Measuring Word-of-Mouth

Measuring word-of-mouth (WOM) results is not really very hard. It only becomes difficult if you try to use quantitative methods.

That's because WOM is a "qualitative" technique. Putting numbers on word-of-mouth communication is like using an apple to check the color of an orange.

To [qualitatively] measure the results of WOM marketing, just ask and answer the following questions:

1. Do prospective customers know: what makes your solar business different than all the others, and when you're the best supplier for the job?

2. Do members of the press (including bloggers) accurately reflect your competitive positioning and lend 3rd party credibility to it?

3. Do industry influencers understand your business strategy and support it to the press?

4. Does the target market see you as a reference source expert/counselor in the solar industry?

5. Do your business partners support your products and strategies?

6. Do your resellers (or channel partners) know where to spend their time, who to call on, and what to say?

7. Are key customers actively involved in testimonial marketing and serving as references?

I've been successfully using this 7-point checklist to evaluate WOM programs for many years. It's really not that hard. Really!

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Word-of-Mouth Communication pt2

The content of word-of-mouth communication for solar products -- once underway -- can be enhanced and mildly diverted by the solar supplier. But because it is essentially an underground communications medium, the content of word-of-mouth cannot be substantially changed or improved, once launched. Hence the need to be correct at the start, to assure that the power of word-of-mouth will not turn negative and then increasingly build negative perceptions.

The risk of negative word-of-mouth is always present, particularly for companies where products may be incomplete at introduction. Negative word-of-mouth is substantially stronger, and works substantially faster than positive word-ofmouth. Using a word-of-mouth based strategy for a new product that does not meet expectations will provide rapid and permanent failure.

For all of its difficulties and risks, word-of-mouth has one powerfully vital attribute: it provides a method for reinforcement that is substantially better than any other medium. There is substantial research on the learning process that says, in essence, that the identical message is only effective the first three times it is received. After three exposures, the recipient becomes saturated with the particular message and interest declines rapidly. It is this finding behind the use of changing messages in advertising, behind the campaign concept.

Word-of-mouth provides continually changing messages to maintain and even enhance learning. Word-of-mouth involves multiple sources (the people who talk about solar) with, by definition, multiple messages. People who are the sources of word-of-mouth customize the message to fit their circumstances and experience.

The value of this customization is that it avoids saturation by providing different messages about the same product, avoiding the saturation point of the same message, and stimulating and reinforcing continuing progress through the learning process. It is for this reason that word-of-mouth has such a powerful effect in quickly stimulating purchase behavior.

The infrastructure concept and infrastructure communications recognize this unique characteristic of word-of-mouth and are designed to keep different messages flowing.

Product introductions that recognize this stimulating word-of-mouth effect focus on effective, customized communications to different segments of the infrastructure primarily to assure that word-of-mouth reinforcement communications keep moving, keep evolving and keep on target. Such product introductions recognize the requirement for multiple messages to multiple segments, they understand and plan based on the infrastructure concept, for changing but consistent messages, and they appreciate the fact that word-of-mouth is outside the marketer's control.

In my next post, I'll talk about ways to measure the effectiveness of word-of-mouth marketing.


Related Articles:
Word-of-Mouth Communications Part One

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Word-of-Mouth Communication

The most likely way that information about a solar product can be effectively communicated is through word-of-mouth.

Word-of-mouth has these advantages:

• The source is seen as credible, particularly in comparison with advertising since the source is a person known to the recipient. Ads are known to be created by the advertiser. Today, even editorial endorsements have the "taint" of being created by "public relations" tactics and therefore have less credibility than word-of-mouth communication.

• Word-of-mouth often deals with awareness, interest, the source's trial experience and product benefits all at the same time. This can move the recipient rapidly through the stages of purchase decision making and often even creating a reason for purchasing, all in one "exposure."

• It appears to have a more permanent effect than most other communications channels

As a result, second only to the task of creating intangibles for solar products and companies is the challenge of finding the most effective way to generate positive and relevant word-of-mouth.

But because word-of-mouth communication is out of the "senders" control, the requirements for developing essential messages, positions and reasons for purchasing is substantially different than it is for, say, advertising.

Advertising is as direct as standing across a small creek from the prospect, and signaling via messages of the advertiser's design, based on assumptions about the recipient's needs. Advertising is direct, controlled and immediate.

Word-of-mouth, on the other hand, is like swimming 40 miles underwater in a decaying swamp, with the mandate that the swim must be completed by a large group of other people under no control of the starting swimmer, via strokes that cannot be prescribed, and on a time schedule that cannot be forecast. And to add more reality to the metaphor, none of the swimmers can see each other.

With an advertising campaign, the marketer determines message, positioning and purchase reasons only weeks or at most months in advance. If a particular advertisement or campaign does not work, it can be pulled and redesigned.

With word-of-mouth communication, however, the initial positioning and messages once started through the word-of-mouth channel (swamp?) are completely outside the sender's control. They are also outside easy measurement. Consequently, they must be designed at the outset to survive the trials of time decay and the communications quality deterioration through a series of people who invariably have motives other than the marketer.

It is for this reason that the initial positioning and message development effort in a solar company is so critical: the risk of failure is so high, coupled with the need for a "hardened" yet buoyant position and set of messages that will work continually.

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Creating Intangibles

Creating intangibles in an emerging market is -- by definition -- a creative marketing and a creative communications task. It is also a "steering" task, comparable to steering an ocean liner where feedback is limited and time is a critical variable. It requires the ability to think through what the customer needs are likely to be in the future, and to begin positioning the emerging product based on expected needs. Hence, it is both exhilerating and risky.

Often, the company's first attempts at bringing a new product to market will seem unsuccessful. Sales will not appear to increase. The messages will appear to be too early, the channels used to send messages inappropriate, or the intangible messages will be received but not correlated to a product.

Each of these apparent "failures" is, however, often a normal part of the process of learning that a potential customer goes through.

The process concept of learning is an vital one with regard to marketing planning. In most product markets characterized by some customer risk (in other words, most markets where the price is higher than a few dollars for a disposable commodity), customers will require three to twelve positive exposures to messages -- during the purchase cycle -- about a new product before they purchase. At the same time, we know that the same message reaches a saturation point after it has been noted three times. The way in which these two apparently contradictory findings - the need for up to twelve exposures and the saturation at three exposures - are fused helps explain the extraordinary power of word-of-mouth communication in an emerging business.

There are also some important caveats here. First, is there a purchase cycle? From the standpoint of perception, if there is no interest in purchasing, there is little chance that a message sent by mass communications channels will be received -- instead, it will merely be disInissed as clutter.

Second, is the message relevant? Even in situations where a customer is disposed toward purchase, if the messages are not on-point, they are likely to be discarded.


Related Articles:
Solar Product Perception

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Determining Intangibles in Emerging Businesses

Determining intangibles in an emerging business is a special case within the disciplines of marketing and communication.

For an emerging business, the base of customers is small, and many customers represent innovators and early adopters, buyers whose characteristics are not typical of the majority of the future market. Indeed, attempting to build a business based on innovators is often a course that leads to bankruptcy. Even if the company does not fail, relying on innovators leaves the majority of the market open to new competitors who focus more effectively on the intangibles important to other adoption segments. It is this phenomenon that results in pioneering firms doing all the early eduction and market development, only to find the lion's share of the market falling to a later entrant.

Building intangibles for emerging businesses remains a special art, particularly in markets where the majority of customers are still classified as innovators. In this situation, traditional research techniques usually do not provide adequate insight into potential intangibles. Instead, management is often wiser to embark on a course of creating intangibles rather than searching for them in the customer base.

Related Articles:
Solar Product Perception

 

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Assessing Intangibles in Turn-Arounds

Determining how customers view product intangibles is easy in turn-around situations. The usual problem is that many of the intangibles no longer relate primarily to the product. Instead, they concern the company's performance. Typically in turn-arounds, most of the intangible aspects surrounding the company turn negative.

For public companies, with highly publicized financial difficulties, the sales force/channel will often spend most of its time trying to answer intangible objections about the company's performance and longevity. In addition, most product advertising is wasted because tangible product claims are overwhelmed by intangible concerns. Here, the challenge is to find ways to reverse the perceived decline in non-product intangibles. Often, a refocus on product intangibles is the most effective way to accomplish this.

The most difficult task facing management of a turn-around is objectively determining the company's current perceptual strengths and weaknesses. Turn-arounds are characterized by attempting to effectively deal with past failures. Failure is an emotional issue. Consequently, determining current perceptions and the areas requiring improvement is something most difficult for existing employees and managers to accomplish. Experience, objective external support is almost always required.

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Determining Product Intangibles

In an existing solar business, with established products, customers and competitors, the process of determining the intangible factors that influence purchasing decisions is relatively simple. It means asking customers (and others who influence the purchase decision) two basic questions:

1. What factors in the purchase and use of solar power are important to you? and,

2. How does our solar offering compare on these factors to other alternatives (including related but not directly competitive products)?

This type of research is easy to describe but difficult to do. In my experience, many research efforts fail to achieve adequate answers to the two questions.

When it does, however, the results can be dramatic. In one recent case, interviews with 200 solar/PV customers and potential customers found that users valued the reputation of the supplier, the service and support provided, prior interaction with the supplier, and industry standards or certifications as the most important intangible attributes of the product. In fact, the tangible characteristics (i.e. PV system specs) ranked no higher than sixth in the customer's ranking.

However, this company had based the majority of its marketing and sales messages on tangible product attributes: conversion efficiency, crystalline vs thin film, panel specs, inverter specs, and maximum power.

The research was commissioned only after a period of frustration and declining sales, and after two new competitors had made substantial early inroads into the company's customer base.

After the product perception research was completed and after the company's sales and marketing messages changed to reflect the results, revenues reversed their decline and climbed twenty-four percent the first year, gross margins tripled, and the market value of the company doubled. All of this occurred with only a slight increase in marketing expenditures, and with no change in the tangible product.

Not all cases are this positive, of course. But enough of them are to demonstrate the power of marketing product intangibles.

Simple in concept as this type of customer focused research is, it rarely appears in discussions about the solar industry. Determining product intangibles and converting the knowledge into messages and programs is easiest in an existing market where competition is strong, such as the example cited above.

The process also works in emerging businesses and in turn-arounds, but the situations are different.

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