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The Role of Advertising inWord of iVIouth

ED KELLERThe Keller Fay Groupekel ler@kel ler fay.comBRAD FAYThe Keller Fay Groupbfay@kellerfay.com

Word of mouth (WOM) is now widely believed to help drive consumer decision makinWhat lias not been as widely discussed is the relationship between advertising andWOM. New empirical data collected by the authors over a three-year period show tha20 percent of WOM discussions refer to paid advertising In media. Further, theresearch finds that conversations that are "advertising influenced" in this way aresignificantly more likely to involve recommendations to buy or try a brand whencompared with other WOM discussions about brands. These findings hold across awide range of product categories.

INTRODUCTIONOne of the seminal studies tn mass communica-tions was conducted in 1944 byColumbia Univer-sity Professor Paul Lazarsfeld. "The Decatur Study,"as it came to be known, was conducted amongwomen and sought to understand the role ofmedia and of individuals who influenced recentconsumer decisions. The study focused on fourcategories: "daily household marketing," fashionand beauty, movies, and politics. It found thatmass communications campaigns often fail tomeetexpectations because of "selectivity" in exposureand perception by recipients for whom messagesare not of immediate interest or relevance, orbecause people hold preexisting opinions that maybe dissonant with the message.

The results of the Decatur Study were later pub-lished by Lazarsfeld andElihu Katz inPersonal In-fluence, in which they describe and validate whatthey called the "two-stepflow"communications p r o -cess in which the power of mass media is signifi-cantly enhanced by delivering messages to opinionleaders who "mediate" the information and dis-seminate it to the broader populace (Katz and La-zarsfeld, 1955). Katz and Lazarsfeld concluded thatmass commurucations are m ore apt to reinforce sup -porters or current customers, rather than convertnew people. It was in this context that they foundopinion leaders were more inclined to absorb mass

media comm unications and then disseminate thto thegeneral public.

Despite these findings, most advertising durthe intervening decades has continued to focuscreating awareness, preference, and purchasetent among mass audiences, and on attracting then converting pro spects. Today, this model is cing under increasing scrutiny as marketers qution th e efficacy of traditiona l adve rtising appro ach

A number of books have provocativelynounced the "end of advertising," due especito declining trust, the profiliferation of mechoice, and the rise of the internet (Godin, 20Jaffe, 2005; Ries and Ries, 2002; Semovitz, 20Zyman andBrott, 2002). This d iscussion is furdriven by research that illustrates the growimpact of word of mouth (V\/OM) as the primdriver of consumer purchase decisions (Advering Age, 2008). New research by our firm shohowever, that this is a false dichotomy andthere is an important interaction effect betwadvertising and WOM, much as was positeKatz and Lazarsfeld and subsequently by otsuch as Bayus (1985),

In this article, we provide new empiricaldence about the importance of mass communtions to WOM. The two, we believe, are noconflict with each other, but rather work qeffectively when they work together.

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ROLE OF ADVERTISING IN WO

EMPIRICAL GENERALIZATIONSApproximately 20 percent of W O M about brands refers to paid advertising in media. Theievel and effectiveness of WOM is substantiaiiy increased when stimulated, encour-aged, and/or supported by advertising, increasing the probability by about 20 percentthat a consumer will make a strong recommendation to buy or try a product.

For the purpo se of this article, we beginwith two empirically derived generaliza-tions;

EG l. Approx imately 20 percent ofWOM refers to paid advertisingin media.

E G 2 . These discussions are more likelyto involve a recommendation tobuy than other WOM about abrand.

Our first generalization regarding the roleof advertising in stimulating WOM is im-porta nt because Katz and L azarsfeld firstpostulated the two-step flow at the earlystages of the mass m edia era. More than 50years later, we see the extent to which thatgeneralization still holds as we enter wh at

believe is the beginning ofthe post mass media era. Our second gen-

Y DATA SOURCE

tive sample of 700 Americans ages 13 to69 about the "conversations" they partici-pated in the day before the interview.

The surveys are administered oniine.The participants are presented initially witha two-page diary they use to keep trackof conversations in 15 product categoriesfor a single day. The following day theycomplete a 20-minute questionnaire inwhich they list the brands that came upin conversation and then answer detailedquestions about their conversation regard-ing each brand.

In this article, our findings cover the 12months ending September 2008, duringwhich time 36,402 respondents were in-terviewed and data for 294,887 conversa-tional mentions of brands were collected.TalkTrack also collects several types ofinformation that are unique and particu-larly important for the purposes of thisarticle: Respondents who participated in a con-

versation about a brand are askedwhether they or any other person inthe conversation referred to an informa-tion source about that brandsuch asadvertising, coupons, website, etc,and the type of information source (e.g.,TV commercial, magazine article, web-site, etc.) is recorded.

Respondents who were on the "receiv-ing end" of advice or opinions about abrand are asked whether they receivedan actual recommendation about thebrand, and also the likelihood that theywill purchase the brand based on theconversation.

Respondents are classified based owhether or not they are opinioleadersin our terminology, "Conversation Catalysts^""based on thsize of their social network and theiself-reported recommending behavioin a variety of product categories.

This information all leads to a deeper understanding of the interaction betweetraditional paid-media advertising andWOM in a way that factors in both offlinas well as online conve rsations, positive awell as negative WOM, and "sendersas well as "receivers" of WOM advice andrecommendations.THE TWO-STEP FLOW THEORYREVISITEDTo empirically confirm the Katz and Lazarsfeld theory, we would expect to findevidence for the following: a substantial proportion of conversa

tions is influenced by advertising; a process that involves "opinion lead

e r s " as crucial disseminators of WOMabout brands, particularly advertisinginfluenced WOM.For the purpose of this discussion, we

are confining our definition of "advertising" to paid-media advertisin g. While TalkTrack also collects information related topublic relations, promotion, point of saledirect marketing, and other forms of marketing and ad vertising, we will leave asidethose marketing channels for future analysis

One of the most important discoveriesin our research is that 22 percent of alWOM about brands involve some par-ticipant in the conversation referring tosomething that they saw or heard in paidmedia advertising. In fact, we believe thiis a conservative estimate of advertising's role in WOM because it only countsconversations wherein advertis ing is

J u n e 2 0 0 9 J O O H f l d L D F H D U E I 1 T IS I I 0 H E S E H H C H 1 5 5

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ROLE OF ADVERTiSiNG iN WOM

specifically mentioned by one or moreparticipants. It does not include occasionswhen an advertisement indirectly (or un-consciously) motivated (or provided con-tent to) a conversation about a brand.

Yet even with this conservative esti-mate, when we apply 22 percent to ourestimate of daily WOM impressions, weproject 716 million daily conversationsabout brands that are "advertis ing-influenced." This does not suggest thatadvertising was the sole cause for theconversation, but orUy that advertising w aspart of the discussion. It might have beenthe cause, or it might have been men-tioned in response to a discussion stimu-lated by something else.

TalkTrack pro vide s co verage in 1 5 dis-tinct product categories, allowing for ex-amining the generalizability acrossindustries (see Table 1). We found thatmore than a fifth of aU WOM is aboutadvertising in 10 of the 15 survey catego-ries, and that for all industries at least 15percent of WOM is influenced by paid-media advertising, leading us to concludethis is a law-like pattern.

The most influenced industries areentertainment/movies, technology, andbeauty. Interestingly, two of these wereamong the categories studied in the Katzand Lazarsfeld Decatur study.

We also found that online WOM com-munications about brands were more likelyto contain references to advertising thanoffline conversations; 32 percent of onlineWOM contains advertising references, com-pared to 21 percent of offline WOM. Wehypothesize that because online commu-nications occur in an ad ver tising-rich en -vironment that lends itself to theforwarding of web links, online WOM ismore likely to be advertising influencedthan offline WOMa difference that maypresent digital advertisers with a veryattractive opportunity to extend the reachof their messages.

TABLE 1Brand ConversationsInfluenced by Advertising

Percent of WOMInfluenced byAdvertising

IndustryEntertainment/moviesTechnologyPersona! care/bea utyAutomotiveTelecommunicationsShopping/retailHousehold productsAl l category averageThe homeTravel servicesFood/din ingChildrenBeveragesSports/recreation/hobbiesFinancialHealth/healthcare

2 7 %2 6 %2 5 %2 4 %2 4 %2 3 %2 2 %22%2 2 %2 1 %2 0 %1 9 %1 8 %1 7 %1 6 %1 5 %

and often at an earlier stage (either aftnew-product release or following neinformation about an existing productmarketing activity). We find that eciency gains from targeting influencan double the impact of WOM marking at the low end, and at the high encan multiply efficiencies by as muchfve times.

ADVERTISING'S ROLE IN THE QUALITYOF WOMWhat about the qualit]/ of talk about brand the effectiveness of that talk? Mresearchers have found that consumare reluctant to admit that advertisingan impact on their purchasing decisiMuch of the enthusiasm for WOM adiscipline is based on the assumption "authentic" WOM, which stems from pitive brand experiences, is more effecthan commercially paid messages.

TalkTrack does confirm the poweWOM in driving behavior (see FigureUsing a 0 to 10 scale where "0" me

Base: Brand convernalions influenced by advertising,32,496Source: Keller

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ROLE OFADVERTISING IN WOM

"very unlikely" and "10" means "ex- far more apt to have no recommendation We have tested this generalization acrostremely likely," respondents on the receiv- at all (31 percent) compared to advertising- the 15 categories covered by TalkTracking end of conversations about brands influenced WOM (18 percent). and find a positive and statistically signifsay they are highly likely to take action Our initial hypothesis is that good ad- icant relationship between WOM that ibased on the recommendations. As many vertising reminds people of why they like advertising influenced and strong recomas 49 percent who answered with a "9" a particular brand and makes it easier to mendations being made for 12 of our 1or "10" reported that they are likely to recommend the brand with a specific ra- categories (see Table 2).purchase each of the brands they talked tionale attached to that recommendation. The difference between advertising and,ibout in their prior-day conversations. In the words of Katz and Lazarsfeld, ad- non-advertising-related WOM and recomSimiiarly, 49 percent said they are likely vertising plays a "reinforcing" function mendations is strongest for entertainmentto pass the advice along to somebody that makes WOM stronger. movies, financial ser\nces, the home, sportselse, and 35 percent said they will seekout additional information about thebrands.

Although these findings are based on IMDLC ^f-reported intentions, they have been P r e v a l e n c e of S t r o n g " B u y / T r y " R e c o m m e n d a t i o n w i t h i n a

by evaluating data in Talk- Brand Co nv ers at io n , D ep en din g on W h e t h e r C o n v e r s a t i o nack' against third-party behavioral data C o n ta in e d a R e f e r e n c e to Adver t i s i ng*in a recent analys is by G r a h a m and Hav-and Havlena found Percent of WOM Receiving

in the ca tegor ie s s tud ied , the re was a R e c o m m e n d a t i o n to "Buy or Try"-j ., 4,. . ^ ., , . * . _o Adverttslng - Non-Ad vertisin g-

. ., Entertainment/movies 47% 36% +11** ...::But the ques t ion rem a ins : how does iP^.^.'^.l^.l^ervices 35% 25% -MO**WOM c o m p a r e in The h o m e 47% 37% -t-10**to other forms of W O M ? W h e n Sports/recreation/hobbies 34% 24% - t - lO**WOM, do we see

of efficacy? By one set fi^H^ehold products 60%_ 51% + 9 * *we see tha t adve r t i s ing - Hea l th /hea l thca re 41% 34% -i-7**

WOM is ab ou t equ ally effec- Technology 40% 34% -.6**as non-adver t i s ing- in f luenced WOM:

. . Telecommunicat ions 34% 28% -1-6**Ihe s am e propor t ion of c o n s u m e r s sayare g o i n g to p u r c h a s e the brand Retail 53%_ 47% + 6 * *the WOM was influenced by ad- Automotive 33% 28% +5**(49 percent) as w h e n it was not ^ Beverages 57% 52% -1-5**

B y a n o t h e r m e a s u r e , a d v e r t i s i n g - ^.9..'^!^'}!^}3. ^8% 54% + 4 * *WOM is associate d wi th mo re Travel serv ices 37% 34% -f3

recommendations. Fully 46 children's products 49% 46% -h3f all advertising-influenced WOM, _ , . , Personal care/beauty 54% 54% a strong recommendation to buy

try" the b r a n d v e r s u s 39 p e r c e n t of ^"^^'^ Brand comiersat ions inf luenced by advert is ing, n = 32.496\\rr^\f \ UM \A7r\\ L\.. i j Source: Kell-r FayGroup's TalkTrack*. October 2007 tltroush September 2008WOM tha t does ..... ,, ; , . , . , ^ , . . . . , * 'Advert ismg-reltea W OM means conversat ions t imt contain a reference to advert is ing a s a n information source.a reference to advertising is "Statistically significant difference a t th e 9 0 % confidence level.J u n e 2 0 0 9 M M l O F l O E R T I S l O G H E S E H I I C H 1 5

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ROLE OF ADVERTISING INWOM

One of the most important discoveries in our researchis that 22percent of aii WOM about brands involvesome participant in the conversation referring tosomething that th ey saw or heard inpaid-mediaadvertising.

hobbies, and household products. Only forthe categories of travel, children's prod-ucts, and personal care/beauty is the dif-ference not statistically significant.CONCLUSIONAround 20 percent of WOM about brandsinvolves mentioning paid advertising as thesource of the information. This suggests aconservative estimate that at least 20 per-cent of WOM occurs because of advertis-ing. Furthermore , this sort of WOM appearsto be of higher quality in that it is morelikely to involve a recommenda tion to buythe brand. This finding supports the "tw^o-step"flowdiscovered 50 years ago, and ourresults generalize across the 15 differentproduct categories we investigated.

These findings raise the question ofwhether advertising more deliberately de-signed to stimulate WOM could increaseits reach and effectiveness, over more tra-ditional campaigns focused on awarenessand persuasion. This is a question thatmay be best answered with case studiesfocused on the growing number of adver-tisers who are making WOM an explicitobjective for their campaigns.

ED KELLER IS theCEO of the Keller Fay Group, a mar-ket research firm tbat specializes inWOM marketing.He is theco-author of Th e Infiuentials: O ne Americanin Te n Tells th e O th e r Nin e Ho w to Vote, W h e r e to Eat,an d What to Buy {Free Press. 2003). Mr. Keliec isthe past president and the current treasurer of theBoard of the Word of Mouth Marketing Association(WOMMA). a board mfimber of the Advertising Re-search Foundation (ARF), and thepast president ofthe Market Research Council.

BRAD FAY is the chief operating officer of the K ellerFay Group. In2007 , hewon the Grand InnovationAward ot the Advertising Research Founcation for thedevelopment of K eller Fay's TalkTrack^, the firs t con-tinuous measurement system for all WOM. includingthe 90 percent ofWOM that occurs offline. Mr.Fay isco-chair of the WOMMA's Influencer Marketing Council.

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K E L L E R , E D , and B R A D F A Y . "Leading the versat ion: Inf luencers ' Impact on Word of Mand Brand Conver sa t ion ." Measuring WoMouth, Vol. 3. W O M M A R e s ar c h A n t h oAutumn, 2007.

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