I was inspired by a piece written by Doug Kleeman questioning many of the common beliefs held by marketers. Over the last two years I have extensively studied word-of-mouth. My thesis examined the performance of word-of-mouth on a social media platform.
I thought it would make for an interesting frolic and detour to dig a bit deeper into some of the common commandments of word-of-mouth marketing.
Much of the academic community has examined the consequences of word-of-mouth. Word-of-mouth volume has been shown to predict movie sales, craft beer sales and television ratings. Word-of-mouth has also been studied from a network science perspective.
Influence and tie strength (strong vs. weak) has been shown to have an effect on how word-of-mouth spreads. Finally, researchers have examined the antecedents, or psychological drivers of word-of-mouth. Berger categorized these drivers into self-enhancement, informational, emotional and accessible (top-of-mind).
From a managerial perspective, the consensus is that word-of-mouth must be “harnessed” (see also: Hughes, Rosen, Dye, Sernovitz). The harnessing of word-of-mouth is often in reference to leveraging the power of customers sharing their experiences with a brand’s products or services. Similarly, harnessing can mean to leverage a brand asset to create word-of-mouth. One leverage is the brand community. It is a common belief that brand communities are comprised of fanatics who will spread their experiences far and wide. You simply grow a community of followers and enjoy the proverbial word-of-mouth fruit. The genesis being McAlexander Schouten and Koenig’s ethnographic study on Harley Davidson’s brand community. Brand managers have extended this work by incorporating Pareto’s famous 80/20 rule into this concept. Thus, 20 percent of a brand’s consumers are the vital few that celebrate their loyalty openly.
Lovemarks Are Great in Theory
The trouble with this notion is that it is rather unfounded. In fact, if we use the often-cited Harley Davidson research (my guess is that the research on Volkswagen is used similarly), Harley owners actually purchase other bikes twice as often. Kleeman does a great job dissecting the impact of Harley’s loyal few. Those considered loyalists only make up one-tenth of Harley’s consumer base and a mere 3.5 percent of their revenue. Sen found similar results within the restaurant industry. In addition, and this occurs over multiple product categories, consumers rarely consider just one brand. As Lapersonne found, only one-fifth of buyers consider only one brand when making a purchase. While it may sound grandiose, true growth is achieved by increasing market penetration, not through the fevered purchasing of the fanatics. (See also)
Loyalty = WOM
Secondly, there is the belief that these loyalist advocate on behalf of the brand by frequently sharing their love. The reality is that the recommendation of these loyalist may not have the effect commonly believed. First, it shouldn’t be a stretch to assume that most of this sharing is insular- meaning shared among the already fanatical (remember the group that accounts for 3.5 percent of revenue). Yeh and Choi found that positive identification with a brand community influenced (more precisely, influenced WOM intention) word-of-mouth among members. It is new customers who are more likely to spread information about products and services. Much of the literature attributes a product’s novelty, or a positive experience, to word-of-mouth. As fanaticism fades, so too does our eagerness to share. Nam et al. found that only one-fifth of customers will ultimately perform word-of-mouth after a positive customer experience. Byron Sharp hammered this point home: “Within every brand’s customer base there are a few people who feel much more attitudinally committed to the brand. It may be part of their self-image…but the marketing consequences of these brand fans turn out to be very limited”. It is easy to fall in love with the narrative that building strong communities will create “loyalty beyond reason” and inspire a chorus of word-of-mouth. As storybook as it may be, growth is experienced through penetration, making volume of conversations, not the conversations of the 20 percent who are considered loyalist, (see: East, Hammond and Lomax, 2008) a much stronger marker for success.