) and amplified WOM (or exogenous WOM). Organic WOM refers to daily communication between people. It springs naturally from the positive qualities of a company. The opposite concept is called amplified WOM – WOM that is started by an intentional marketing campaign to get people talking (Sernovitz 2006, pp.6-7). The following table reveals the major differences between the two kinds of WOM. For comparison, traditional advertising is integrated into the third column:
T ABLE 4: E NDOGENOUS AND E XOGENOUS WOM 22
Type of WOM Organic or endogenous WOM Naturally occurring communication. It occurs naturally when people become advocates because they are happy with a product and have a natural desire to share their support and enthusiasm. C C Amplified or exogenous WOM Communication as a result of a firm’s actions. It occurs when marketers launch campaigns designed to encourage or accelerate WOM in existing or new communities. B C C ... B Advertising

Description

n/a

Information flow Initiative Implementation

C

Consumer Consumer Enhance organic WOM activity by: • Focusing on customer satisfaction • Improving product quality and usability • Responding to customer concerns and criticism • Opening a dialog and listening to people • Earning customer loyalty

Firm Consumer Amplify WOM activity through: • Creating communities • Developing tools that enable people to share their opinions • Motivating advocates and evangelists to actively promote a product • Giving advocates information that they can share • Using advertising designed to create buzz or start a conversation • Identifying and reaching out to influential individuals and communities • Researching and tracking online conversations

Firm Firm

Suggested actions for marketing

n/a

22

based on Godes & Mayzlin (2008, pp.2, 3), WOMMA (2006, p.5)

25

D E F I N I TI O N

O F E WOM-M A RK E TI N G

Paul Marsden from the London School of Economics says that WOM marketing is the promotion of a company or its products and services through an initiative conceived and designed to get people talking positively about that company, product or service (Marsden 2007, p.xviii). For Sernovitz (2006, pp.4-5), WOM marketing is B2C2C marketing. It is learning to work with WOM towards a marketing objective by joining a genuine conversation. Sernovitz defines WOM marketing as giving people a reason to talk about your stuff and making it easier for that conversation to take place. The WOMMA use the same definition (2006, p.2). They understand WOM marketing as a comprehensive term for a variety of marketing types that encompasses WOM, as the following table shows. Some of them can also be realized online to stimulate eWOM:
T ABLE 5: T YPES OF WOM M ARKETING (E XCERPT ) 23
Buzz marketing Viral marketing Using high-profile entertainment or news to get people to talk about your brand. Creating entertaining or informative messages that are designed to be passed along in an exponential fashion, often electronically or by e-mail. Forming or supporting niche communities that are likely to share interests about the brand (such as user groups, fan clubs, and discussion forums); providing tools, content, and information to support those communities. Cultivates evangelists, advocates, or volunteers who are encouraged to take a leadership role in actively spreading the word on your behalf. Identifies key communities and opinion leaders who are likely to talk about products and have the ability to influence others. Interesting or fun advertising, e-mails, catch phrases, entertainment, or promotions designed to start word of mouth activity. Creates blogs and participates in the blogosphere, in the spirit of an open, transparent communication to share information that the blog community may talk about. Creates tools that enable satisfied customers to refer their friends.

Community marketing

Evangelist marketing Influencer marketing Conversation creation Brand blogging Referral programs

All these definitions require a reason for people to talk and marketing efforts to facilitate the communication. To give a definition for eWOM marketing, we need to take a step back to the definition of eWOM itself. As discussed (compare 2.2.1), eWOM is WOM communication via the internet. When we transfer this insight to eWOM marketing, the definition would read as follows: eWOM marketing is giving people a reason to talk about products and services on the internet and making it easier for that conversation to take place via the internet.

23

WOMMA 2006, p.3

26

3. M ARKETING IN A N EW E NVIRONMENT
The internet, the home of eWOM, evolves extremely fast. This requires some more insights on today’s marketing environment for the development of marketing strategies to tap eWOM. These concern marketing itself, social networks and online communities – and especially their users. The medium of eWOM marketing is real people. Because of this, it is necessary to identify the talkers which are the creators and disseminators of eWOM (Sernovitz 2006, pp.22, 65). In this context it is also important to have a closer look at people’s motivation to post or read eWOM to optimize the eWOM actions that will be described in chapter 4.

3.1 A N EW M ARKETING E NVIRONMENT
Traditional WOM marketing happened in the old environment of push marketing:
F IGURE 14: T HE T RADITIONAL M ARKETING E NVIRONMENT 24

In a very provocative manner, McKinsey consultant John Hagel described the old marketing techniques in the Three Is of Marketing (Maymann 2008, p.69): • Intercept: Target and expose customers to your message wherever you can find them • Inhibit: Make it as difficult as possible for the customer to compare your product or service with any other options • Isolate: Enter into a direct relationship with the customer and, wherever possible, remove all third parties from the relationship

24

Maymann 2008, pp.14, 40

27

With the advent of the internet, web 2.0 applications and social media, this has dramatically changed. Derived from the implications of attention scarcity at the beginning of the marketing funnel (compare 1.1.3), Hagel developed the Three As of Attention which are (Maymann 2008, p.69): • Assist: Brands have to assist their customers, not wasting their time with irrelevant content or not offering them an instant gratification • Attract: Brands should have their customers seek them out. This needs a good choice of media and distribution. Brands have to blend in and be relevant in order to attract users to their campaigns • Affiliate: To deliver more value, people have to be mobilized. They are likely to assist companies if these understand the importance of contextuality, trusted sources, and influencers The change from the three Is to the three As represents a move from attention scarcity to the engaged users, and from product- and brand-centered promises to a customer-centric promise (Maymann 2008, p.69):
F IGURE 15: T HE S OCIAL M ARKETING E NVIRONMENT 25

Marketing in general has not kept up with these radical changes. Consumers often expect more than what marketing is offering them. Because of this, brands have to switch from push (traditional content and commercial advertising) over pull (value adding content & interactivity) to participation (relevance and contextuality), Maymann says (2008, p.12). The WOMMA (2006, p.4) acknowledges this, too: “We work to create customer enthusiasm instead of pushing marketing messages”, they say. Talking is the new marketing and describes the change from outbound push

25

Maymann 2008, pp.14, 40

28

communication with the customer to the participation and stimulation of two-way conversations between consumers (Li/Bernoff 2008, p.69). It is about companies integrating everyday people into their processes, giving them more interaction with the product, recognizing them and listening to them better (Balter 2008, p.9). This fundamental change is necessary. Consumers have way too much money, information, access and alternatives to settle for being targets (Balter 2008, p.166). And, additionally, they do not trust traditional marketing messages any longer. To make a decision, consumers are increasingly turning to the web for information about products and services and consequently communicating about them online. While the demand for eWOM increases, the efficiency of traditional advertising declines. This also has consequences for eWOM marketing: eWOM marketing is no longer just WOM on the internet. With the insights from above, it is clear that eWOM marketing requires a brand new understanding regarding consumers and technology. “T H E G R O UN D S W E L L ” In the new marketing environment, the old premise of media and brand control is being replaced by increasingly flexible user scenarios. Forrester analysts Li & Bernoff call these scenarios the groundswell, a social trend in which people use technologies to get the things they need from each other, rather from traditional institutions like corporations. It is a consequence of the collision of people, technology, and economics (Li/Bernoff 2008, pp.9-10). Maymann, whose approach is similar, names four major forces for this trend that can be subsumed under Li & Bernoff: People’s desire to connect, stay in touch, create and help each other, is a universal and fundamental emotion. The democratization of information changed passive consumers to active users. This led to the rise of social media which cover people’s basic need to communicate and engage with others. People have always depended on and drawn strength from each other. They have always opposed institutional power (Maymann 2008, p.30; Li/Bernoff 2008, pp.49, 10). Most people are online today due to the widely availability of fast internet connections. Technology as a facilitator led to a fundamentally new kind of software that is far more interactive and people-aware. It guides users and adds transparency to

29

complex user scenarios. But, in any case, it must be noted that the software is just the enabler and that it is the technology of being connected in the hands of connected people that makes it so powerful (Li/Bernoff 2008, p.10, 11; Maymann 2008, p.30). The third driver is economics, or, as Maymann puts it, the attention economy. On the web, traffic indicates that consumers spend their time and attention online. Advertisers have recognized this and try to convert attention into advertising power. As a consequence, it could be said that traffic and time equal money. According to Forrester Research, online advertising had reached a turnover of $ 14.6 billion in the U.S. and $ 7.5 billion in Europe in 2007. This means that any venture that creates significant traffic can expect revenue. The key to succeeding under these circumstances is reaching users through media that people can consume when they want, where they want and how they want (Maymann 2008, p.30; Li/Bernoff 2008, p.11). C O N CL US I O N Connected people draw power from each other. In crowds, they are in charge. While an individual can be stopped or sued, the web connects them and allows people to draw strength from each other. Lawyers and companies are no longer the most powerful force on the internet. But people are: When they use web 2.0 tools to link up with other people, this could be threatening to companies. The groundswell has changed the balance of power and is increasingly accelerating. The groundswell as the force of millions of people in combination with the rapid evolution of new technologies make it extremely variable in form. That makes it tough for traditional businesses to deal with it and it is expected to come to every business very soon (Li/Bernoff 2008, pp.5-6, 9, 10, 13, 12).

3.2 T ARGETING C ONSUMERS

IN THE

N EW M ARKETING E NVIRONMENT

According to the Participation Inequality, most online conversations are driven by only a very small group of web users (Nielsen 2006; Rubicon 2008, p.7). To optimize the eWOM marketing efforts, it is important to target the right consumers on the internet to avoid waste coverage. Nielsen refers to the 90-9-1 Rule to describe the effects of the Participation Equality: 90 percent of all web users are so-called

30

lurkers who only read and observe, but don’t make contributions. The next group that accounts for 9 percent is contributing from time to time. Only 1 percent of all web users participates a lot and posts the majority of content (Nielsen 2006):
F IGURE 16: P ARTICIPATION I NEQUALITY A CCORDING TO THE 90-9-1 R ULE 26

Rubicon Consulting proved Jakob Nielsen’s assumption, but revealed different proportions of the eWOM participants, changing the 90-9-1 Rule to a 26-65-9 Rule:
F IGURE 17: H OW W EB U SERS P ARTICIPATE IN O NLINE C OMMUNITIES 27 90 80 70 60 50 40 30 20 10 0 Most frequent contributors Occassional contributors Silent lurkers Abstainers 9 0 20 9 0 17 Percent of content Percent of users 65 80

Rubicon Research (2008, p.8) found that • only 9 percent of web users [the most frequent contributors (=MFCs)] create 80 percent of the user-generated content on the web

26 27

illustration based on data from Nielsen 2006 from Rubicon 2008, p.8

31

• an additional 65 percent, the so-called occasional contributors, account for the remaining 20 percent of content The reason for the change in proportion could be a result of the data28 Nielsen refers to. These are quite out-dated originating from 1998, when the Internet was fairly new and not widespread. Another reason could be the evolving role of easyto-use online tools and of the rise of social networks such as Facebook or MySpace that are completely based on the concept of participation and contribution. In summary it can be said that only few people are actually contributing to online communities. Nonetheless, the majority of users are at least observing the web. They watch the way a company treats the MFCs, and they base their judging on this. This makes MFCs to important proxies for marketing messages to the company’s entire customer base, e.g. to the occasional contributors and the silent lurkers. Rubicon Consulting recommends companies to take care of the MFCs even if the web influence in a company’s industry is relatively low. The reason is that a lot of customers base their decision on reviews and comments they read online. The little number of MFCs is a chance for companies to identify and integrate them into their communication (Rubicon 2008, pp.14, 35). For working with influential communities, the WOMMA (2006, p.6) recommends four actions which should also apply to eWOM. They recommend to • find people who are most likely to respond to the marketing message • identify people who are able to influence target customers • inform these people about what you do and encourage them to spread WOM • support issues and causes that are important to these people Sernovitz says that just digging the customer database and assuming that the active customers or big spenders are a company’s talkers is fundamentally wrong (Sernovitz 2006, p.70). For a better targeting of the talkers, a demographic and a behavioural classification are required.

28

Nielsen refers to an 1998 article from Whittaker et al., The Dynamics of Mass Interaction

32

3.2.1 B E H AV I O UR AL C HA R A C T E R I ZAT I O N (S O CI AL T E CH N O G R AP HI C S P R O FI L E ) Forrester Research has examined the behavioural dimensions of the talkers and grouped them based on their activities on the web to one of six groups. The four relevant groups will be explained below. The groups of the so-called Social Technographics Profile can overlap as, most creators are also spectators, for example. According to Forrester, 18% of the U.S. and 10% of the European adult online population belong to the most active group of creators (Li/Bernoff 2008, p.41).
T ABLE 6: T HE S OCIAL T ECHNOGRAPHICS P ROFILE 29
Creators Critics Joiners Spectators ...maintain websites, publish blogs, or upload YouTube videos ...react on this online content through ratings or reviews, or comments ...participate on social networking sites as Facebook or MySpace ...just consume blog entries, reviews or social media others produce

3.2.2 D E MO G R AP HI C S

OF THE

M O S T F R EQ U E N T C O N T R I BUT O R S

Rubicon Consulting studied the demographic predisposition of talkers. Their most important finding is that these people are much younger than the average surfer:
F IGURE 18: MFC S C OMPARED TO O VERALL U SERS 30 25 all users 20 15 10 5 0 13-15 16-18 19-25 26-30 31-40 41-50 51-60 61-70 over 70 most frequent contributors

The Rubicon survey (2008, p.16) unveiled a few other notable characteristics: • they are young and more likely to be singles than other web users • 61 percent of them are male • 40 percent of them are students (which is not surprising given the age) • MFCs post content (e.g. a comment or review) at least twice a day

29 30

according to Forrester Research, taken from Li/Bernoff 2008, pp.41-45 from Rubicon 2008, p.14

33

• MFCs are more likely than other web users to work in the communications, technology, arts, or entertainment industry All these insights help marketers to target eWOM talkers or to activate inactive occasional contributors respectively lurkers.

3.3 A CTIVATING C ONSUMERS

IN THE

N EW M ARKETING E NVIRONMENT

To recommend marketing actions to harness eWOM, it is also necessary to analyze people’s motivation to post and to read user-generated content.

3.3.1 M O T I V AT I O N

TO

P O ST E WOM (C O M MUN I C AT O R )

Understanding why people engage in eWOM might provide insights which could help encourage communicators to post positive eWOM. Sernovitz lists three major motivators (Sernovitz 2006, p.13):
T ABLE 7: R EASONS FOR E WOM C OMMUNICATION 31
The stuff It’s about YOU: The marketer and his products • They love you and your stuff • They hate you • You’ve given them something to talk • You’ve made it easy for them to talk Feeling good It’s about ME: The talker • They feel smart • They feel important • They want to help people • They want to express themselves Feeling connected It’s about US: The group of enthusiasts • They are part of the brand family • They are part of a team • They are insiders

A survey by Hennig-Thurau et al. (2004) provides a more academic approach. Their insights are based on several utilities: Focus-related utility is based on the assumption that adding value to a community through his or her contributions is an important goal of an individual. The four motives for focus-related utility are (Hennig-Thurau et al. 2004, p.42): • concern for other consumers • helping the company • social benefits • exerting collective power over a company

31

from Sernovitz 2006, p.13

34

Helping other people is a higher-level motivation and major driver of WOM engagement. The motivation for the communicator is to feel good about relaying the information because people like to believe that their intentions are well meaning and unselfish (Balter 2008, p.20; Sernovitz 2006, p.16). Consumption utility is a post-purchase advice-seeking motive. Reading reviews and comments written by others can motivate consumers to describe their own experiences with a product or to ask others for problem-solving strategies (HennigThurau et al. 2004, pp.42-43). There are two motives associated with approval utility. Economic rewards are an important driver of human behaviour because they are considered by the recipient as a sign of appreciation of his behaviour (Hennig-Thurau et al. 2004, p.43). Selfenhancement motivation is driven by people’s desire for positive recognition from others. According to Dichter (1966, p.157), the WOM communicator will not recommend something “for free”, as he expects some kind of psychological reward. This reward can be informal feedback from a reader (when he praises the writer’s contribution) or formal feedback like contribution rankings (Nyilasi 2007, pp.173174; Hennig-Thurau et al. 2004, p.43), e.g. as on Amazon.com:
F IGURE 19: A MAZON . COM – E VALUATION OF R ATINGS ON THEIR H ELPFULNESS 32

As a result, a contributor experiences satisfaction and approval utility, because he feels good to have special knowledge and competence on a certain field. People want to look smart and to feel important; and the more they are being asked, the more important they feel. This is a result of people’s constant battle to keep up their self-image. Therefore people share information to ensure that others see
32

from www.amazon.com/review/product/B000RZDBM2/ref=dp_top_cm_cr_acr_txt?_ encoding=UTF8&showViewpoints=1 (Accessed March 17th 2008)

35

them in the way they want to be seen. Blogs and online communities took approval utility to a whole new level (Balter 2008, p.20; Sernovitz 2006, pp.15, 16). Homeostase utility (Balance Theory) is associated with the two motives expressing positive emotions and venting negative feelings. It is based on the assumption that people have a basic desire for balance in their lives. According to the Balance Theory, individuals strive to restore equilibrium after their originally balanced state has become unbalanced. In the context of eWOM, a positive or negative purchase experience can cause an imbalance, e.g. when a product or service makes someone feel good, bad, angry or even mystified. This can result in an eWOM comment, e.g. a written online review that reassures the communicator that he has made the right decision (Hennig-Thurau et al. 2004, p.44; Balter 2008, p.24; Sernovitz 2006, p.13). Merely talking to people can remove negative feelings associated with cognitive dissonance. eWOM supports people to validate their own opinion which they have already formed. Mentioning a certain product or service allows them to check whether they have included all considerations into their decision or if they have missed something and to let someone confirm that they are right

(Schindler/Bickart 2005, pp.39-40; Nyilasi 2007, pp.173-174; Balter 2008, p.22). The last motive is the people’s desire to be part of a group, one of mankind’s most powerful human emotions. WOM talk about products and services is a handy shortcut in relationship building and an easy way to establish common ground between people. People want to be connected, and writing about a product is one way to achieve that connection. People are emotionally rewarded when they share their joy with a group that has a common interest, and this enthusiasm translates very easily into WOM (Sernovitz 2006, p.17; Balter 2008, p.21). E M PI RI C AL A S S E S S M E N T
O F TH E S E

M O TI V E S

The empirical assessment of these eWOM motives’ (i.e. factors’) influence on the platform visiting frequency and the tendency to write comments brought up the following results (Hennig-Thurau et al. 2004, p.48):

36

T ABLE 8: E WOM M OTIVE I NFLUENCE (F ACTOR -S CORE R EGRESSION R ESULTS ) 33
Rank 1 2 3 4 Economic incentives 6 7 8 Helping the company Venting negative feelings Platform assistance .10 -.01 -.10 -.18 5 6 7 8 Advice seeking Venting negative feelings Helping the company Platform assistance .06 .01 -.03 -.04 Platform visit frequency Social benefits Extraversion/pos. self-enhancement Concern for other consumers Advice seeking .37 .15 .13 .10 Rank 1 2 3 4 Social benefits Economic incentives Concern for other consumers Extraversion/pos. self-enhancement Comment writing .34 .18 .16 .12

The different WOM motives are usually intertwined and multiple motives are at play (Balter 2008, p.24), and marketers can easily appeal to them.

3.3.2 M O T I V AT I O N

TO

R EA D E WOM (R EC EI V E R )

The identification of consumers’ interests and motives is important for the stimulation of relevant eWOM content. Schindler & Bickart as also Hennig-Thurau & Walsh’s examined the drivers for reading eWOM which are partly congruent. The latter based their study on the following motives:
T ABLE 9: H ENNIG -T HURAU & W ALSH – M OTIVES FOR E WOM-U SAGE 34
Source of origin 1. Rooted in traditional consumer research Motive dimension Obtaining buying-relevant information • • • 2. 3. Social orientation through information Learning how a product is being consumed Community membership • • • Specific characteristics of online articulations 4. • • Motive Risk reduction Reduction of search time Determination of the social position Dissonance reduction Learning how a product is being consumed Belonging to a virtual community Learning what products are new Remuneration

5. Remuneration

Risk reduction and reduction of search time (= obtaining buying relevant information) are the most basic motives for consumers to refer to eWOM (Schindler/Bickart 2005, pp.57, 39). Perceived risk is supposed to be the main driver in this context and results directly from Risk Theory (Arndt 1967, p.294;
33

Hennig-Thurau et al. 2004, p.48; values = standardised regression coefficient; it does not cover being part of a group because this motive has not been studied by Hennig-Thurau et al. derived from Hennig-Thurau/Walsh 2003, pp.53-54

34

37

Hennig-Thurau/Walsh 2003, p.53). It is a consumer’s subjective assessment of a potentially negative outcome of a purchase. Services, in this context, show a higher perceived risk than goods. The more risky a consumer perceives a purchase, the more likely it is that he is referring to eWOM. (Nyilasi 2007, p.169). An interesting insight in this context is that consumers often rely on eWOM when there is no input from strong-tie sources available, e.g. for products or services that are new or only infrequently purchased (Schindler/Bickart 2005, pp.44-45). Reduction of search time is motivated by the consumer’s self-perceived lack of time and his expectation of decreasing decision time and effort. Additionally, the information might contribute to a more satisfying purchase decision outcome (HennigThurau/Walsh 2003, p.53). Practical explanations for these motives are given by Wiedmann et al. (as cited in Hennig-Thurau/Walsh 2003, p.53): “As markets become saturated with information and products, it is increasingly difficult for consumers to know and process all alternatives. In such circumstances, competent advisors can help consumers to become informed without their engaging in cognitively demanding and time-consuming search activities.” Social orientation through information is a combination of the motives determination of the social position and dissonance reduction. The motive claims that consumers might read product-related eWOM in order to evaluate not only the product, but also the associated social prestige to determine their social position (HennigThurau/Walsh 2003, p.54). The second motive results from the Theory of Cognitive Dissonance and the consumer’s desire to decrease dissonant cognitions by increasing cognitive consistency (Schindler/Bickart 2005, pp.39-40). Cognitive dissonance arises when consumers experience post-purchase concerns due to an uncertainty surrounding their purchase (Jobber/Fahy 2006, p.63). This incongruence may be caused by conflicting information, e.g. a friend’s recommendation in comparison with an advertisement. Unbiased eWOM as provided by virtual opinion platforms may reduce cognitive incongruence (Hennig-Thurau/Walsh 2003, p.54). Learning how a product is being consumed is another motive for the eWOM usage (Hennig-Thurau/Walsh 2003, p.53). This has been empirically supported by Granitz & Ward. As their study shows, 20 percent of their sample group turned to eWOM to find out how to use a certain product (Granitz/Ward 1996, p.164)

38

Community membership includes motives that are not related to a purchase, but part of the community experience itself (Hennig-Thurau/Walsh 2003, p.57), as belonging to a virtual community, and learning what products are new in the marketplace. The first comes from social-psychological online community research: People try to find a group of consumers with similar product concerns and interests, e.g. to help each other to solve product-related problems. The second motives explain why consumers need to learn what products are new in the marketplace (Schindler/Bickart 2005, p.46; Hennig-Thurau/Walsh 2003, pp.54, 53). Many opinion platforms reward their consumers, directly or indirectly, for reading online contributions. Because of this, remuneration is also likely to be a motive for reading online articulations (Hennig-Thurau/Walsh 2003, pp.54, 58). E V AL U A TI O N
O F TH E

M O TI V E S ’ I M PO R T AN C E

The evaluation of all these motives unveiled that risk reduction and the reduction of search time are the most important motives to read user-generated content or eWOM (Hennig-Thurau/Walsh 2003, p.55):
T ABLE 10: M OTIVES FOR R EADING O NLINE A RTICULATIONS 35
Rank 1 2 3 4 5 6 7 8 Risk reduction Reduction of search time Determination of social position To learn how a product is to be consumed Belonging to virtual community Dissonance reduction To learn what products are new in the marketplace Remuneration Motive Factor of importance (2.027) (2.155) (2.529) (2,579) (2.854) (2.912) (2.954) (3.253)

3.4 T HE T EC HNOLOGIES

OF THE

N EW M ARKETING E NVIRONMENT

It is questionable how marketing could prepare for the challenges of the new, online world. The key activities in which consumers participate are blogs, usergenerated content, social networks, forums, ratings and reviews. It is not sufficient to understand their technologies, because they are rapidly changing. Li & Bernoff

35

Hennig-Thurau/Walsh 2003, p.57; scale ranges 1 = fully agree, 5 = fully disagree

39

point out that it is much more important to concentrate on the relationships within these groundswell activities (Li/Bernoff 2008, p.18). BLOGS
AN D

U S E R -G E N E R A TE D C O N TE N T

Tools and software enable people to create and edit text, audio, videos and other content on their PC and publish it on blogs or user-generated content sites. They are cheap and easy to use. The groundswell allows people to express themselves and show off their work that other people can easily retrieve and consume. The interlinking between these sites creates relationships between both the contributions and their authors and forms the blogosphere (Li/Bernoff 2008, p.19). S O CI AL N E TW O R K S & C O M M UN I TI E S Social networks enable their members to maintain personal sites with their profiles. They facilitate relationships with technology and support the users to connect and interact with each other (the so-called friending). There are a variety of social networks for nearly every group represented on the web. The most established social networks are MySpace and Facebook. Sites such as LinkedIn and German Xing focus on professionals, while German SchülerVZ and StudiVZ address students, for example (Li/Bernoff 2008, p.21). F O RU M S , R A TI N G S , R E V I E W S Another appearance in the new marketing environment includes forums as also rating and review sites. Users of these sites can post comments or questions or can respond to these comments or questions (Li/Bernoff 2008, p.26). There are forums for nearly any topic on the web. Popular examples for review and rating sites are TripAdvisor.com for travel or Epinions.com for nearly everything. On these sites, people share their experiences with brands, products and services. Apart from the stand-alone sites, there are also built-in review and rating functions on shopping sites such as amazon.com, for example.

40

4. S TRATEGIES TO A MPLIFY E WOM
As discussed above (compare 2.3), eWOM marketing is giving people a reason to talk about products and services on the internet and making it easier for that conversation to take place via the internet. The ultimate goal to achieve when working with social media, Maymann says (2008, p.60), are peer-to-peer recommendations. But to get people to recommend a brand, they must like and respect it (Maymann 2008, p.60). Satisfied customers share their enthusiasm and support the brand. But when a product fails, they will hold the brand accountable and broadcast its failing. Because of this, only honest marketers with proper products should engage in eWOM marketing. If the promises of the marketing message are not backed by reality, eWOM will backfire. Once marketing gives people a voice, as it is going to be described below, people will tell the truth, both good and bad. WOM marketing is recognizing that a happy customer is the greatest endorsement (WOMMA 2006, p.4). Sernovitz and the WOMMA describe four basic principles:
T ABLE 11: T HE F OUR B ASIC A IMS OF WOM M ARKETING 36
Be interesting Brands should be interesting because nobody talks about boring products. People need a reason to talk. If the product is boring, marketing has to do something special. Make people happy Only happy customers are good advertisers. This requires amazing products, excellent service or a remarkable experience. Apart from that, it means uncomplicated problem solving. Make it easy People are lazy, so marketing has to help eWOM along. Spreading eWOM requires a simple, repeatable message, and some help for people to share it, e.g. a send-a-friend button. Earn trust and respect This requires being a honourable company and ethics as a basic corporate guideline. It means being good to the customers, talking to them and fulfilling their needs.

The basic strategies to amplify eWOM recommendations are (WOMMA 2006, p.2): • customer satisfaction, • two-way dialogue and • transparent communication Literature is using different terms for actions to stimulate (e)WOM. As the following synopsis demonstrates, they are all very similar in their content:

36

taken from WOMMA (2006, p.4) and Sernovitz (2006, pp.9-12)

41

T ABLE 12: S YNOPSIS OF WOM M ARKETING A CTIONS 37
Li/Bernoff focussed on web 2.0 WOMMA Sernovitz offline focus with consideration of new online technologies Research and listen to feedback Track on- and offline conversations by supporters, detractors, and neutrals. Listen and respond to pos. and negative conversations. Working with influential comm. Find people who are likely to respond to your message or are able to influence your target customers. Engage in transp.conversation Encourage two-way conversations. Create blogs and other tools to share information. Participate openly on online forums. Create comm. and connect people Support independent groups that form around your product. Host discussions and message boards. Give people sth. to talk about Information that can be shared or forwarded or that encourages conversation. Encouraging communications Develop tools to make telling a friend easier, create forums and feedback tools, social networks. n/a Co-create and share information Involve consumers in marketing and creative. Let them “behind the curtain” to have first access. Create advocate programs Tracking customer feedback Measure and understand what people are saying (search blogs, read message boards, listen to feedback, use advanced measurement tools). Talkers Find people who will talk about you.

1

Listening (Research) Ongoing monitoring of customer conversations instead of occasional surveys and focus groups.

2

3

4

Talking (Marketing) Participation in and stimulation of two-way conversations customers have with each other, in contrast to just outbound communications.

Taking part Join the conversation (let staff surf and reply to comments, post on blogs, join discussions, answer e-mail, offer personal service).

n/a

5

n/a

Topics Give People a reason to talk.

6

Energizing (Sales) Making it possible for enthusiastic customers to help sell to each other. Supporting (Support) Enabling customers to support each other. Embracing (Development) Helping customers to work with each other to come up with ideas to improve products and services.

Tools Help the message spread faster and farther

7

8

n/a

9

To give the following passage a structure, the thesis will use Li & Bernoff’s terms as a grid. The topics (5) will be discussed in 0 below.

4.1 D EVELOPING

A

S TRATEGY

Before participating, marketers should take a step back and ask themselves about their own objectives and their customer’s expectations. After that, they can start planning. For this, Forrester has developed a four-step planning process, the socalled POST-method (Li/Bernoff 2008, p.67):

37

taken from Sernovitz (2006, p.63), Li/Bernoff (2008, p.69), and WOMMA (2006, p.6)

42

T ABLE 13: S TRATEGY P LANNING WITH THE POST-M ETHOD 38
People Objectives Strategy Technology Brands need to determine whether their customers are ready for further participation and in which way it is likely that they will engage. This can be assessed by the evaluation of what consumers are already doing. Second, the marketing aims need to be defined, why a company should participate in the groundswell, e.g. for general image improvement or for increase in sales by energizing certain customers. Third, marketing has to determine the way it wants the relationship with its customers to change, if customers shall carry messages or just be more engaged with the company, for example. At least, after all questions have been answered, the appropriate technology to participate in the groundswell can be chosen, e.g. viral videos, blogging or supporting a community.

4.2 L ISTENING
The eWOM environment is a complex, dynamic system and eWOM changes quickly. The first action to amplify eWOM is listening. This is necessary to know what is going on, to spot trends as they occur and to quickly correct the course or take actions to influence the system (Allsop et al. 2007, pp.404-405). Listening takes over the traditional business function of research. It is the ongoing monitoring of consumer conversations and replaces occasional research like surveys and focus groups (Li/Bernoff 2008, p.69). While traditional research often delivers uncertain results, online sources such as blogs allow genuine access to people’s thoughts, because conversations are written down and are visible. Companies can learn what people really think just by reading. As a consequence, WOM marketing is not only a marketing tool, but also a research tool (Sernovitz 2006, p.168). There are three ways to listen to the internet respectively the groundswell. They differ in their complexity and in the depth of their results: • standard search engines • private communities • brand monitoring The easiest way to listen to the groundswell feature standard listening procedures with specialized search engines, e.g. Google Blog Search, Feedster, Technorati or BlogPulse. They assist in analyzing chatter about topics, brands or products and enable companies to identify and understand the talkers. Checking out what people have tagged a brand on Del.icio.us or Brandtags39 is another way to find out more about a brand. Technorati is helpful in determining which blogs have the
38 39

Li/Bernoff 2008, pp.67-68 see www.brandtags.net/browse.php

43

most influence, and some tools allow real-time notification about newly posted items that contain pre-defined catchphrases (Sernovitz 2006, pp.153, 169).
F IGURE 20: S TANDARD S EARCH T OOLS FOR L ISTENING

But this is only a start. To be effective, Li & Bernoff recommend falling back on professional vendors who deliver two kinds of support: private communities and brand monitoring (Li/Bernoff 2008, p.81-82). Communispace, Networked Insights and MarketTools allow companies to set up a private community on the web. The community works like a continuously running focus group or “listening machine” to generate insights. Communispace, for example, recruits up to 500 participants in the client’s target market. They participate at least one hour per week in a community similar to social online networks. Costs for a six-month survey are $ 180,000. Private communities allow people to discuss and express what they looked for and how they used a product, and that in a way that focus groups cannot (Li/Bernoff 2008, pp.82- 86).
F IGURE 21: V ENDORS OF P RIVATE C OMMUNITIES

Brand monitoring is the most refined way of listening. Nielsen BuzzMetrics, TNS Cymfony or MotiveQuest deliver neat reports of what is going on in blogs, YouTube or in discussion forums, for example, and trace these findings back to certain departments as customer service, for example. The tools conduct automated monitoring of the whole online chatter that is associated with a brand. MotiveQuest, for example, is not only tracking positive and negative comments, but also tracking 500 expressions of emotional disposition with terms like inspiration, anger or excitement. As one of the most expensive providers, MotiveQuest charges $ 70,000 per project (Li/Bernoff 2008, pp.21, 82, 90).

44

F IGURE 22: B RAND M ONITORING V ENDORS

B E N E F I TS

OF

L I S TE N I N G

Listening to the comments on a blog is free and worth as much as expensive research from focus groups. With the insights from the groundswell, people talk to a brand instead of talking about it (Sernovitz 2006, p.173). eWOM is traceable. While most WOM is happening offline and can hardly be tracked or measured, the eWOM conversations are public and easy to study. Listening communities reduce survey time and allow answering the “why” question which traditional research does not do so well. Apart from that, it delivers genuine answers, e.g. to find out what the brand really stands for, and enables marketing to adjust the communication. Additionally, listening delivers precise consumer data. Tracking tools such as those mentioned above allow saying from where or from which website talkers come from, what they were interested in or what they searched for to get there. Listening identifies influencers which can be cultivated afterwards to energize the groundswell (Li/Bernoff 2008, pp.93, 94; Sernovitz 2006, p.170). eWOM is an unbiased dialogue, so marketers can learn about their product, the acceptance of its features, how it is used or who likes it. This allows them to refine the marketing message, to define the target group more precisely or to improve the product itself (Balter 2008, p.127). Listening generates and gives access to a pool of new ideas for products, services or improvements in efficiency for free (Li/Bernoff 2008, p.94). Listening can also predict future developments: Positive eWOM about a product, for example, indicates an increase in market share about one or two months later. It allows companies to spot and understand ongoing trends and changes. And, finally, listening enables companies to connect with people who encounter problems and address their problems directly. It works as a kind of early-warning system for upcoming negative news or PR crisis and helps to respond to negative news before things get out of hand (Li/Bernoff 2008, pp.92-94).

45

R E Q UI RE M E N TS

FOR

L I S TE N I N G

Listening is only useful if a company’s customers participate in the groundswell. Li & Bernoff suggest defining the company’s percentage of creators and critics. If it is high (>15%), brand monitoring is effective for listening. If it is very high (>30%), brand monitoring is obligatory. A lower percentage results in lack of representativeness, but a private community might be useful as well. All insights have to be properly interpreted and integrated with other sources. They have to be managed and, if necessary, embedded into corporate actions (Li/Bernoff 2008, pp.95, 96).

4.3 T ALKING
Listening is only one part of the conversation – talking is the other. It solves most problems that have been described in the problem definition (compare 1.1). Talking describes the change from outbound push communication to the participation in and stimulation of two-way conversations between consumers. This is what marketers have to prepare for (Li/Bernoff 2008, pp.69, 125). The traditional marketing funnel looks like Figure 23 below. In theory, marketing is driving people from the left to the right to convert them into buyers. But actually marketing does not have much influence on the middle stages – eWOM has, and its influence is strongest there, Li & Bernoff say (2008, p.101).
F IGURE 23: E WOM I NFLUENCE WITHIN THE M ARKETING F UNNEL 40

The reason for this are the conversations that customers have in the middle of the funnel. Here it is where they make their purchase decisions. They read, ask and discuss on blogs, forums or social networks to make the right choice. Shouting
40

based on Li/Bernoff 2008, p.101

46

does not work at these stages, but eWOM and genuine conversations do because people trust the WOM from people they have never met (Sernovitz 2006, p.138; Li/Bernoff 2008, p.102). eWOM as an important determinant of consumer behaviour can influence each of the stages within the marketing funnel (HennigThurau/Walsh 2003, p.51; Schindler/Bickart 2005, p.41):
F IGURE 24: T HE I MPACT OF E WOM IN THE C ONSUMER D ECISION M AKING P ROCESS 41

The following statements all come from traditional WOM research, but according to Schindler and Bickart, all these effects on the consumer decision process can also occur for eWOM. In this case, the referability of eWOM (see 2.2.2) may even enhance the long-term effects of WOM because the information can be accessed whenever it is needed (Schindler/Bickart 2005, p.41). Within the marketing funnel, eWOM can cause problem recognition, for example, because a message makes the receiver aware of a discrepancy between his ideal and his actual state and thus evoke product awareness. eWOM is also thought to be an important source of information that consumers consider during the stage of information search. Another outcome of the pre-decision information search is the so-called consideration set. eWOM input can add alternative items to this set that are further considered by the consumer. By presenting negative information, eWOM input can also delete them. During the alternative evaluation, eWOM might suggest attributes that should be attended, too, and can help the consumer to de41

Kotler et al. (2007, p.335), Schindler/Bickart (2005, pp.41, 57)

47

cide where an item should be purchased. And even after the purchase, eWOM can influence the post purchase evaluation by helping to decrease dissonant cognitions (Schindler/Bickart 2005, pp.40-41). As a consequence, eWOM generates sales, builds loyalty and supports public relations (PR) (Balter 2008, p.162). Brands can start talking and participate in these conversations. As a consequence, people will comment, expect attention to their posts and a response. This makes talking hard work, but it is the only chance to influence consumers out of the reach of traditional advertising, and not only them, but also all those who are reading a company’s contributions (Sernovitz 2006, p.138; Li/Bernoff 2008, p.102). The easiest way to start a dialogue is simple and easy-to-find feedback forms. Another method is online message boards where customers can write to a company and other customers (Sernovitz 2006, p.171). The most common ways to start talking are viral videos, engaging on user-generated content sites and social networks, blogging or creating an own community. Each of these actions is suited to solve a special communication problem resulting out of the middle of the marketing funnel (Li/Bernoff 2008, pp.103, 124):
T ABLE 14: S OLVING P ROBLEMS R ESULTING FROM THE M ARKETING F UNNEL 42
Problem Missing Awareness People do not know about a brand or product. Solution Example Posting viral videos Blendtec’s Will it Blend viral videos Too little WOM People do not talk to each other about your brand. Joining social networks E&Y’s recruitment profile on Facebook Complexity There are complex messages to communicate. Starting to Blog HP’s more than fifty corporate blogs Accessibility The brand can’t reach its customers. Creating a Community P&G’s Beinggirl.com for feminine care products

4.3.1 P O ST I N G V I R AL V I DE O S If people do not know about a brand or product, viral videos work excellently to create awareness, not just for consumer products, but also in a B2B setting. Viral videos require affecting ideas; and if the videos succeed, the company must be ready to enter into a conversation with thousands of viewers (Balter 2008, p.39; Li/Bernoff 2008, pp.124, 103).

42

derived from Li/Bernoff 2008, pp.123-124

48

Wilson and Helm deliver similar definitions for viral marketing. Viral Marketing is a company’s activities to make use of customers’ communication networks to promote and distribute products (Wilson 2005; Helm 2000, p.158). It is a communication and distribution concept that relies on customers to transmit digital messages to other people in their social sphere (Helm 2000, p.159). Creating WOM with a viral video requires a story that people love to talk about, e.g. topics such as sex, social, political or evil humour, or violence. It is only effective if it is new and original (Klesse/Prange 2009, p.73; Balter 2008, pp.59, 40). T H R E A TS In recent times, the line that separates getting noticed from getting hated has gotten very thin. In fact, Dave Balter says, when there is viral wrongdoing suspected, the brand is mostly the first suspect (Balter 2008, pp.59, 58). One example for this is the Volkswagen Terrorist Commercial in which a suicide bomber blows himself up in a Volkswagen Polo outside a restaurant. While he is killed, the car remains intact and the off reads as the campaign’s claim Polo: small but tough. Even if the
true buyer never got public, VW was held accountable for the video for a long time (Brook 2005).
F IGURE 25: S CREENSHOTS FROM THE V OLKSWAGEN T ERRORIST C OMMERCIAL 43

43

source: www.YouTube.com/watch?v=HnL-7x4n4d8 (Accessed March 11th 2009)

49

Another threat from a communication perspective is that many viral videos create WOM about the ad itself, but not about the product. This might raise heightened awareness, but does not contribute to a company’s credibility or sales (Balter 2008, p.59). But awareness is not everything. It is also necessary to start a relationship with the viewers, otherwise viral videos are just another way of push. The viral must allow its viewers to interact (Li/Bernoff 2008, p.104). B L E N D TE C ’ S “W I L L I T B L E N D ?” A very successful example of a viral video campaign delivered blender manufacturer Blendtec. Basically, from a video camera and a few dollars’ worth of goodies, Head of Marketing George Wright created a consumer brand. The Will It Blend? videos they made became part of a viral marketing campaign for the 1.8hp Total Blender and were only featured on YouTube. Each video shows Tom Dickson, the company’s CEO, dressed in a white lab suit. The films are accompanied by cheesy 1950s music as Dickson proceeds to blend golf balls, a rake handle or Apple’s just released and hard to get iPhone:
F IGURE 26: S CREENSHOTS FROM B LENDTEC ’ S “W ILL I T B LEND ?” 44

The virals were produced as a substitute for advertising to create awareness – and they worked. Sales for the $ 399 blender went up 20 percent while the first series
44

source: www.YouTube.com/watch?v=qg1ckCkm8YI (Accessed March 11th 2009)

50

of five videos cost a total of only $ 50 to create. Within the first week, the videos had been watched by 6 million people. After music channel VH1 and Jay Leno had featured the blender, the numbers went up on 62 million. The benefit is simple, Wright says: Nobody is questioning that we make the best blender in the world (Lischka 2007b; Li/Bernoff 2008, pp.103, 100; Godin 2007, p.126).

4.3.2 E N GA GI N G

IN

S O CI A L N ET W O R K S

AN D

S O CI A L M EDI A S I T E S

Engaging in social networks and social media sites supports marketing when there is too little WOM and people don’t talk about a brand as it is especially important for fashion products as well as TV shows or cars. The sites offer great opportunities for companies that are able to form groups to engage users in a dialogue. The key is to be there and to respond to the customers (Maymann 2008, pp.12, 97; Li/Bernoff 2008, p.124). According to Li & Bernoff, creating a personality within a social-networking site is one of the simplest ways to extend brand reach (Li/Bernoff 2008, p.103) because corporate profiles offer completely new and promising ways of targeting (Maymann 2008, p.56). No other WOM tool has as much potential for scale and reach as the social networks and social media sites, Sernovitz says. Social networks are basically supercharged message boards that also allow an instant linking between its users (Sernovitz 2006, pp.138, 139). Examples are • MySpace, LinkedIn, and Facebook, or • German StudiVZ and Xing On social media sites, people share stories that have been added and edited completely by consumers (Sernovitz 2006, p.139). Examples are • Wikipedia, the online encyclopaedia (a so-called wiki), • the video and photo hosting-sites YouTube and Flickr, • Digg, a social news site for people to discover and share web content, and • Craigslist, a centralized network of local online classifieds and forums These sites are a place to be for marketing to the corresponding target group, because a lot of product conversation has moved with these people to the web. There it is connected, linked to, and accelerated (Sernovitz 2006, pp.139, 140).

51

But first, before a brand joins a social network, the company should clarify that their customers participate. This is the case if (Li/Bernoff 2008, p.107): • half of the customer base are joiners (compare 0), • with customers aged from 13 to 23 (it is a must to participate), or if • customers are mostly aged 24 to 35 (e.g. on Facebook) Joining a community is also promising if a brand has loyal followers that are likely to friend a brand. In this case it is also highly likely that there are already very active and focused online communities. These exist for nearly every industry on the web (Li/Bernoff 2008, pp.107-108; Sernovitz 2006, p.138) and often generate massive traffic regarding the target group. In this case, companies should support these sites and engage on them. If a company sets up a profile, it is important to allow connecting and to encourage interaction. Companies should also not sit back and hope to get noticed, but actively ask their talkers to connect them: Success on social networks is determined by the number of connections a corporate profile has. But as with viral videos, it is again necessary to create a dialogue and to answer questions individually. To enter a dialogue, interactive elements and the allocation of personnel to respond are required (Sernovitz 2006, p.141; Li/Bernoff 2008, pp.104-106, 108). Maymann warns that companies might be left disappointed by their efforts, if they misunderstand the equilibrium between media, the user and the advertiser: If there is too much pushing, he says, brands might have negative experiences with their users (Maymann 2008, p.56).

52

E X A M PL E : E RN S T & Y O UN G C A RE E RS A good example for participation on a social network is delivered by Ernst & Young Careers. Its profile intends to recruit personnel and it already has 27,815 fans:
F IGURE 27: E RNST & Y OUNG C AREERS ON F ACEBOOK 45

4.3.3 J O I N I N G

THE

B LO GO S P H ER E

Communicating in social networks is quite limited. For a long-term commitment to talk with consumers, blogging is offering more opportunities, especially for extending and accelerating the two-way dialogue. Private blogs are a result of the lowering of the barriers for publishing information and represent the shift in the balance between institutionally controlled and consumer generated media. Some of the most visited blogs have become even more popular than many newspapers. Private as also corporate blogs enable brands to talk directly with their customers and give them a story to spread. In this way, blogs create eWOM (Sernovitz 2006, pp.24, 136; Li/Bernoff 2008, p.108; Maymann 2008, p.55).

45

source: www.facebook.com/ernstandyoungcareers (Accessed March 11th 2009)

53

Blogs are designed for frequent updates and therefore perfect tools for companies that have much to say, but cannot publish daily press releases (Sernovitz 2006, p.136). They are also good at explaining complex messages. The consideration of complex options makes consumer decisions difficult, and blogging is solving this problem with detailed or special information on specific aspects. Thus blog entries and comments reassure customers before, during and after their purchases (Li/Bernoff 2008, p.124) and strengthen the influence of eWOM. But before a company starts to blog, it should answer the question of if it really wants to engage in a dialogue with its consumers. If the answer is yes, it should start with the development of a strategy in compliance with the POST method (see 4.1), especially regarding the blog’s aim (Li/Bernoff 2008, p.115), and start with listening. The first way to participate in the blogosphere is to just commenting on other people’s contributions, not just for talking, but also to get feedback (Li/Bernoff 2008, p.21). Blogs raise and discuss opinions and many of them have become extremely influential in the process of spreading information to people (Maymann 2008, p.55). Listening and using tools as Google Blog Search or Technorati help brands to find out which of them have the most influence (Li/Bernoff 2008, pp.115). The second way is operating one’s own blog. From my personal opinion, this is the more promising way because permanent corporate blogs are easily to find and form a record of a company’s statements and information. Apart from that, it will collect the critical mass needed to get the conversation going. The intention can be focussed on announcing, supporting, responding or for image purposes (Li/Bernoff 2008, p.116). The blog by Sun Microsystems’ CEO Jonathan Schwartz, for example, covers topics as corporate strategy, product development or corporate values and is a public forum for letters from outsiders that are discussed and answered (Schwartz 2009). Schwartz admits that this open dialogue looked risky to him at first sight, but today he says that it is even more risky to close oneself from the blogosphere and that others will talk for the company if a company does not participate in the talking (Schwartz 2009).

54

F IGURE 28: S UN CEO J ONATHAN S CHWARTZ ' S B LOG 46

A single corporate blog as GM’s FastLane47 or a variety of blogs from all over the company, as HP or Microsoft do, are both possible ways to engage. HP, for example, operates nearly fifty blogs that cover most products and markets for the reason of customer support (Li/Bernoff 2008, p.109). All forms of blogging have one basic principle in common: listening and responding to other blogs in the blogosphere (Li/Bernoff 2008, p.103). This is the big benefit of blogging, the possibility to respond to customers within the marketing funnel. This way, blogs are influencing all blog visitors who are just readers. Trust can be increased when bloggers respond as a real person and not as the company, because their contributions are perceived as honest, genuine and personal statements (Li/Bernoff 2008, pp.109-110, 117). This is what Jonathan Schwartz puts emphasis on, too: being honest and open, treat readers with respect and absolutely avoid promotion. To keep authenticity, blogs should also not be

46 47

Jonathan’s Blog, available from http://blogs.sun.com/jonathan/ (Accessed March 11th 2009) compare http://fastlane.gmblogs.com/

55

written by ghost-writers, this would be like someone else writing ones emails, Schwartz says (Schwartz 2009). Blogging means also responding and connecting blog entries to similar ones on other blogs – hoping to get noticed is insufficient. In the end, the success of a blog is a function of how many connections it has to other blogs and other content (Sernovitz 2006, pp.141) because with missing comments there is no dialogue and no influence on consumers’ purchase decisions (Li/Bernoff 2008, p.117). T H E ROI
OF

BLOGGING

As a side-effect, blogs reduce the number of support calls and complaints by unhappy customers, because they can find problem solving comments online. By talking to a few customers, companies can respond to thousands of other customers who experienced the same problem. At the same time, blogging unlocks cash of IT service and consulting revenue (Li/Bernoff 2008, p.110-111). This brings up the question of the ROI of blogging. The following example from Li & Bernoff (2008, p.113) refers to a single high-level blog as GM’s FastLane:
T ABLE 15: S TART - UP AND O NGOING C OSTS FOR B LOGGING 48
Planning and development Training for blogging executive Blogging platform Brand-monitoring service IT support Content production, including executive time Review and redirection

C OSTS
$ 25,000 $ 10,000 $ 25,000 $ 50,000 $ 3,000 $ 150,000 $ 20,000

Total costs, year one

$ 283,000

The main costs arise from the time spent for blogging. But the blog’s high visibility generates a value as well because it might generate answers to customer questions, heads off PR problems and leads to valuable insights through customer feedback (Li/Bernoff 2008, p.112). With time, blogging builds relationships and credibility and the company is seen as a member of the community instead of a marketer just looking for publicity (Sernovitz 2006, p.137). Overall, blogging generates a positive ROI:
48

Li/Bernoff 2008, p.113

56

T ABLE 16: B ENEFIT A NALYSIS FOR B LOGGING (A NNUAL ) 49
Advertising value visibility and traffic; estimate 7,500 daily page views at a $ 2.50 cost per thousand PR value press stories about/driven from blog content; estimate 24 stories at value of § 10,000 each WOM value referring posts on other medium- to high-profile-blogs; estimate 370 posts at a value of $ 100 each Support value Support calls avoided because of information on blog; estimate 50 daily calls avoided at $ 5.50 per call Research value Customer insights; estimate comments & feedback equivalent to 5 focus groups at $ 8,000 each

V ALUE
$ 7,000 $ 240,000 $ 37,000 $ 69,000 $ 40,000

Total benefits, year one

$ 393,000

4.3.4 C R E AT I N G

A

C O MM UN I T Y

Sometimes brands can’t reach their customers because the target group is insistent on depending on each other and not on listening. Communities can solve this sort of accessibility-problem within the marketing funnel. In such a situation, online communities create the environment for them to do so and give otherwise disparate conversations a home. Creating a community is an efficient way to engage with customers and deliver value to them (Sernovitz 2006, p.24; Li/Bernoff 2008, pp.125, 103). To be effective, a community needs long-term support and maintenance, content, new features and redesigns. Stopping it will have a negative effect on the affected customers (Li/Bernoff 2008, p.123). Companies can either launch their own community or join an existing one (WOMMA 2006, p.4). But first of all it must be checked whether the target group is big enough to form a community. If the number of joiners (see 0) is above average, there is a high likelihood for a community to succeed (Li/Bernoff 2008, p.122). If the target group consists of natural joiners, there is probably already an existing community. In this case, it is cheaper and more promising to sponsor such a site instead of launching an own community, even if the company gives up control. If a brand decides to launch its own community, credibility, the basis of eWOM, is only gained if the community forms around its customer’s passions or interests. Launching a simple product site leads nowhere. In the case of Beinggirl.com, P&G

49

Li/Bernoff 2008, p.113

57

didn’t launch another girlie network, but a special one about growing up, because everything else would have ended up in competition with already established websites (WOMMA 2006, p.4; Li/Bernoff 2008, p.123) P R O CT E R & G AM BL E ’ S B E I N G G I RL . C O M P&G’s Beinggirl.com is intended to sell feminine care products, but actually it has nothing to do with tampons and the like. But rather with growing up and everything else young girls deal with. One category features a psychologist who answers questions, for example. Every Ask Iris answer has a little brand tag at the end. There is also an area to order free samples of P&G products. To boost awareness and traffic, P&G features the site in kits for health classes around the U.S. and sends regular newsletters to remind girls who have subscribed to go back to Beinggirl.com. Using the community, P&G entered a dialogue with their target group that formerly strongly resisted messages about their products. But Beinggirl.com is only accepted because it solves the girl’s problems instead of Procter & Gamble’s (Li/Bernoff 2008, p.119-121).
F IGURE 29: P ROCTER & G AMBLE ' S B EINGGIRL . COM 50

50

source: www.Beinggirl.com/en_US/home.jsp (Accessed March 16th 2009)

58

T H E ROI

OF A

C O M M U N I TY

S U CH AS

B E I N G G I RL .C O M

The purpose of Beinggirl.com is to introduce young women to P&G products. They tend to stick with the same brand throughout their whole life. If a woman spends $ 5 a month over forty years, this sums up to $ 2,400. With an assumed profit margin of 20%, this adds up to $ 480 for each girl choosing Tampax or Always. Forrester estimates annual costs of about $ 3 million a year for the running of Beinggirl.com. This means that if as few as 6,250 girls per year are persuaded to use P&G products the site reaches breakeven (Li/Bernoff 2008, pp.121-123). This makes talking to their customers with a community, according to P&G’s calculations, four times as effective as traditional advertising to reach the target customers!

4.3.5 G E N E R AL R E M A R K S A B O UT T A LK I N G An open dialogue means giving up control about the message. This level of freedom may be uncomfortable for marketers who have always tried to determine the direction of the conversation. But talking is essentially important, because the conversation is going on right now – about every company and every product. People are talking in ways that are not approved neither by marketing nor compliance, PR or the legal department. In this environment, companies only have a choice either to join the conversation or to let it happen without them. Non-attendance bears another risk, the threat of WOM backlash, even if there is positive eWOM for the moment. WOM could also die or go negative – because companies that do not respond might be seen as ignorant or snobby (Sernovitz 2006, pp.39, 152; Li/Bernoff 2008, p.8). Once a company joins in on eWOM conversations, there is no way back. When a brand reaches out to its customers and encourages them to talk, they expect the company to participate and respond (Sernovitz 2006, p.25). F I X P RO BL E M S
AN D

M AK E P E O PL E H A P PY

The two-way dialogue requires that the company gives its customers the answers they want to hear, to respond to their emails and to accept their comments on the corporate blog (Sernovitz 2006, p.25). When people complain, companies need to find a way to solve the problem, or at least offer to try. Public complaints on the web are a call for attention: When brands are generous about solving the problem, they create a topic for positive eWOM because quick help mostly is quite rare, Ser-

59

novitz says. Any company can make a mistake, but the way they deal with it determines the outcome in terms of WOM and makes a difference (Sernovitz 2006, pp.154-155). T AL K I N G
IS NOT

SELLING

Taking part is not selling – pushing products by posting off topic comments in blogs and forums would be like spamming the dialogue partners (Sernovitz 2006, p.158). In terms of eWOM marketing, the consumer is no longer a target, but a partner. D I S CL O S URE & H O N E S TY Talking requires absolute honesty. This includes the identity of the talkers in particular. Transparency about the affiliation with a brand adds status and credibility to the talker – and so does honesty (Sernovitz 2006, pp.30, 159). Against one’s expectations, disclosure makes comments more trustworthy and keeps eWOM marketing from backfiring (Allsop et al. 2007, pp.404-405). P R O V I D E G UI D AN CE When companies start to talk, there should be clear guidance and training for all employees who want to participate in the conversation, especially on ethics. Companies that decide to talk should set up strict guardrails, e.g. a short and straightforward blogging policy, that prevents unwanted behaviours (Sernovitz 2006, p.157; Li/Bernoff 2008, p.109; Schwartz 2009). 51 S O CI AL M E D I A O P TI M I Z A TI O N (SMO) The last remark on talking refers to social media optimization. To take advantage of social media, companies have to make it easy for people to find the company’s contributions and make it easy for the information to travel around. Social media optimisation expands the reach and the likelihood to get the customer’s attention through a stronger visibility and presence in an environment where most activity about products takes place outside the corporate website (Maymann 2008, p.97). The strategies to optimize social media are helping the content to travel and facilitate tagging & bookmarking:

51

compare Appendix 2 for the blogging policy of Sun Microsystems

60

T ABLE 17: S TRATEGIES TO O PTIMIZE S OCIAL M EDIA 52
Helping content to travel Helping content to travel means creating content that is worth to be linked, e.g. on a blog, or the active distribution of material as whitepapers, PDFs, videos, or podcasts. These materials can be sent to other sites for publishing to create satellites of a company’s content. Tagging and bookmarking require only quick buttons to the most-used social bookmarking tools, e.g. Digg. Apart from that, tags increase the visibility in both social bookmarking tools as also on search engines. Tagging instantly connects web pages to the WOM conversation.

Tagging & Bookmarking

4.4 E NERGIZING
Energizing is the key strategy to replace the traditional business function of sales. It means finding enthusiastic customers and helping them sell to their peers. This is the fundamental ideal of user-centric marketing (Maymann 2008, p.56; Li/Bernoff 2008, p.69). Energizing is a powerful tool to boost sales by turning satisfied customers into viral marketers who spread positive WOM about a product for free. This way, energizing makes them and their referrals an incredibly powerful asset (Li/Bernoff 2008, pp.130, 135). Energizing is more powerful, but also more risky than listening and talking, because energizing encourages people to talk about a brand. While in the past a company had to worry only about influencing experts, it now has to be aware of every buyer with a problem who could easily point out the weaknesses of a product or service in a blog entry, video or review (Li/Bernoff 2008, p.28). Because of this, if there is a large number of dissatisfied customers, energizing them would worsen the situation. It is also not suitable for companies with ubiquitous products that are available from a variety of suppliers or do not show emotional connections or do not have a strong brand. If a company’s customer base does not show the right profile or if they do not participate at all, it is of no use to start a community (Li/Bernoff 2008, pp.147-149). But when a brand’s customers are enthusiastic, energizing works well. In this case, companies need to connect with them and encourage them to spread eWOM. If a brand manages to make them write about a product or upload pictures, it benefits from all the people down the Social Technographics Profile (see Table 6), e.g. spectators who will hear about it (Li/Bernoff 2008, p.131).

52

taken from Maymann (2008, p.97) and Sernovitz (2006, p.140)

61

An example for the financial benefits of energizing gives Apple. Apple’s enthusiastic customers provide the company with high numbers of referrals and the lack of nWOM (respectively detractors). These result in a higher total customer worth (which is the customer value plus his referral value). That is nearly 1.7 times higher than that of other computer hardware manufacturers’ promoters (about $ 4,400 compared to $ 2,600), as the graphic shows (Satmetrix 2008, p.15):
F IGURE 30: B UYER VS . R EFERRAL E CONOMICS (A PPLE C OMPUTERS ) 53

Apart from that, Apple buyers benefit the brand with a higher referral value attributable to positive WOM that is nearly 2.5 times higher than that of other computer hardware promoters ($ 1927 as compared to $ 816). And while Apple doesn’t lose money due to the absence of detractors, nWOM does not cost them $ 1,350 as it does to the other computer hardware companies (Satmetrix 2008, p.15). A clear proof that energizing enthusiastic customers pays off.

4.4.1 E N ER GI ZI N G O N LI N E C O M MU N I T I ES To energize their most enthusiastic customers, companies can think about creating their own community or participating in an already existing one. Both are good ways to energize consumers that are really passionate about a product and have an affinity for each other. In this context, Li & Bernoff mention B2B settings in particular. A new community only makes sense if there is not already an existing one. Otherwise, participation is the better strategy (Li/Bernoff 2008, pp.134, 149).

53

taken from Satmetrix 2008, p.15; values not directly related to eWOM, but to overall WOM including eWOM

62

It is important to mention that communities, apart from very few exceptions, do not form around products, but related topics in general: The LEGO community54, for example, is not about the blocks itself, but building with them, and the eBags community55 is not about luggage, but travelling. As a consequence, communities have to focus on the customer’s problem or his interests, not the company’s product. And, not less important, companies need to know that a community once has been started, cannot be stopped anymore (Li/Bernoff 2008, p.149). To energize community members, companies could address the abovementioned triggers to post eWOM (see 3.3.1). The corresponding actions include making people feel important or letting them feel like insiders or look like one to their friends. Companies should also show them that they appreciate the talkers, or make it fun. A special club, for example, could give people status and recognition (Sernovitz 2006, p.84-85). Other actions include the motivation and connection of people through special talker programmes, e.g. fan sites, the possibility to sign up for member benefits or a customer advisory board (Sernovitz 2006, pp.89-91). If energized community members turn against a brand, companies must listen. They cannot lay them off if they do not behave the way the company wants them to. Energized customers within a community expect a response and companies have to, if possible, give them what they desire most, information and evidence that they make a difference (Li/Bernoff 2008, pp.150, 151).

4.4.2 E N ER GI ZI N G C R I T I C S (R AT I N G S

AND

R EV I E W S )

If there is no community or lack of real enthusiasts, tapping the critics is far easier than trying to turn customers into creators (Li/Bernoff 2008, pp.136, 137). Posted reviews are opinions and experiences published by consumers on the internet. They can be found, for example, on • online opinion platforms (e.g. Epinions.com), • online shops (e.g. Amazon.com) • consumers’ websites, blogs or entries on social networking sites

54 55

LUGNET, the International LEGO Users Group Network: www.lugnet.com www.ebags.com, accessible via single products

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According to Hennig-Thurau et al. (2004, pp.39-40), online opinion platforms are the most widely used of the existing eWOM formats. They provide consumers with the opportunity to read other consumers’ experiences and opinions on goods and services and let them publish their own contributions. A popular example is Epinions.com (“Unbiased reviews by real people”):
F IGURE 31: C ONSUMER O PINION S ITE E PINIONS . COM 56

But there are also online reviews on retail sites such as Amazon.com. Amazon displays customer reviews with a verbal account of the consumer’s experience and a formalized rating of the product. Interestingly, readers can rate these contributions themselves by their helpfulness:

56

www.epinions.com

64

F IGURE 32: E XAMPLE FOR AN A MAZON . COM C USTOMER R EVIEW 57

Ratings and reviews can boost sales volume. This makes them especially appropriate for retailers and other businesses with a large potential of critics. Again, the effectiveness of eWOM results from its natural credibility that comes from the recommendations of real people with no commercial interests. Consumers benefit because ratings and reviews increase the market transparency and make a purchase decision easier. As a potentially negative outcome for brands, it might be harder for them to establish long-term relationships, which in turn stresses the importance of firm-related customer loyalty. Companies, whose products and services get rated, receive focused and instructive feedback. This is even more valuable than brand monitoring which only finds random mentions (Sernovitz 2006, pp.146; Hennig-Thurau/Walsh 2003, p.66; Li/Bernoff 2008, pp.134, 28). T H E S T R A TE G Y B E H I N D R A TI N G S
AN D

REVIEWS

The strategy behind ratings and reviews is energizing critic activities. Both positive and negative comments influence their readers. Positive comments, for example, increase the purchase rate (Li/Bernoff 2008, pp.137, 138). But missing reviews influence the purchase behaviour, as well. If there are no comments on a product, this is a signal for the consumer that the product is not even worth considering.
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from www.amazon.com/Lenovo-S10-10-2-Inch-Ideapad-Processor/dp/B001GNBD8I/ref=pd_bbs_sr_1?ie=UTF8&s =electronics&qid=1231007063&sr=8-1 (Accessed April 8th 2009)

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Many people assume the worst case and look for other, more popular products (Sernovitz 2006, pp.147-148). As a consequence for marketing it is important to energize customers to increase the rating and review activity. In order to energize the critics’ activity, companies can address the triggers that make people post eWOM. The motivations have already been discussed above (compare3.3.1). In the context of ratings and reviews, social benefits, concern for others and self-enhancement should be suitable triggers. Forums and reviews, Li & Bernoff say (2008, p.28), succeed because they let people show off. As for communities, they want to feel important and they like to be asked because they get a kick out of being an expert. The more people ask for their advice or attest their competence, the more important they feel. An evaluation system like Amazon’s is therefore a promising way increase the rating activity (Sernovitz 2006, p.86). Other ways to energize critics are giving them a higher status to make them feel like being in the inner circle or asking for their input, for example. For a retailer, telling customers that “other people bought this” can turn unvoiced recommendations into valuable WOM, too (Sernovitz 2006, pp.147-148). As a last remark in this context, it should be said that companies with bad ratings or reviews do not have a rating or review problem, but a quality or service problem. In this case, listening to the critique, contacting the author and improving the product are the solution (Li/Bernoff 2008, pp.28, 129). T H E ROI
OF

R A TI N G S

AN D

REVIEWS

Ratings and Reviews pay off for a company. In total numbers, Li & Bernoff calculated the ROI of ratings and reviews for a company such as online luggage retailer eBags.com (Quote: “Don't listen to us, listen to our customers: 1,646,084 customer reviews (…) right now!” 58):

58

www.ebags.com (Accessed February 22nd 2009)

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T ABLE 18 : T HE ROI OF R ATINGS AND R EVIEWS 59
Start-Up and Ongoing Costs Up-front development cost paid to technology vendor Yearly ongoing costs paid to technology vendor Additional yearly ongoing costs at company Total Costs, Year One Profit Site visitors Visitors seeing reviews Sales at typical 2,5% conversion, $ 100 per transaction Sales with ratings/reviews: 3% conversion, $ 110 per transaction with an estimated increase of the conversation rate of 20% and an estimated size increase per transaction of 10%; assumed a boost of only the sales of the top 20% of the items Net additional sales because of ratings/reviews 10,000,000 2,000,000 $ 5,000,000 $ 6,600,000 $ 50,000 $ 25,000 $ 125,000 $ 200,000

$ 1,600,000

Net additional profit at 25% profit margin

$ 400,000

The additional profit will grow in the subsequent years. About 80% of all reviews are positive. The rest of 20% of negative comments might be worrying on first sight, but in turn they back up the credibility of the site (Li/Bernoff 2008, p.138).

4.5 F INAL R EMARKS

ON E WOM

M ARKETING

“Nothing is more powerful than a kid with a blog”, Sernovitz says and describes the fact that consumers are in charge today. The marketing departments and ad agencies have no longer control over the marketing message and real people drown the media of the traditional marketing mix with their voices. A single customer comment could have more power than any ad has (Sernovitz 2006, p.39). Alan G. Lafley, CEO of Procter & Gamble, agrees, and says that “Consumers are beginning, in a very real sense, to own our brands and participate in their creation. We need to learn to begin to let go and embrace trends like commercials created by consumers, or online communities built around favourite products.”60 Ricardo Guimarãres, founder of Thymus Branding, goes even further and says (cited in Li/Bernoff 2008, p.79): “The value of a brand belongs to the market, and

59 60

taken from Li/Bernoff 2008, p.139 cited in Mooney/Rollins 2008, p.24

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not to the company. The company in this sense is a tool to create value for the brand (…) Brand in this sense – it lives outside the company, not in the company.” A brand is whatever its customers say it is and not what its advertising or brand statement claim or what the company wants to be like. It is not the image that advertising campaigns craft, a company or brand is what people do and feel when they interact with a product or service. A brand is what people experience with the company. Customers talk about a brand if its story matches their experience and keeps its promises, and they come back because it is as it is. (e)WOM tells the story that is really happening underneath all the marketing. Its content is determined by what a company does, not by what its marketing says. Sernovitz comes to the conclusion that success comes not from what a company advertises, but from what it delivers (Sernovitz 2006, pp.46, 48). In summary it can be said that eWOM marketers have to provide • a quality product or service • quality content, and • ethical or behavioural quality NEED
FOR

Q U AL I TY

O F TH E

P R O D U CT

OR

S E R V I CE

If a company has good products or services, people are going to spread positive WOM. Good experiences mean a better chance for eWOM to proliferate. If the company is not, they will tell that, too (Maymann 2008, p.56; Sernovitz 2006, p.46). Companies have to deliver absolute quality, they cannot hide bad products and services with expensive advertising anymore and manipulating the consumer opinion will not work, because connected people will always bring the truth out (WOMMA 2006, p.8). Sooner or later, the internet makes all faults public. Product reviews and other eWOM appear as soon as a new product is launched. Everyone is able to know shortly if a product is good or not. And, additionally, if consumers catch a brand doing something just a little sleazy, they assume that the company is completely sleazy (Sernovitz 2006, pp.46, 31). Word of mouth marketing is self-policing and pushes marketers to create better products and provide genuine satisfaction (WOMMA 2006, p.4). This requires a new way of thinking. It is not important to think about the marketing of a new

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product, Sernovitz says, but about what people will say after they use it, and what they tell others about its functionality, its quality or usage experience. The same force that rewards companies with free marketing, sales and profits when they treat people well and produce good products, can stop companies from treating their customers badly, simply by affecting their sales (Sernovitz 2006, pp.xxvii, 49). NEED
FOR

Q U AL I TY

OF

C O N TE N T

Making communication and information sharing easy for people is a start (Maymann 2008, p.56). Additionally, talkers need input because WOM stops when there is nothing to talk about. All eWOM starts with the creation of a message respectively content that will spread. Good topics are portable, clear ideas that one person can repeat successfully (Sernovitz 2006, pp.83, 23): If a brand expects its customers to spread eWOM, it has to deliver quality of content. The quality in respect of contextuality or relevance of content is the major factor that determines the viral capability of eWOM. It leads to better reception and makes it more likely that the content travels across networks and communities to be discovered by other people. When it provides people with the incentive to engage with the content and has tie-ins with other (traditional) elements of the campaign, marketing messages can cut through the advertising clutter (Maymann 2008, pp.56, 45). Seth Godin calls this being remarkable, being worth remarking on and worth saying something about (Godin 2005, p.3). If the content is irrelevant, it bores people, and marketing is again forced to spend millions on advertising, with the likely result that customers are annoyed, walk away and talk their friends with them. Advertising, Sernovitz says, “is the price of being boring”: When the consumer doesn’t talk about a company’s products, it has to pay print and TV ads and do it themselves (Sernovitz 2006, p.xxv). A very good example for the quality of content and an integrated campaign gives Dove’s Campaign for Real Beauty that will be described in the following paragraph as an example for the necessity of integrity.

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NEED

FOR

A BS O L U TE I N TE G RI TY

Companies also have to provide behavioural or ethical quality. Groundswell participation and eWOM marketing are not sufficient. For the future, companies as well as entire industries need to show complete integrity. An example for this necessity is again Dove’s Campaign for Real Beauty. Unilever’s Dove cosmetics brand had an excellent marketing idea to distinguish the brand from its competitors: “At Dove, we want to help free ourselves and the next generation from beauty stereotypes.”61 The corresponding campaign did extremely well and generated a lot of (e)WOM.
F IGURE 33: D OVE ’ S C AMPAIGN FOR R EAL B EAUTY 62

Dove also entered the groundswell and launched a community63 about self-esteem (not about soap or hair conditioner). The awareness for the campaign and its website created among others viral videos (Dove Evolution and Onslaught). As part of the campaign, Dove also founded the Dove Self-Esteem Fund. The fund aims for a change of the current, narrow beauty definition.

61 62 63

www.dove.us/#/cfrb/ source: www.adverbox.com/dove/ (Accessed March 25th 2009) www.campaignforrealbeauty.com

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The first (viral) spot for the Campaign for Real Beauty was Evolution. It demonstrated the transformation of an average woman (left picture) into a top-model, using cosmetics, hair styling and image manipulations (right picture) to drive visitors to the Dove Self-Esteem Fund’s website:
F IGURE 34: S CREENSHOTS FROM D OVE ' S E VOLUTION S POT 64

before

after

64

source: www.youtube.com/watch?v=iYhCn0jf46U (Accessed March 25th 2009)

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D O V E ’ S “O N S L A U G H T ” V I R AL The follow-up was Onslaught. It also promoted Dove’s Campaign for Real Beauty Onslaught. and the Dove Self-Esteem Fund. The video shows stereotypes from cosmetics adEsteem vertising. In the final shot a little girl can be seen and the payoff says: “Talk to your daughter before the beauty industry does” does”.
F IGURE 35: S CREENSHOTS FROM D OVE ' S O NSLAUGHT S POT 65

Soon after the release the viral back fired when two spoofs appeared on YouTube, back-fired both criticizing Unilever, the company that owns the Dove brand.

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source: www.youtube.com/watch?v=Ei6JvK0W60I (Accessed March 25th 2009)

72

Dove says66 that they want to help women and girls to celebrate their natural, individual beauty, to make a difference. Filmmaker Rye Clifton had a closer look on this claim, beauty stereotypes and the cosmetics industry. His response to Dove’s engagement was the short-film A Message from Unilever. The viral video contrasts the contradictory messages put out by Unilever, the corporation that owns both Dove and Axe. Axe is using exactly the clichés that Dove condemns to get the attention of young men. Rye Clifton’s payoff reads “Talk to your daughter before Unilever does”.
F IGURE 36: S CREENSHOTS FROM “A M ESSAGE F ROM U NILEVER ” 67

66 67

source: http://dove.ca/doveselfesteemfund/ (Accessed March 25th 2009) source: www.youtube.com/watch?v=SwDEF-w4rJk (Accessed March 26th 2009)

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The other viral that attacked Dove came from Greenpeace. It deals with the topic of deforestation in Indonesia where rain forests are cut down for palm oil plantation, an important ingredient for cosmetics. Without any proof Unilever is accused of supporting the deforestation. The payoff reads: “Talk to Dove before it’s too late.”:
F IGURE 37: G REENPEACE ’ S O NSLAUGHT ( ER ) V IRAL A GAINST D EFORESTATION 68

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source: www.youtube.com/watch?v=odI7pQFyjso (Accessed March 26th 2009)

74

D I S C US S I O N The original Onslaught viral is the most popular of the three videos. Both spoofs are behind in the number of viewers. Data from Viralvideochart.com also shows the connected blog posts and comments. Again, Onslaught counts the most mentionings. It has also the best viewer per post ratio. This means that engagement with the original spot was higher than with the spoofs. I personally assume that the better ratio is a result of (e)WOM that created a positive predisposition of people towards the Dove brand. Building credibility in advance, Dove could benefit from its customers’ goodwill in this situation.
F IGURE 38: C OMPARISON OF P OPULARITY (V IEWS ) 69

Dove "Onslaught" A Message from Unilever Greenpeace "Onslaught(er)" 0
Discovered Dove “Onslaught” Rye Clifton’s “A Message from Unilever” Greenpeace “Onslaught(er)” Dove “Evolution” (for comparison) 01 Oct 2007 25 Oct 2007 21 Apr 2008 09 Oct 2006

2,115,170 190,322 744,120 500000
Views 2,115,170 190,322 744,120 19,509,338

1000000

1500000

2000000
Blog posts 1,416 ratio70 1,494 : 1 100 ratio 1,903 : 1 294 ratio 2,531 : 1 5,557 ratio 3,510 : 1

2500000
Comments 1,911 ratio 1107 : 1 181 ratio 1,052 : 1 343 ratio 2,169 : 1 9,559 ratio 2,040 : 1

Duplicates 9 0 0 49

Anyway, without any TV support, Greenpeace’s Onslaught(er) video managed to get more than a third of the viewings of the original spot. This means a lot of awareness for the spoof and maybe negative (e)WOM for the Dove brand. These findings stress the importance of absolute integrity for a company, especially when brands get visible, when they step ahead and occupy such a prominent position as Dove did with the Campaign for Real Beauty and the Dove Self-Esteem

69 70

data collected from www.viralvideochart.com ( Accessed April 6th 2009) ratio = views per blog post respectively views per comment

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Fund. Behavioural and ethical qualities are essential. Otherwise, activists such as Rye Clifton or Greenpeace might attack. The backfire could concern • the whole company group, as Dove and Axe with “A Message from Unilever” • or even a whole industry as the cosmetics business in case of “Onslaught(er)” This demonstrates again the need for a quality first attitude in every way of a company’s processes, behaviour or products. O TH E R M O D E R A TO RS
OF THE

( E )WOM I M P A C T

The impact of (e)WOM itself is dependent on different other moderators that increase or decrease the WOM effect on the consumer. There is proof that a positive predisposition towards a brand can reduce the persuasiveness of negative (e)WOM, for example (Nyilasi 2007, p.170). According to Nyilasi (2007, p.170), prior information about a brand is the most important moderator. The consumers’ receptivity depends on the fit of their prior beliefs with their obtained information. Another moderator of the eWOM impact is the expert level of the communicator (Nyilasi 2007, p.170; Godes/Mayzlin 2008, p.5). Cues for expertise, e.g. past achievements, are capable of increasing the persuasive effect of eWOM (Schindler/Bickart 2005, p.40). The credibility of a message also increases when there is a presence of negative information along with positive information. And it is also supposed that eWOM is more persuasive if it is written from a first-person perspective. Perceived similarity between writer and receiver is perceived to be more trustworthy and can also increase the persuasiveness of eWOM. The source’s perceived trustworthiness is dependent on the reader’s attributions of the source’s intentions (Schindler/Bickart 2005, p.40). According to the AccessibilityDiagnosticity Theory, the impact is also depending on the vividness of the message that is said to generate favourableness. Vividness makes the explanation more diagnostic and easier to access for the receiver than impersonal information (Nyilasi 2007, p.171).

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5. A CTIONS ON N EGATIVE E WOM AND U NETHICAL T ACTICS
This chapter will first describe negative WOM (nWOM). Then it will describe the marketing strategies for meeting nWOM and dealing with it. Finally, unethical eWOM marketing tactics that marketers should refuse will be discussed.

5.1 N EGATIVE ( E )WOM
WOM does not have to be necessarily positive. It could also communicate a dissatisfying experience with a product or service (Nyilasy 2007, p.166). In this case, WOM is called negative word of mouth and is extremely dangerous for marketing as there is evidence that nWOM • is more potent than positive WOM (Nyilasy 2007, p.166), • spreads more quickly within social networks (Allsop et al. 2007, p.405), and • spreads further than its positive counterpart (Helm 2000, p.158) A study by Burson-Marsteller revealed that while people pass along positive news to an average of only 13 people, they shared negative information with an average of 17 people (Allsop et al. 2007, p.405). To marketers who cannot grant absolute customer satisfaction, nWOM is a fearful phenomenon (Helm 2000, pp.158-159). R E AS O N S
F O R N WOM

According to Richins et al., consumers’ tendency to go negative is initialized by their perception of how a company responds to their problems or complaints. If they think that the company is not listening, they are more likely to spread nWOM. This is congruent with Blodgett et al. who say that the perception of the complaint process determines the tendency to engage in nWOM (both cited in Balter 2008, p.141). Another finding by Richins et al. is that if a consumer does not like a product that is not showing any particular fault, he will not tell anyone. This is not the case when she thinks that she has been misled or betrayed. In this case, people are likely to articulate nWOM even about a proper product (Balter 2008, p.141). N E G A TI V E E WOM Apart from negative offline WOM, there is also negative eWOM. This is just a logic consequence of their conceptual similarity. Drawing on Hennig-Thurau et al. (Hennig-Thurau et al. 2004, p.39), negative eWOM is per definition any negative state-

77

ment made about a product or company, which is made widely available via the internet. The blessing of speedy communication can easily become the curse of eWOM. The same features that make the web an ideal communications medium for positive WOM, e.g. speed and the ease of use, are also ideally suited to proliferate nWOM. Most consumers do not go looking for negative news, but they pay attention when they hear it. Critical or false information can harm a brand’s efforts and jeopardize the trust it has invested heavily in building (HarrisInteractive 2004, p.1). The motivation to spread negative eWOM seems to be not in spite, but rather a genuine desire to prevent others from making unsatisfying decisions (HarrisInteractive 2004, p.4; Allsop et al. 2007, p.405).
F IGURE 39: K ELLOGG ' S L EGO F UN S NACKS

E X A M PL E S Food giant Kellogg’s provides a recent example for negative WOM. Jerry Holkins, author of the weblog Penny Arcade saw a TV commercial for Kellogg’s Lego Fun Snacks, fruit flavoured candy in the shape of LEGO bricks. He expresses his emotional reaction in his blog:71 “I would love to know what sick bas-

tard at Kellogg’s came up with this genius idea. I just spent the first three years of my sons life trying to get him not to eat blocks, and now you're telling him they taste like f***ing strawberries. Thanks a lot a**holes. Seriously, how in the hell did this ever get past their legal department. You can't tell me that this isn't a lawsuit just waiting to happen. I can only assume that their next product is fruit flavoured thumbtacks.” Penny Arcade is not just an average weblog. According to the TIME magazine72, it was the Best Website 2008 and generates a lot of traffic. The post was soon picked up by several other blogs, e.g. The Consumerist, and is the subject of several discussion boards discussing the product (Bhargava 2008).

71 72

www.penny-arcade.com/2008/6/18/ (Accessed March 28th 2008) www.time.com/time/specials/2007/0,28757,1809858,00.html (Accessed September 17th 2008)

78

Another phenomenon is boycott sites or so-called hate pages. They are an extreme example of negative consumer response and illustrate the dangers of being targeted with nWOM by interest groups or (a few) individuals:
F IGURE 40: H ATE P AGE W ALMARTSUCKS . ORG 73

The first three lines of the blog entry on walmartsucks.org speak for themselves: • Help stock our shelves with Wal-Mart horror stories or find a lawyer to sue Wal-Mart • Go ahead, show ‘em who’s really boss • Give us the power of your inside information As the thesis will demonstrate below in the next paragraph, a single dissatisfied consumer or frustrated employee choosing to mail his story is enough to cause enormous financial or image damage. A hate page like this is an easy way to spread the negative experience to the media and millions of consumers.

5.2 S TRATEGIES

ON

N EGATIVE E WOM

An example for the power of blogs and public opinion as well as false crisis management is the case of bike lock manufacturer Kryptonite.

73

http://walmartsucksorg.blogspot.com/ (Accessed March 17th 2009)

79

T H E K RY P TO N I TE C AS E On September 12th 2005, it started with a single blog entry which alleged it was possible to easily open a Kryptonite lock with a BIC ballpoint pen (Klesse/Prange 2009, p.73). Only two days later, other blogs joined the discussion and posted the URL of a YouTube video demonstrating the unlocking. Four days later, even with the video posted, Kryptonite issued a statement claiming that their locks are a "deterrent to theft". This answer did not satisfy the blogosphere and more and more bloggers started to write about the issue, read by millions of other users, as Technorati data shows (Kirkpatrick 2005, p.48):
F IGURE 41: S PREADING OF N WOM (K RYPTONITE C ASE ) 74

The next day, traditional media like the New York Times and AP reported the story, which set off new blogging activity. One week later, the story reached its peak with estimated 1.8m readers per day. Finally, ten days later, Kryptonite had lost $ 10m, not including image damage. At this time, the company had to announce that it would exchange the affected 100,000 locks for free (Kirkpatrick 2005, p.48). Andrew Bernstein, CEO of TNS Cymfony, assumes that the anger might have been stopped before it hit the papers and became widespread, if the company had only taken the issue and their customers seriously and responded earlier. TNS, as described above (compare 4.2), watches the web for corporate customers and provides warning systems for such upcoming disasters (Kirkpatrick 2005, p.48).

74

taken from Kirkpatrick 2005, p.48

80

N E G A TI V E E WOM B E A RS C O M PL E TE L Y N E W C H AL L E N G E S

FOR

M A RK E TI N G

Consumer reviews as well as opinion platforms or blogs can exert a strong influence on consumer buying and communication behaviour. These comments offer opportunities, but bear also risks, because WOM does not necessarily have to be positive (Hennig-Thurau/Walsh 2003, pp.65-66). Negative articulations are the consequence of dissatisfying experiences with a product or service (Nyilasy 2007, p.166). They are extremely dangerous for marketing because they can spread rapidly to a very large number of people, as the Kryptonite case demonstrated. Additionally, they become part of the public record and accessible forever (HennigThurau/Walsh 2003, p.66). Consumers seek out these articulations because they do not trust marketing sources and refer to eWOM to make a well informed decision (Balter 2008, p.137). This indestructibility has to be kept in mind, especially in case of nWOM or (intentional) false eWOM (Schindler/Bickart 2005, p.39). A very impressive example for a special kind of the indestructibility of web content is the so-called Streisand Effect.75 It describes a phenomenon that could occur when companies or individuals try to censor or remove information from the web. Their attempt backfires and causes the information to be widely published on the web, because the incident receives intensive publicity. Instead of being suppressed, the information is widely mirrored across the internet (Canton 2005). Maybe the most prominent example for the Streisand Effect is the spreading of the code for the decryption of HD-DVDs. The 32-hexadecimal digit code received a lot of attention, particularly on the site of the popular social bookmarking service Digg.com. Referring to the Digital Millennium Copyright Act (DMCA), the group responsible for the licensing of the Advanced Access Content System (AACS) tried to ban the code from the internet and threatened, among other sites, to sue Digg (Canton 2005). In the end, Digg decided to disobey and posted a blog entry entitled “Digg This: 09-f9-11-02-9d-74-e3-5b-d8-41-56-c5-63-56-88-c0”:

75

The term Streisand Effect refers to singer/actress Barbra Streisand’s attempt to ban an aerial photo of her house from the website of photographer Kenneth Adelman who wanted to picture the whole California coastline in 12,000 pictures (Canton 2005).

81

F IGURE 42: T HE S TREISAND E FFECT ON THE HD-DVD P ROCESSING K EY 76

In the end, the AACS did not reach their aim of banning the code, but caused the opposite: The code spread like a wildfire and can be found 305,000 times via a simple Google search query today. This example demonstrates that a brand’s eWOM marketing should include not just actions to influence and harness positive WOM, but also measures to neutralize nWOM (Allsop et al. 2007, p.405). This is backed and stressed by two surveys. A study by Verde Group unveiled that people who have just heard about a dissatisfying shopping experience are less likely to visit the regarding store than the person who actually had the bad experience (Kawasaki 2006, p.184). Another example is provided by Sernovitz (2006, p.160), who reports that on average, an unhappy customer tells five people about his experience, but a formerly unhappy customer,

76

compare

http://blog.digg.com/?p=74, dated May 1st, 2007; Kevin Rose is one of the company’s founders (Accessed April 2, 2009)

82

who is made happy, tells ten people. This means that making unhappy people happy is more valuable than making them happy in the first place. Companies that keep on with bad products or poor customer service get a problem in the online world. They have to fix these sources of nWOM, because future search queries regarding the brand will not only show up the official website and news stories, but also thousands of negative posts. Without action on nWOM, such companies can never book another online advertisement again without having it placed next to the posts of dissatisfied consumers (Sernovitz 2006, p.44). M E AS U RE S
TO

D E AL W I T H N E G A TI V E WOM

There are different kinds of nWOM on the internet. Depending on its origin, different kinds of response are required (Allsop et al. 2007, p.405). When nWOM is a result of customer dissatisfaction because a product failed to meet expectations, companies should find out the reason, fix the problem and improve the product (Allsop et al. 2007, p.405; Sernovitz 2006, p.25). Fixing problems is the most powerful marketing a company can do (Sernovitz 2006, p.160) and the way of a company’s response to nWOM is an important source of positive WOM (Balter 2008, p.138). Unexpected product failures are also a reason for nWOM. Safety issues or scandals that are based on truth may be blown out of proportion. Again, honest response and fast action to fix the problem are vitally important (Allsop et al. 2007, p.405). Negative WOM from competitors or critics often contains scaremongering, halftruths or entire lies. Allsop et al. (2007, p.405) warn that modern technology and the media's appetite for controversy give these critics more publicity than they deserve. An example for this is the pain reliever Motrin sold by McNeil Consumer Healthcare. One of their campaigns triggered an avalanche of protest via twitter and the blogosphere because consumers felt taunted. After a while, McNeil withdraw their TV and print campaign. Later, research company Lexalitics analyzed the “tweets” from micro-blogging service Twitter and found out that the critics were a minority with only one third of the comments (Heuer 2009, pp.78-79). For a case like this, Allsop et al. (2007, p.405) recommend aggressive response and using the facts to settle the attacks of negative WOM.

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There is not a single strategy to cope with nWOM. Most actions take the same steps as those for amplifying positive WOM (Sernovitz 2006, p.163): • listening • building credibility and goodwill in advance • showing that one is listening (talking) • enabling hidden supporters and quiet advocates • converting critics if possible • not trying to win A company can overcome negative reactions to its brand if it listens carefully, responds quickly and fixes faults (Balter 2008, p.142). Companies should always know what people are saying about them so they are not caught unprepared by surprise. Apart from that, it is easier to talk badly about someone who is absent and expected not to be listening (Sernovitz 2006, pp.163, 164). ONLINE SURVEY 50 percent of the participants of the online survey believe that they are prepared for the challenges of the web 2.0. But in fact, only 37.5percent conduct web monitoring – full 62.5 percent of marketing departments could anytime be caught by surprise.77

Building credibility and goodwill in advance allows companies to benefit from it when it is needed. Participation in the blogosphere helps to earn this credibility because a company becomes known as a reliable partner (Sernovitz 2006, p.163). There is proof that a positive predisposition towards a brand can reduce the persuasiveness of negative (e)WOM, for example (Nyilasi 2007, p.170). Companies must respond to occurring problems and show that they are listening. Balter cites Mangold et al. who uncovered that half of all negative WOM is coming from consumers who feel treated badly and unfairly by a company when they encounter a problem and no-one is listening to them (Balter 2008, p.138). The first Kryptonite entry, for example, was only posted because the company did not respond (Klesse/Prange 2009, p.73). Most negative comments and conversations are a call for help and assistance. Most authors are positively surprised when they see
77

compare Appendix Questions A-1 and B-2

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that a company is reading their contributions (Sernovitz 2006, pp.164, 163). Additionally, there should be an easy solution for customers to complain, because literature found that this can reduce the chance that they will spread nWOM (Nyilasy 2007, p.173). Apart from offering to solve a problem, it is again important to identify ones affiliation to a brand, but it is even more important to answer as an individual: People tend to shout at the big companies, while responding to an individual will downscale their anger. The response should be very fast which means within 15 minutes. Otherwise, in the groundswell environment, the tenor of the discussion might already be determined and linked (Sernovitz 2006, p.164; Heuer 2009, p.79). It is also important to tell the company’s side of the story in consideration of the public record. Blogs, for example, are displayed in reverse chronological order. The final statement counts most, because people see first what is written at the end of the blog. Moreover, the newer blog posts show up first in search results, too (Sernovitz 2006, p.165). Hidden supporters or quiet advocates exert particular power in the world of WOM. They do not speak up like brand evangelists do, but when they talk, they have more influence in WOM conversations than brand evangelists. When nWOM gets ugly, quiet advocates can create a positive backlash. Quiet advocates are people who like a certain product, but do not talk much about it. They first become vocal when they are convinced that a product is being unfairly bashed. To rally these troops, companies need an open conversation. There is no way for them to know that their favourite brand needs their help if it hides from criticism (Sernovitz 2006, p.164; Balter 2008, pp.138, 153). Good crisis management can change distracters into advocates. If the company responds positively to nWOM and detractors acknowledge that their concerns matter, it can turn them into powerful talkers. This provides two benefits: First, there will be a story of a good ending posted on the internet, and second, converted critics become even more enthusiastic fans (Balter 2008, pp.9, 137, 141; Sernovitz 2006, pp.160, 165). Dealing with negative WOM is about earning respect, not necessarily agreement. This requires responding and participating instead of trying to manipulate and

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initiate legal action, even if the inherent lack of control might be frightening (Sernovitz 2006, p.165).

5.3 U NETHICAL WOM T ACTICS
A recent example for the abuse of eWOM marketing is Calvin Klein. In 2007, five young people started to post comments on the most important German blogs and internet forums. They linked back to their profiles on MySpace, YouTube, Flickr and others which gave them the appearance of real people. In most comments they posted terms like “in2” or “technosexuell” and the signature “what are you in2?”. A connection to the new Calvin Klein fragrance IN2U was soon unveiled and bloggers found that someone had started systematic ad placements. A little later, Coty Prestige Lancaster Group took responsibility for the campaign which they said was not stealth advertising, but a blog-soap for the web 2.0 generation. Their comments could be considered as indirect advertising. But their references to the IN2U website or detailed comments about it are advertising, not flagged nor paid and using unaware bloggers and their readers for commercially driven purposes. Blogger Robert Basic (author of Basicthinking.de), is displeased by the false comments on his blog and feels utilized. For him, this is annoying, but not harmful. He says that this sort of campaign will either be rapidly exposed or develop no advertising impact, because they are too unremarkable (Lischka 2007a; Gerdes 2008, p.28). U N E T H I C AL WOM M A RK E TI N G There are dishonest tactics which undermine the trustworthiness of WOM. According to the WOMMA, “any practice intended to deceive people” is unethical. They list seven examples (WOMMA 2006, p.7) that are also applicable to eWOM marketing:
T ABLE 19: U NETHICAL WOM M ARKETING T ACTICS
Stealth marketing Shilling Infiltration Comment spam Defacement Spam Falsification Any practice designed to deceive people about the involvement of marketers in a communication Paying people to talk about (or promote) a product without disclosing that they are working for the company; impersonating a customer Using fake identities in an online discussion to promote a product; taking over a web site, conversation, or live event against the wishes or rules set by the proprietor Using automated software (‘bots”) to post unrelated or inappropriate comments to blogs or other online communities Vandalizing or damaging property to promote a product Sending bulk or unsolicited e-mail or other messages without clear, voluntary permission Knowingly disseminating false or misleading information

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For eWOM, these unethical actions could be users who pose as everyday people to embed corrupt content that seems to be truthful, but is not. Another threat would be companies that go a step further and bribe real bloggers or online community moderators to post their messages (Lischka 2007a; Balter 2008, p.176-177). These dangers provoke general criticism of WOM marketing: author William Gibson calls it a twist he was not quite paranoid enough to imagine. He fears companies that recruit unpaid volunteers to infiltrate lives and talk up products. David Byrne, who is a general observer of pop culture and modern life, is worried about a world in which no one is to be trusted any longer because no one knows whether someone is being helpful or if he has a hidden agenda (Balter 2008, pp.175, 176). Because of this, the WOMMA and literature absolutely refuse these marketing actions that are based on deception (WOMMA 2006, p.7; Ossi Urchs in Zunke 2008, p.22; Balter 2008, p.176; Sernovitz 2006, p.5).
78 ONLINE SURVEY The survey unveiled that most companies don’t use unethical eWOM tactics (1a).

But for the future, some marketers think that the actions are promising. While the majority of eWOM users rates them as little or not promising (1b), this is slightly different for the non-users who rate the future perspectives more positively (2).
1A. (ACTIVE EWOM MARKETERS) THE INTERNET HOLDS MANY OPPORTUNITIES TO GENERATE WOM. IN WHICH AREAS ARE YOU ENGAGED?
Incentives for bloggers, in order to make them blog benevolent about products Own placements of positive reviews on sites as ciao.de, in forums or shops PR-service that is disguised as individuals, to spread positive eWOM Very promising promising

YES

X out of Y

11.1% 1 0% 0 11.1% 1 Little promising Not promising

1/9 0/9 1/9 I don’t know

1B. (ACTIVE EWOM MARKETERS) HOW DO YOU SEE THE FUTURE OF THESE EWOM ACTIVITIES?
Incentives for bloggers, in order to make them blog benevolent about products Own placements of positive reviews on sites as ciao.de, in forums or shops PR-service that is disguised as individuals, to spread positive eWOM

----

1 11.1% 4 44.4% 2 22.2%

4 44.4% 4 44.4% 3 33.3%

3 33.3% -3 33.3%

1 1 1

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compare Appendix 1, Questions C-1, C-2, and F

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Very promising

promising

Little promising

Not promising

I don’t know

2. (PASSIVE EWOM MARKETERS) HOW DO YOU SEE THE FUTURE OF THESE EWOM ACTIVITIES?
Incentives for bloggers, in order to make them blog benevolent about products Own placements of positive reviews on sites as ciao.de, in forums or shops PR-service that is disguised as individuals, to spread positive eWOM

-1 7.1% --

5 35.7% 6 42.9% 4 28.6%

5 35.7% 3 21.4% 3 21.4%

4 28,6% 3 21.4% 6 42,9%

0 1 1

D AN G E RS

OF

U N E T H I C AL WOM T A C TI CS

IN

G E N E R AL

Attempts to manipulate people or the conversation through deception, infiltration or dishonesty are morally bankrupt practices (Sernovitz 2006, p.28). The basis of the power of WOM is real honesty and its strength is trustworthiness that is undermined by dishonest tactics (WOMMA 2006, p.7; Balter 2008, p.177). WOM marketing is only successful when people trust each other and tell others honestly about what they like and what they do not like. Unethical (e)WOM marketing is jeopardizing consumers’ trust, and if these practices continue, WOM could experience serious damage (Sernovitz 2006, p.28; Balter 2008, p.176-177). Because of this, the WOMMA (2006, p.7) recommends marketers to not • impersonate people, push the so-called “shilling”, or to hide their identities, • manipulate or corrupt honest opinions, and • infiltrate, invade, or violate online or offline venues Apart from the WOMMA’s Code of Conduct, the WOMMA also issued a code of ethics to maintain ethically correct behaviour nor just by the company itself, but also its agencies, vendors, and internal departments. It is called the Honesty ROI and thought to give orientation (WOMMA 2006, p.7):
T ABLE 20: T HE WOMMA’ S H ONESTY ROI 79
• • • Honesty of Relationship: Honesty of Opinion: Honesty of Identity: You say who you are representing. You only say what you really believe. You never lie about who you are.

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http://womma.org/ethicscode/ (Accessed January 29th 2009)

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D AN G E RS

FOR

B UY E RS

OF

U N E TH I C AL WOM A C TI O N S

Dishonest eWOM marketing is also threatening for an advertiser and his brand. The main dangers of unethical eWOM marketing actions are • the high likeability of disclosure • poor efficiency • serious brand damage Employees of a company who sneak into blogs or forums as normal users to spread their PR are unmasked sooner or later, and website operators are great at sniffing out fake reviews (Sernovitz 2006, p.29). This, web expert Ossi Urchs says, is the worst-case scenario for any brand (in Zunke 2008, p.22). WOMMA, literature and blogosphere agree that unethical WOM will always be exposed and condemned (WOMMA 2006, p.7; Sernovitz 2006, p.29; Lischka 2007a). The difference between unethical deception and true participation is disclosure. Because of this, companies should always clearly address their affiliation (Sernovitz 2006, p.29). Apart from that, the WOMMA regards unethical WOM marketing actions as mostly inefficient. Sernovitz agrees and thinks that it does not work in the long run. Finally, it might not develop an advertising impact, because it is just too unremarkable (WOMMA 2006, p.7; Sernovitz 2006, p.28; Lischka 2007a). The most dangerous threat of unethical WOM marketing is the danger of brand damage. In case of false entries, the positive WOM a company hopes to create could turn negative, because today’s consumers are extremely savvy and the web provides all the information and resources to catch dishonest companies in a lie and discipline them (Sernovitz 2006, pp.29, 28).

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6. R ESULTS
The intention behind this master-thesis was to answer whether marketing could stimulate and promote positive eWOM and describe how companies could meet negative eWOM and deal with it. Additionally, the thesis was also to illustrate the opportunities of eWOM in the context of consumer generated online content and examine its perils for marketing. These are the results:

6.1 H OW

TO

S TIMULATE E WOM

First of all, it is possible at all to combine the power of WOM with the rapidly evolving possibilities of the internet. And second, marketing can harness this combination. There is a multi-step approach to engage with eWOM marketing. Listening is just the first step and takes over the role of traditional market research, while talking and energizing start the interaction with the consumers and support the proliferation of eWOM. T AL K I N G There are various steps within the marketing funnel. While advertising creates awareness at most, the different tools of eWOM marketing reach further and help to solve problems that occur within the funnel, e.g. as a result of ad clutter, marketing literacy or the shift in trust, that have been mentioned in the problem description in 1.1. As described above, (e)WOM is influencing each step of the decisionmaking process, from the problem recognition to the post purchase evaluation (compare 4.3.1). This is what eWOM marketing actions do: If there is no awareness and people do not know about a brand, viral videos can make them aware of a company’s product or service (see 4.3.1). When people do not talk to other people about an attractive product or brand that has the potential to get people to talk about it, a profile on a social networking site is a good choice to create eWOM (see 4.3.2). When the consumers have to consider complex options, e.g. for financial products, the decision-making becomes difficult. Blogging can solve this problem because it reassures the customer before, during and after the purchase (see 4.3.3).

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Sometime companies encounter accessibility problems: When the consumers do not listen to a brand or are insistent on depending on each other, companies can create or support a community for them to create an environment where these people feel well and are ready to listen to the marketing message (see 0). The depth of marketing engagement and interaction with the consumer increase from step to step. These and the actions described below have one thing in common: They require not only talking to the consumer, but also listening and responding to their feedback. eWOM marketing is about honest two-way communication between marketer and consumer (see 3.1). If there is no dialogue, eWOM dies or goes negative. ENERGIZING Energizing goes a step further than talking. It replaces the traditional business function of sales. Energizing means to find enthusiastic customers and turn them into WOM propagators. It is a powerful tool to boost sales through satisfied customers who spread positive WOM for free. The techniques of energizing are • developing tools to make telling a friend easier • working with social networks (creating communities) • creating forums and feedback tools (ratings & reviews) Tell-a-friend buttons are an example for tools that make telling a friend easier. They are easily set up on any website, and an “other people bought this” remark on a retailer’s site can turn passive recommendations into eWOM. Online Communities are a good way to energize consumers that are passionate about a product and have an affinity for each other. Energizing should give people a feeling of importance or of being an insider-like status. Companies can achieve this by showing them appreciation or by giving them status and recognition, e.g. with a club created for them, special member benefits or by calling into a customer advisory board (see 4.4.1). This feeling of importance or of being an insider is also the key motivation for critics: Rating and review sites are especially appropriate for retailers and businesses with a large potential of critics. The strategy behind ratings and reviews is influencing their readers: They boost sales because for people looking for popular

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products, a large number is a signal that the product is worth considering (compare 4.4.2). If there are no community or real enthusiasts for a product or brand, tapping the critics is an effective alternative.

6.2 H OW

TO

D EAL

WIT H

N EGATIVE E WOM

Negative consumer reviews and opinions on the internet can exert a strong influence on other consumers’ buying and communication behaviour. Via the internet, dissatisfying product- or service experiences can spread rapidly to a huge number of people, and apart from that, they become an indestructible part of the public record. As a consequence, making unhappy people happy is more important than making them happy in the first place (see 5.2). To deal and engage with negative online articulations, honest response and fast action are required. Companies have to fix problems and improve affected products. The actions are largely similar to the actions for stimulating positive eWOM (compare 5.2), therefore companies should • build credibility and goodwill in advance (e.g. through blogging) • listen and conduct brand monitoring (as an early-warning system) • fix problems as soon as they occur (show that the company is listening) Most nWOM comes from consumers who feel a lack of support or attention to their problems. Many negative comments are merely calls for help and assistance. A company can overcome these negative reactions through careful listening and quick response. Listening enables companies to connect with people who encounter problems and address their problems directly. Listening is also an earlywarning system for upcoming negative news and allows a company to respond to nWOM before things get out of hand. Another way to reduce the chance that nWOM is being spread is to give customers easy ways to complain. When companies manage to build goodwill in advance, e.g. through participation in the blogosphere, they can benefit from it when goodwill is needed. Additionally, a positive predisposition towards a brand can reduce the persuasiveness of negative eWOM. And, with good crisis management, companies can change distracters into brand advocates and turn them into powerful talkers.

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6.3 O PPORTUNITIES
O P PO R T UN I TI E S
OF

AN D

P ERILS

OF

C ONSUMER G ENERATED C ONTENT

C O N S U M E R G E N E R A TE D O N L I N E C O N TE N T

As described above, eWOM is an excellent tool to solve many of the problems traditional marketing and advertising encounter today. Aside from ad clutter, consumer annoyance and media fragmentation, it is very effective within the marketing funnel. It is perceived as unbiased information and highly relevant for the consumers, because they can decide when and what to look up for a purchase decision. eWOM is completely free product promotion and eWOM marketing pays off very soon (e.g. P&G’s Beinggirl.com community 0). Furthermore, eWOM delivers genuine consumer insights for market research purposes that are not falsified by artificial test environments or the questioning. PERILS
OF

C O N S U M E R G E N E R A TE D O N L I N E C O N TE N T

When a company is not listening and responding to consumer generated content, eWOM also holds threats. There are several reasons. The slightest dishonesty and the smallest product failures are immediately exposed, for example. The online chatter does not know regulations. People do not ask for permission to use corporate material and do not care about copyright violations. Other threats in this context are the mixing of fact and opinion, the reporting of rumours, the spreading of halftruths or failure to disclose conflicts of interest. All these things make eWOM an uncontrollable phenomenon; especially when negative eWOM becomes part of the permanent record. Another fact in this context is the change of the balance of power on the internet. The internet connects people and allows them to draw strength from each other. This makes it hard to stop or sue individual people, if it is possible at all. Lawyers and companies are no longer the most powerful force on the internet. Today, empowered people are in charge and brands have to keep this change in mind.

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SWOT

AN AL Y S I S F O R E WOM M A RK E TI N G

The results of the thesis lead to the following SWOT-analysis for eWOM marketing:
F IGURE 43: SWOT-A NALYSIS OF E WOM M ARKETING
Strengths • • • • • • cheapest marketing tool (eWOM is free) higher efficiency than other marketing tools due to its credibility most effective chance for outperformance due to higher growth rate (Net Promoter Score) most customer friendly listening is a free research tool on genuine thoughts Weaknesses • • • eWOM marketing is a long-term strategy and takes time it requires corporate-wide out-performance eWOM has only limited influence on certain consumer purchase decisions • • • • • • • • Opportunities most other companies aren’t yet aware of the chances of eWOM marketing eWOM marketing could give brands a competitive advantage first mover advantage for those who start to build relationships and credibility now opportunity to prepare the whole organisation for an eWOM-driven future Threats failures become immediately public permanent record of rumours, half-truths or untruths uncontrollable (compare Streisand Effect) unethical marketing tactics harm the credibility of eWOM

As we can see, there is a tendency of the strengths and opportunities to outweigh the weaknesses and threats of eWOM marketing.

6.4 I NSIGHTS F ROM

THE

O NLINE S URVEY

The results from the online survey can be found in the text (where applicable) and in the Appendix 1.

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7. C ONCLUSION
The results clearly show that it is possible to stimulate electronic word of mouth. eWOM marketing offers a number of advantages compared to traditional marketing tools such as advertising, and promising opportunities. Some questions however still need to be answered: 1. What is the real importance of eWOM marketing? Is it just a fad or a niche tool? 2. How should marketing departments proceed? What actions can they take?

7.1 T HE R EAL I MPORT ANCE

OF

O FFLINE WOM C OMPARED

TO E WOM

eWOM marketing offers promising chances for marketing. The question is whether it can keep these promises. The real power of eWOM influence is important and has to be discussed because eWOM marketing only makes sense if it exerts a significant effect on consumer purchase decisions. Some voices in marketing literature doubt this influence on customer decision making.

7.1.1 I S T H E R E A L A CT I O N

IS

O F F LI N E ?

In their 2006 article “Word of Mouth: The Real Action is Offline”, Ed Keller and Jon Berry approve a great future for WOM marketing, but abnegate it for eWOM marketing. They base their verdict on studies on Americans’ WOM conversations. These unveiled that only 7% of WOM interactions happen online:
T ABLE 21: I MPORTANCE OF WOM C OMMUNICATION C HANNELS IN 2006 80
Face-to-face Phone conversations E-mail/instant messaging Text messages Chat rooms / blog conversations online WOM online WOM online WOM online WOM communication combined = 72% 18% 3% 3% 1% only 7% 2,500m 630m 105m 105m 35m 245m

Other little promising data come from Cate Riegner. She examined the influence of user generated content (UGC) on consumer purchase decisions. At first glance, her

80

data from Keller/Berry 2006

95

figures look very disappointing, too, because they suggest that only 9 in 100 purchases are influenced by eWOM (Riegner 2007, pp.436, 442):
T ABLE 22: I NFLUENCE OF U SER -G ENERATED C ONTENT S ITES IN 2006 81
Consumer reviews/rating sites Blogs/discussion boards Instant messaging/chat rooms Social networking sites UGC sources (any) 5% 3% 2% 1% total: 9%

For certain product-categories such as expensive tech-electronics or high-touch retail, her findings are more promising and illustrate the relative importance of eWOM compared to offline sources in general (Riegner 2007, p.442):
F IGURE 44: I NFLUENCE OF U SER -G ENERATED C ONTENT BY P RODUCT CATEGORY 82 Pricey tech-electronics High-touch retail Household staples No touch services 0 4 5 10 15 20 25 30 5 8 24

eWOM seems to influence more complex or higher priced items like technology and consumer electronics. The likelihood of influence is lower for • products of low-interest, • products that are purchased in stores (e.g., consumer packaged goods, CPGs), • products buyers want to see, try on or feel (e.g., furniture, apparel), • or products that are personal or confidential in nature (e.g., travel, finance) Another finding by Riegner is that the eWOM influence is not only stronger for certain product categories, but also for products that are purchased online. These are twice as likely to be influenced by UGC as products purchased offline (Riegner 2007, pp.442-443).
81 82

Riegner 2007, p.442; based on 1,397 respondents who purchased a product in the last three months Riegner 2007, p.443; based on 1,397 respondents that purchased the product in the last three months. High-touch retail = e.g. clothing, appliances or furniture; household staples = e.g. beverages or pet supplies; no touch services = e.g. travel or financial services

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7.1.2 D I S C US SI O N At first glance, Keller & Berry’s as also Riegner’s findings suggest that eWOM marketing exerts just a very small effect on customer purchase decisions. This would make the successful application of eWOM marketing questionable. I personally disagree to these estimations. Keller & Berry’s figures from 2006 may be correct, but they are also just a snapshop of the 2006 situation. Since then, a lot has happened. The internet is evolving, and so are eWOM and consumer media usage (see 1.1), which will be described below. Their findings do not include recent trends and might therefore be outdated. From my opinion, Keller & Berry also made an important error in reasoning: It might be correct that 72% of WOM conversations happen offline, but their study does not describe how many of these conversations have at least been influenced by eWOM. They only describe the channels that are used to pass WOM, but do not consider its origin which would be important to make a correct conclusion. Cate Riegner’s results show the same problem as Keller & Berry’s: The basic figures also date from 2006 and might be outdated, too. In contrast to Keller & Berry, she admits that the present influence of eWOM on purchase decisions is relatively low but puts emphasize on its positive perspective. Riegner says that eWOM is still in an early adopter phase and has high hopes on younger broadband users that are already participating most in eWOM activities (Riegner 2007, p.447):
T ABLE 23: O NLINE C OMMUNICATION T OOL U SAGE BY A GE 83
Age E-mail Instant messaging/chat Forum/blogs/discussion boards 13-17 81% 73% 33% 18-24 90% 68% 29% 25-34 95% 49% 26% 35-44 97% 38% 19% 45-54 98% 30% 12% 55+ 99% 23% 9%

83

Riegner 2007, p.439; based on 4,190 respondents (broadband users)

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The most influential consumers on the web who embrace the internet, not just as a tool, but as a way of life, are aged between 24 and 44 years:
F IGURE 45: O NLINE T ALKERS BY A GE AND G ENDER 84 60 50 40 male female 30 20 10 0 13-17 18-24 25-34 35-44 45-54 55+

Riegner predicts that this group will grow considerably within the next five years. The percentage of eWOM influence for certain product categories might also rise when younger people enter adulthood, settle into new homes and gain more disposable income. This way the impact of UGC is likely to expand to other less techoriented products in near future, with high-involvement categories progressing faster than low-involvement products (Riegner 2007, pp.443, 447). The data from 2006 might be somewhat outdated, but I personally share Riegner’s hopes for the future. So seem to do marketing decision makers:
ONLINE SURVEY

79.2 percent off all marketing decision makers from the online survey can imagine to integrate eWOM into their marketing activities (16.7% can’t, 4.2% don’t know). More than a half (54.2%) believe that it is going to become a permanent marketing discipline (16.7% don’t, 29.2% don’t know).85

The literature on (e)WOM marketing is also convinced of the future importance of eWOM. Schindler & Bickart (2005, p.35), for example, say that “This type of com-

84 85

Riegner 2007, p.440; based on 1,148 users of message boards, chat rooms, listservers and wikis compare Questions A-1 from the online survey

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munication is already playing a role in marketing, and promises to do so much more in the future”. Paul Marsden concludes that WOM is the oldest media available for marketing and that it has become even more important today, because the new personal communication technologies like blogs, instant messaging or mobile phones increase the speed, reach and utility of WOM (Marsden 2007, foreword p.XX ). Finally, Emanuel Rosen emphasizes that WOM is not just another marketing fashion. He says that WOM is a new, powerful media channel that marks a major shift in marketing (Rosen 2005, p.ix). I fully agree to these statements. But there are also some hard facts that back this forecast. From my personal opinion, eWOM marketing will succeed for the same three reasons that led to the groundswell (compare 3.1): the collision of people, technology and economics. People’s desire to connect, to stay in touch, to create, and to help each other, is an universal and basic need and the rise of social media has just begun. Facebook, for example, grew by 500% from 2006 to 2008:
F IGURE 46: G ROWTH OF S OCIAL N ETWORKING S ITES F ROM 2006-2008 86 Facebook Yahoo!Groups 30 25 20 15 10 5 0 2006 2007 2008 Myspace Groups.Google Craigslist LinkedIn

The internet stands apart from other media because it enables its users to interact. At its core, it is a tool for interpersonal communication (Riegner 2007, p.436); and

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source: www.marketingcharts.com/wp/wp-content/uploads/2009/01/netpop-social-networksfacebook-grew-500-percent-december-2008.jpg (Accessed March 30th 2009)

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the enormous growth is a consequence of people’s fundamental need to commun communicate and engage with others (Maymann 2008, p.30). The latest communication tool in this context is Twitter, a social networking and micro-blogging tool that enables people to send and read personal updates known as tweets. Tweets are posts limited to 140 characters in length. I tweets. personally think that Twitter w not be the last application that will further will change the media env ronment and increase the future influence of eWOM on co environment consumer purchase dec mer decisions – there are many more to come. Granitz & Ward (1996, p.161) give another interesting reason for the increasing importance of eWOM. While earlier, people turned to their circle of social ties like family, neighbours or friends, today’s society is increasingly characterized by social disintegration. The reasons for this, the authors say, are the break . break-up of the extended family and the growing number of single households. As a consequence, many people’s circle of ties is increasingly limited and includes no strong ’s strong-tie sources with expertise about certain topics. These people turn to the web to inte interact with others who share their consuming passions. Therefore social disintegraTherefore, tion could help to explai the success of social networks in particular and eWOM in explain general. The most important insight in this context is that the groundswell, the movement, in which people connect and use technologies to get the things they need from each other rather than from traditional institutions, is a social trend (Li/Bernoff 2008, pp.9 10). This means that marketing departments are caught in pp.9-10). an exterior sociological process and can do nothing about it at all, except from pa participating As today’s media landscape is still being fundamentally restructured (Keller 2007, being p.448) and both media fragmentation and changes in consumer behaviour are inhanges creasing (compare 1.1 the attention economy as described by Maymann (compare 1.1), 3.1) will be a key driver for further developments and create new websites, online ) content or internet technology that will increase eWOM on the web. Apart from that, it is assumed by experts that the mobile internet, enabled by digital conve convergence, is the last big growth market to come (Berke 2007, p.78). This will have to dramatic effects on eWOM, when we imagine consumers using fast mobile broa broad-

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band connections to check for product reviews right in front of a shelf or to get an actual price comparison to bargain with a shop assistant. A Nielsen survey says that the mobile internet will dramatically grow despite of the actual economic downturn: It revealed that about 60 percent of the approximately 200 million mobile data users in the surveyed countries intend to increase their usage in the next two years. And, even more significant, more than 25 percent of the millions of nonusers plan to use mobile data services shortly (Tellabs 2009):
F IGURE 47: I NTENDED M OBILE I NTERNET U SAGE C HANGE 87
U.S. Current users who intend usage increase over the next 24 months Non-users who intend usage over the next 24 months 58% 27% Europe 55% 28%

The findings on economy are directly intertwined with technology, another factor that will increase the future eWOM influence on consumer purchase decisions. Some years ago, no-one could imagine a website like YouTube: Watching large AVIfiles that are stored on expensive and rare online storage via a 56k connection was hardly conceivable. This has fundamentally changed. Technology is cheap, innovations such as MP3- or FLV-files with their high compression rates reduce data traffic and broadband connections accelerate the download. Today, most people in the developed world are online, because fast internet connections are ubiquitous (Li/Bernoff 2008, p.10). This always on access via broadband further deepens peoples’ engagement, Riegner says. In the U.S., in 2007, over 70 percent of internet users connected via broadband, while broadband adoption was growing at a 60 percent compound annual growth rate. Although the majority of internet users are on broadband, the percentage of people who connect to the internet via a broadband connection still does not reach 50 percent. As seemingly ubiquitous as the internet appears to be today, there is still an incredible growth ahead (Riegner 2007, p.437).

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Tellabs 2009; Europe includes data from the UK, Germany, France, Italy and Spain

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This is similar to mobile broadband connections. Mobile devices like the iPhone are speeding up the diffusion of the mobile internet. T-Mobile iPhone users, for example are generating 60 times more data traffic than the average T-mobile customer
F IGURE 48: T HE I P HONE – K EY TO THE M OBILE I NTERNET 1

(Welt Online 2008). The number of suitable devices is rapidly growing, too. In November 2008, TMobile Germany had already sold 450,000 Apple iPhones, of which 190,000 were iPhone 3Gs that are equipped with HSDPA high-speed access to the internet. The iPhone 3G sells three times faster than its predecessor. Apart from that, 45,000 users are using unlocked iPhones on the E-Plus network (Welt Online 2008). In Q4/2008 and with 4.365m units sold, Apple’s world-wide iPhone sales exceeded the sales of the first three quarters together (Apple 2008a, p.26) and the overall iPhone sales for 2008 (ended Sep-

tember 27th 2008) summed up to 11.6m units while sales in 2007 were only 1,4m (Apple 2008b, p.42). There is still much potential growth ahead, and the iPhone sales do not include competitor’s devices such as Google’s new Android phone. The dependency on eWOM influence in consumer purchase decisions has also been surveyed by Rubicon Consulting. Like Riegner, they found that younger people were more likely to be influenced by eWOM, for movies e.g. more than 60 percent of young people compared to less than 40 percent of web users over 40 (Rubicon 2008, p.12):
F IGURE 49: E WOM I NFLUENCE ON M OVIE S ELECTION IN 2006 AND 2008 88 13-24 / <40 years Riegner's 2006 data Rubicon's 2008 data 0 10 20 30 40 age >25 / >40 years 48 40 50 60 60 70

25

88

Riegner (2007, p.445) and Rubicon (2008, p.12); Riegner = age limit 24/25, Rubicon age limit = 40

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The Rubicon survey also brought out differences of the effect of eWOM on consumer purchase decisions depending on the category. While decisions on electronics or vacations are all heavily influenced, many services decisions are affected only weakly (Rubicon 2008, p.12):
F IGURE 50: W EB I NFLUENCE BY P RODUCT OR S ERVICE C ATEGORY 89 60 50 40 30 20 10 0 Buying Planning Choosing a Buying a Picking a electronics vacation movie car restaurant Buying Choosing a Choosing a clothing doctor mechanic

Both Riegner and Rubicon give different reasons for these differences: Riegner assumes that people need to see and touch items of low influence physically, rather than evaluate them more intellectually. This, she says, could be the reason that may limit the potential for eWOM to influence the purchase decisions in these categories (Riegner 2007, p.443). Rubicon mentions that some people might not feel comfortable to use eWOM for certain decisions, too. But they draw also another interesting conclusion from their findings and say that a low rate of eWOM influence is a sign that the right online marketplace has not yet been created for the concerned industry. They found that most of the categories with little eWOM influence were categories in which it is hard to gather information anyway (Rubicon 2008, pp.12, 35). The most convincing fact for a promising future of eWOM marketing gives the comparison between Figure 50 and Figure 49, the comparison between Rubicon’s 2008 data and Riegner’s values from 2006. The data allow a direct comparison between the eWOM influence on movie choosing behaviour and on purchase decisions for consumer electronics. Moreover, Riegner’s high touch retail and no touch services values can be compared with the categories buying clothing and planning a
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Rubicon 2008, p.12

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vacation from Rubicon. The latter are less meaningful, but can serve as an indicator for future developments in the concerned categories:
F IGURE 51: R APID G ROWTH OF E WOM I NFLUENCE B ETWEEN 2006 AND 2008 90 70 60 50 40 30 2006 data (Riegner) 2008 data (Rubicon) 20 10 0 Buying consumer electronics Choosing a movie (<25/<40 years) Choosing a movie (≥25/≥40 years) Buying no Buying high touch retail / touch services / Buying Planning Clothing vacation

The eWOM influence on consumer purchase decisions is rapidly growing, as we can see. Rubicon’s 2008 data reverse the disappointing 2006 figures by Keller & Berry and Riegner (see 7.1.1) and unveil an extremely positive trend for the future of eWOM influence and the opportunities for eWOM marketing.
E WOM

M A RK E TI N G

K E E PS I TS P R O M I S E S

In summary eWOM marketing can keep the promises it makes, especially since the eWOM influence on consumer purchase decisions is rapidly growing. Other reasons that argue for eWOM marketing are the groundswell as an irreversible social trend and people’s desire to connect, combined with increasing social disintegration, and the evolution of the internet. Concerning the internet, the ongoing proliferation of landline broadband connections (ADSL) and the mobile internet (UMTS/EDGE/ HSDPA) promise a more intense usage of eWOM sources. Because of this, I personally believe in a great future of eWOM marketing.

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Riegner (2007, p.445); Rubicon (2008, p.12)

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7.2 N EXT S TEPS

FOR E WOM MARKETING

The thesis concentrated on the stimulation of positive eWOM and the dealing with its negative counterpart. But eWOM marketing does not stop at listening, talking or energizing. Companies that decided to get into dialogue with their customers will inevitably go further, Li & Bernoff say. The conversation will get deeper and control will decrease, but the opportunities for a company will grow even further:
T ABLE 24: E WOM M ARKETING D OES N OT S TOP ON E NERGIZING 91
Listening (Research) Ongoing monitoring of customer conversations instead of occasional surveys and focus groups. Talking (Marketing) Participation in and stimulation of two-way conversations customers have with each other. Energizing (Sales) Making it possible for enthusiastic customers to help sell to each other. + Supporting (Support) + Embracing (Development)

Enabling customers to support each other.

Helping customers to work with each other to come up with ideas to improve products and services.

7.2.1 S UP P O R T I N G (C R E AT I N G C O M M UN I T I E S

TO

C O N N E CT P EO P L E )

The first step beyond energizing is supporting. It complies with the traditional business function of customer support. For many companies, customer support is a burden; they do not want to hear from their customers because every call means that something went wrong and that costs incur (Li/Bernoff 2008, p.157). Supporting in a groundswell sense means to back out as a company from traditional customer support and to enable customers to support each other through the creation of communities and the connection of people (Li/Bernoff 2008, p.69). People already using certain products can support new customers to get started and get a better product experience (Maymann 2008, p.102). Supporting provides benefits for everyone: • Buyers get the needed information, have an easier start and a better product experience • Supporters get feedback on their answer which works as psychic reward and makes them feel better • Companies get valuable insights on their products and save money (compare Table 25 below)

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derived from Li/Bernoff 2008, p.69

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Additionally for a brand, a community and shared interests result in a more dedicated audience (Maymann 2008, p.102). Astonishingly, people are quite willing to help complete strangers. Supporting could take many forms. Examples (Li/Bernoff 2008, p.158) are • Dell’s support forums, • BearingPoint’s wikis, or • Yahoo!’s and Naver’s questions and answers Forums are interesting for companies whose products raise a lot of questions, while BearingPoint is using a wiki92 that is full of information to reassure clients and lets the company stand out (Li/Bernoff 2008, pp.163, 165, 167). Mobile phone provider Simyo is operating a support community. Here, the consultants are ordinary clients with a passion to help. Prospects can choose from a variety of people and pick the profile that seems to match their interests best:
F IGURE 52: U SERS H ELP U SERS ON S IMYO 93

92 93

www.openmethodology.com source: www.simyo.de/de/informieren/aktuell/simyo_pate.html?pid=9293&lid=Informieren+Uebersicht_s4p2& lpos=Teaser+simyo+pate+paten&name=%26lid%3DInformieren%2BUebersicht_s4p2%26lpos%3DTeaser%2B simyo%2Bpate%2Bpaten (Accessed March 26th 2009)

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The profiles look like in Figure 53 below. They do not just take the prospects needs into account (e.g. easy usability and information about the person’s qualification), but also those of the supporter. As described above (compare3.3.1), people search for psychic income, e.g. good feelings from altruism, self-enhancement or belonging to a group. Simyo perfectly taps this desire: The index card shows the supporter’s rank, his answer quality and his average response time. All this data gives the supporter the necessary feedback for self-enhancement and allows him to show off his knowledge. A very clever idea is the reference to the response time, an excellent trigger to enhance speed:

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F IGURE 53: S IMYO P ARTNER P ROFILE AND Q UESTIONNAIRE 94

According to Forrester analyst Elizabeth Herrell, the average support call costs $ 6 to $ 7, while technical support calls cost about $ 10 to $ 20. Companies tried to decrease their support expenses with online questions & answers for self-service and by offshoring support functions, but the results was hit-or-miss quality (Li/Bernoff 2008, pp.157-158). Supporting provides companies with support for free – all they have to do is to activate their most enthusiastic customers.

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source: https://pate.simyo.de/question.aspx?pateuid=f55f14514032433b83d0c72b2bc9d83b (Accessed March 26th 2009)

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This is what computer Manufacturer Dell did. Dell operates a support forum where customers can ask other customers. This way, Dell saves at least $ 10 per avoided support call. Additionally, all answers stay online and traceable. Since 1999, Dell’s most active supporter Jeff Stenski posted over 20,000 answers. These have been viewed over 2,000,000 times by other people. If only 5% of them found the answer to their problem, Stenski saved Dell over $ 1,000,000 for free. And he is not alone, there are thousands of customers on the forum to help others (Li/Bernoff 2008, p.160). In numbers, the ROI of supporting for a company with a technical product and about 5 million customers looks like this:
T ABLE 25: T HE ROI OF A C OMMUNITY S UPPORT F ORUM 95
Start-up costs Annual ongoing costs Forum software Moderation and management Advertising to drive traffic Total costs, year one (e..g. Lithium) (5 full-time staff) (10,000 clicks/month at $ 1 per click) $ 60,000 $ 500,000 $ 120,000 $ 705,000 (planning and development) $ 25,000

Benefit analysis Customers participating in support forum annually

(includes only avoided support calls) (assume 1% of all customers) (assume 5% of all customers) $ 50,000 $ 250,000 $ 300,000 $ 100,000 $ 1,000,000

Additional customers viewing content, without contributing to forum Total support calls these customers would have made Support calls avoided because of forum Cost savings from avoided calls

(estimate average of 1 call per customer) (assume 33% find answers in the forum) (assume $ 10 per call – lowest possible estimate)

In summary it can be said that supporting is not just benefitting the customers, but especially the company itself.

7.2.2 E MB R A CI N G (C R O W D SO UR CI N G ) After “insourcing” consumers into customer support, companies can proceed to the final and deepest step of customer participation and embrace them. Embracing takes over the traditional business function of development. It means helping customers to work with each other to come up with innovative ideas to improve a company’s products and services, Li & Bernoff say. It is integrating people with all their opinions and knowledge into the company’s processes to make them an inte95

Li/Bernoff 2008, p.162

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gral part of the product innovation and improvement (Li/Bernoff 2008, pp.69, 176177, 183) Outsourcing corporate tasks to an undefined group of people or in the form of an open call is also called crowdsourcing.96 Embracing also means co-creation and information sharing: Co-creation involves the consumer into marketing and asks for feedback on creative campaigns. Information sharing means to allow the customers to have a preview on new products or to give them first access to new information and content (WOMMA 2006, p.6). According to Maymann (2008, p.102), embracing is also an effective way to increase brand advocacy. Regardless of the action, embracing again strengthens the relationship with respectively the loyalty of consumers. In general, product development is hard. Making customers an integral part of the corporate processes enables companies to develop products or services which customers really want, in a better quality and also faster (Li/Bernoff 2008, p.183).
ONLINE SURVEY

The online survey showed that most marketing decision makers are not yet ready for or cannot imagine extensive consumer participation as needed for embracing:97
Yes Can you imagine to develop products in an online dialogue with your customers? Can you imagine you customers to make strategic decisions for you? 37.5% (9) 25.0% (6) No 54.2% (13) 70.8% (17) I don’t know 8.3% (2) 4.2% (1)

There are various examples for customer integration. Procter & Gamble, for example, operates two communities for embracing, Tremor for Teenagers and Vocalpoint for mothers of little children. They help to develop and improve products and share their opinions.

96 97

http://en.wikipedia.org/wiki/Crowdsourcing (Accessed April 8th 2009) compare Appendix, Questions A-1

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Another example is the German Saftblog by juice producer Walther’s where company and customers discuss everything from CRM and quality to the design of the new packaging (Zunke 2008, pp.23-24):
F IGURE 54: W ALTHER ’ S S AFTBLOG 98

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source: www.walthers.de/blogs/index.php (Accessed March 27th 2009)

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7.3 F INAL R ECOMMENDATIONS
The evolution of the groundswell, the rapid growth of social networks and the increase of the influence of eWOM on consumer purchase decisions allow only one conclusion: Companies must engage with eWOM marketing! This gets even more important as the technological possibilities and especially the mobile internet, that has just started its triumph, evolve further on. Companies have to earn the respect and recommendations of their customers. When a brand treats its consumers well, they will do the marketing for them – and for free (Sernovitz 2006, p.xxiv). As we have seen, people are already talking and are part of the marketing process. They own the brands, as Lafley and Guimarãres say, and people determine the success of products and services, they create brands or smash them to pieces. Engaging with eWOM, listening, talking and energizing is the only chance to influence the conversation, otherwise people will talk anyway, spread rumours, and get it wrong (Sernovitz 2006, p.xxix). Today, brands need big ideas as Dove’s Campaign for Real Beauty, integrated campaigns that strongly focus on the influence of (e)WOM. Ad clutter, media fragmentation and poor efficiency define today’s marketing landscape and demonstrate that there is a lack of alternatives for marketers. Off course, things can go wrong, and companies cannot keep a social movement like the groundswell under their control. I agree with Li & Bernoff who say that there is no right way to engage with eWOM activities (Li/Bernoff 2008, p.75). But apart from unethical eWOM marketing tactics, there is only one really wrong way: Fail to participate at all.

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A PPENDIX 2 – B LOGGING P OLICY BY S UN M ICROSYSTEMS

S UN G UIDELINES ON P UBLIC D ISCOURSE 99
Many of us at Sun are doing work that could change the world. Contributing to online communities by blogging, wiki posting, participating in forums, etc., is a good way to do this. You are encouraged to tell the world about your work, without asking permission first, but we expect you to read and follow the advice in this note.

Advice By speaking directly to the world, without prior management approval, we are accepting higher risks in the interest of higher rewards. We don't want to micro-manage, but here is some advice that we expect you to follow to help you manage that risk. It's a Two-Way Street The goal isn't to get everyone at Sun contributing online, it's to become part of the industry conversation. So, if you are going to write, look around and do some reading first, so you learn where the conversation is and what people are saying. Remember the Web is all about links; when you see something interesting and relevant, link to it; you'll be doing your readers a service, and you'll also generate links back to you; a win-win. Don't Tell Secrets Anything you post is accessible to anyone with a browser. Some sites have a restricted content feature, but keep in mind that external content is NOT as secure as content that resides on a protected intranet — you are responsible for the content you post and the restricted spaces you manage. Common sense at work here; it's perfectly OK to talk about your work and have a dialog with the community, but it's not OK to publish the recipe for one of our secret sauces. Content requiring a non-disclosure agreement or considered Sun Proprietary should NOT be published on Sun's community sites — even in spaces set up to restrict access to Sun employees only. If the judgment call is tough, on secrets or other issues discussed here, it's never a bad idea to get management or Sun legal help before you publish. No Comment Do not comment on work-related legal matters unless you are Sun's official spokesperson for the matter, and have Sun legal and management approval to do so.

to be continued

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source: www.sun.com/communities/guidelines.jsp, Accessed 19th of March 2009

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Policies Apply Sun's Standards of Business Conduct and other Sun Policies (including export compliance, trademark guidelines, privacy requirements, proprietary and confidential information protection, and antidiscrimination) continue to apply. Be Respectful Whether in the actual or a virtual world, your interactions and discourse should be respectful. For example, when you are in a virtual world as a Sun representative, your avatar should dress and speak professionally. We all appreciate actual respect. Be Interesting, but Be Honest Writing is hard work. There's no point doing it if people don't read it. Fortunately, if you're writing about a product that a lot of people are using, or are waiting for, and you know what you're talking about, you're probably going to be interesting. And because of the magic of linking and the Web, if you're interesting, you're going to be popular, at least among the people who understand your specialty. Another way to be interesting is to expose your personality; almost all of the successful online voices write about themselves, about families or movies or books or games; or they post pictures. People like to know what kind of a person is writing what they're reading. Once again, balance is called for; a community site is a public place and you should avoid embarrassing the company and community members. One of Sun's core values is integrity, so review and follow Sun's Standards of Business Conduct in your online community contributions. Write What You Know The best way to be interesting, stay out of trouble, and have fun is to write about what you know. If you have a deep understanding of some chunk of Solaris or a hot JSR, it's hard to be boring or get into too much trouble writing about that. On the other hand, a Solaris architect who publishes rants on marketing strategy or tax policy has a good chance of being embarrassed by a real expert, or of being boring. Don't Write Anonymously If you comment publicly about any issue in which you are engaged in your capacity as a Sun employee, even loosely, you must make your status as a Sun employee clear. You should also be clear about whether, in such commentary, you are speaking for yourself (presumably the normal case) or for Sun. Business Outlook Rules There are all sorts of laws about what we can and can't say business-wise. Talking about revenue, future product ship dates, pricing decisions, roadmaps, unannounced financial results, our share price or similar matters is apt to get you, the company, or both, into serious legal trouble. Stay away from financial topics and predictions of future performance.

to be continued

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Quality Matters Use a spell-checker. If you're not design-oriented, ask someone who is and take their advice on how to improve. You don't have to be a great or even a good writer to succeed at this, but you do have to make an effort to be clear, complete, and concise. Of course, "complete" and "concise" are to some degree in conflict; that's just the way life is. There are very few first drafts that can't be shortened, and improved in the process. Think About Consequences The worst thing that can happen is a Sun sales pro is in a meeting with a hot prospect, and someone on the customer's side pulls out a print-out of something you've posted and says "This person at Sun says that product sucks." In general, "XXX sucks" is not only risky but unsubtle. Saying "Netbeans needs to have an easier learning curve for the first-time user" is fine; saying "Visual Development Environments for Java suck" is just amateurish. Once again, it's all about judgment. Using your public voice to trash or embarrass the company, our customers, your co-workers, or yourself is not only dangerous, but not very smart. Moderating Some community sites, such as wikis, require a Sun employee moderator. Optional moderation on other sites such as a group blog and forum can add value by maintaining content organization and responding to ongoing decisions and questions. The goal of moderating is to "guide and nurture" not "command and control." Other People's Information It's simple – other people's information belongs to them (be it Intellectual Property or Personal Information). It's their choice whether to share their material with the world, not yours. So, before posting someone else's material, check with the owner for permission to do this. If you're unsure, Sun's copyright experts or Sun's privacy experts can offer guidance. Disclaimers Many employees put a disclaimer on their front page saying who they work for, but that they're not speaking officially. This is good practice, but don't count on it to avoid trouble; it may not have much legal effect. Community sites contain material written by Sun employees and are governed by company policies. When employees leave Sun, material written during their employment normally remains in place and is subject to the same policies. Sun Alumni are invited to have their non-Sun blog syndicated on our Alumni Blogs site and may continue to contribute material to wikis and forums, where additional terms and conditions apply.

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ITM-C HECKLIST

G E N E R AL E C O N O M I CS WOM has strong impact on economy. For 1994, McKinsey estimated that more than two-thirds of the U.S. economies were influenced by WOM. These numbers are quite dated, but regarding the rapid growth of the WOM and eWOM influence on purchase decisions, this share must at least have kept its size (Dye 2000, p.140; Schindler/Bickart 2005, p.36):
WOM I NFLUENCE ON U.S. E CONOMY 100

S TR A TE G I C M AN A G E M E N T eWOM marketing is not just a marketing tool, as we have seen. It is a completely new marketing philosophy. eWOM marketing is a holistic approach that affects the whole company, from development (create products people really want) over production (absolute quality is required) to customer support (address failures and fix the problem). It is also a long-term commitment, but if strategic management follows all the requirements of eWOM marketing, success is programmed. M A RK E TI N G On account of missing alternatives, marketing has to prepare for a fundamental shift and the breakaway from a one-way, top-down communication model to an open and equal two-way dialogue, from transaction or mass marketing back to relationship marketing, the “new marketing”. eWOM marketing is the most prom-

100

from Dye 2000, p.140; total equals US$ 6 trillion

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ising way to master the challenges of ad clutter, media fragmentation and other problems regarding traditional marketing. F I N AN CI AL M AN AG E M E N T Financial management has to begin with a new view on the company’s customers. The CLV is no longer the determinant for the allocation of marketing budgets, but the CRV is. eWOM marketing is a long-term commitment, as already said. But the referring actions pay off very soon, as we have seen. And, most important of all, the result is not only an increased customer satisfaction, but also higher corporate growth, as Reichheld’s examinations on the Net Promoter Score have shown. Because of this, financial management should engage with eWOM marketing and allocate the required funds. H U M AN R E S O U R CE S M AN A G E M E N T eWOM marketing has its base in customer referrals. These are a result of customer satisfaction. The employees are those who can make a difference, everything a little nicer, better, faster or more friendly; and the company has to motivate them to do so. This is the aim of Starbucks’ Employee First Philosophy, too. According to CEO Howard Schultz, “only employees that are treated well, will in turn, treat customers well” (Thompson et al., p.C-482-C-483). Online shoe retailer Zappos follows the same philosophy and offers not only jobs, but also entertainment and an excellent working environment, because the management thinks that happy employees make a difference. Zappos’ financial figures seem to prove this:
F IGURE 55: Z APPOS ’ T URNOVER S INCE 2000 101 1200 1000 1000 800 597 600 400 200 2 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 9 184 32 70 370 850

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Heuer 2008, p.133; 2008 figures estimated; in million USD

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Additionally, employees are an important source of (e)WOM and talk to clients, customers, friends and families (Balter 2008, p.167). S O F T S K I L L S / L E A D E RS H I P eWOM marketing is about human behaviour – as marketing is and was all the time. One could say it like Immanuel Kant in his work Critique of Practical Reason: “Act in such a way that the maxim of your will could always hold at the same time as a principle of a universal legislation.” This might sound quite philosophical, but all assignments I wrote during my studies, came to this result. People do not want to wait for something. They want salespeople to ask friendly. They want companies to fix their problems with little effort. Everything we like, most other people like as well. In principle, marketing is easy, and eWOM as well. All marketers have to do is ask themselves what they personally like and then integrating it into the marketing practice. B US I N E S S L AW In compliance with the legislation of the European Commission, Great Britain enacted a law that criminalizes (Gerdes 2008, p.26) • the spreading of positive marketing messages without disclosure of the author’s affiliation to a company respectively brand • the employment of buzz marketers on social networking sites that do not disclose their affiliation with their contractor (i.e. the brand) • the spreading of viral advertising on the web that predicts to originate from an ordinary internet user The first two of them are not problematic and in accordance of the WOMMA’s position, for example. But the third point would criminalize creative and awarded advertising such as Hornbach’s Ron Hammer viral video in which a fictive stuntman jumps over a Hornbach do-it-yourself store, or the web story of Mary Woodbridge, a fictional 85-year old woman that pretended to plan climbing the Mount Everest.

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F IGURE 56: S CREENSHOT F ROM M ARY - WOODBRIDGE . CO . UK 102

Apart from legal duties, marketers should reject anyway all unethical tactics related to manipulation, deception, infiltration or dishonesty (WOMMA 2006, p.2). R E S E AR CH M E T H O D S / M AN AG E M E N T D E CI S I O N M AK I N G Listening is the only way to gather real customer opinions that are not diluted by artificial test environments or the posing of the questions. Online tools allow a systematic examination of the status quo and uncover insights traditional market research cannot. Two of the world’s biggest advertising spenders, Procter & Gamble and Unilever, have discovered the opportunities of listening, too, and linked with the Advertising Research Foundation to develop reliable tools and standards to watch the online chatter. Kim Dedeker, Vice President Consumer and Market Insights at Unilever America, agrees in this context that the industry continues to torture consumers with boring and antiquated search methods (Neff 2008).

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www.mary-woodbridge.co.uk/de/frameset_mw.html [Accessed April 11th 2009]

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