Final Report MRP2003

8/7/2019 Final Report MRP2003

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WORD OF MOUTH

A Reporton

WORD OF MOUTH-AN

EFFECTIVE WAY OF

COMMUNICATION

ByDigvijay Gaur

08BS0000947

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WORD OF MOUTH

Management Research Project

on

Word of Mouth-An effective Way OfCommunication

SUBMITTED TO: SUBMITTED BY:Dr.M.C Kapoor Name: Digvijay Gaur

College Guide Enrollment Id:08BS0000947 Mobile No: +919911106916

Email Id: [email protected]

A report submitted in partial fulfillment of the

requirements of

MBA program

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Acknowledgement:

Knowledge is an experience gained in life. It is the choicest possession, which

should not be shelved but should be happily shared with others. In this regard we

are extremely fortunate to have done a project on consumer behavior.

I express my gratitude to my esteemed guide Dr. M.C Kapoor, ICFAI BUSINESS

SCHOOL, Gurgaon for his valuable critiques, assistance and encouragement,

which enabled me to carry on the project successfully. He gave me a wonderful

opportunity to work on this project. His time-to-time guidance and incessant

support helped me to broaden my outlook on the project. I am highly obliged for

his support.

I also want to give my gratitude to Dean, ICFAI Business School and other persons

of the Institute, to give me an opportunity of exploring new things and adding

value to my knowledge.

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Executive Summary

Word-of-mouth marketing, which encompasses a variety of subcategories,

including buzz, blog, viral, grassroots, because influencers and social media

marketing, as well as ambassador programs, work with consumer-generated

media and more, can be highly valued by product marketers. Because of the

personal nature of the communications between individuals, it is believed

that product information communicated in this way has an added layer of

credibility. Research points to individuals being more inclined to believe

WOMM than more formal forms of promotion methods; the receiver ofword-of-mouth referrals tends to believe that the communicator is speaking

honestly and is unlikely to have an ulterior motive (i.e. they are not receiving

an incentive for their referrals).

To promote and manage word-of-mouth communications, marketers use

publicity techniques as well as viral marketing methods to achieve desired

behavioral response. Influencer marketing is increasingly used to seed

WOMM by targeting key individuals that have authority and a high number

of personal connections.

In summary, word-of-mouth not only plays an important role in the

evaluation of products but also plays an important role in society as well.

As a tool of advertisement, the extent of relationship between movies and

Word of mouth is to be discussed in the whole study of the project,

similarly, as a tool of information, the extent of relationship between MP3

players and Word of mouth is also to be discussed in the study.

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WORD OF MOUTH

I. Introduction :Word of mouth:

Word of mouth is a reference to the passing of information by verbalmeans, especially recommendations, but also general information, in an

informal, person-to-person manner. Word of mouth is typically

considered a face-to-face spoken communication, although phone

conversations, text messages sent via SMS and web dialogue, such as

online profile pages, blog posts, message board threads, instant messages

and emails are often now included in the definition of word of mouth.

There is some overlap in meaning between word of mouth and the

following: rumour, gossip, innuendo, and hearsay; however word of

mouth is more commonly used to describe positive information beingspread rather than negative, although this is not always the case.

Word of mouth marketing (WOMM)

Word-of-mouth marketing, also known as buzz marketing and viral

advertising, can be highly valued by product marketers. Because of the

personal nature of the communications between individuals, it is believed

that product information communicated in this way has an added layer of

credibility. Research points to individuals being more inclined to believe

WOMM than more formal forms of promotion methods; the receiver of

word-of-mouth referrals tends to believe that the communicator is

speaking honestly and is unlikely to have an ulterior motive (i.e. they are

not receiving an incentive for their referrals).

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In order to promote and manage word-of-mouth communications,

marketers use publicity techniques as well as viral marketing methods to

achieve desired behavioral response.

Influencer marketing is increasingly used to seed WOMM by targeting

key individuals that have authority and a high number of personal

connections.

Marketers place significant value on positive word-of-mouth, which has

historically been achieved by creating products or services that generate

such "buzz" naturally.

The relatively new practice of word of mouth marketing attempts to

inject positive "buzz" into conversations directly. While marketers havealways hoped to achieve positive word-of-mouth, deliberate efforts to

generate beneficial consumer conversations must be transparent and

honestly conducted in order to meet the requirements of Section 5 of the

Federal Trade Commission Act that prohibits "unfair or deceptive acts or

practices." In order to help marketers understand the difference between

legitimate and unfair practices, a number of professional organizations

have put forward recommendations for ethical conduct.

Word-of-mouth effects in the life cycle of cultural goods have beenmathematically modeled.

With the emergence of Web 2.0, many web start-ups like facebook,

youtube, myspace, and digg have used buzz marketing by merging it with

the social networks that they have developed. With the increasing use of

the Internet as a research and communications platform, word of mouth

has become an even more powerful and useful resource for consumers

and marketers. Tracking this online 'buzz' has led to the rise of a range of

services and tools known as buzz monitoring as a component of online

public relations.

Successful example:

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WORD OF MOUTH

To promote and manage word-of-mouth communications, marketers use publicity

techniques as well as viral marketing methods to achieve desired behavioral

response. Influencer marketing is increasingly used to seed WOMM by targetingkey individuals that have authority and a high number of personal connections.

Marketers place significant value on positive word-of-mouth, which is traditionally

achieved by creating products, services and customer experiences that generate

conversation-worthy "buzz" naturally. The relatively new practice of word of

mouth marketing attempts to inject positive "buzz" into conversations directly.

While marketers have always hoped to achieve positive word-of-mouth, deliberate

efforts to generate beneficial consumer conversations must be transparent and

honestly conducted in order to meet the requirements of Section 5 of theFederal Act that prohibits "unfair or deceptive acts or practices." To help marketers

understand the difference between legitimate and unfair practices, a number of

professional organizations have put forward recommendations for ethical conduct.

Word-of-mouth effects in the life cycle of cultural goods has been mathematically

modelled. For evidence as to the conditions under which word-of-mouth

communication is effective, see Grewal et al. 2003.

With the emergence of Web 2.0, many web start-ups like Face

book, YouTube, MySpace, and Digs have used buzz marketing by merging it withthe social networks that they have developed. With the increasing use of the

Internet as a research and communications platform, word of mouth has become an

even more powerful and useful resource for consumers and marketers.

In October 2005, the advertising watchdog group Commercial Alert petitioned the

United States FTC to issue guidelines requiring paid word-of-mouth marketers to

disclose their relationship and related compensation with the company whose

product they are marketing. The United States FTC stated that it would investigate

situations in which the relationship between the word-of-mouth marketer of aproduct and the seller is not revealed and could influence the endorsement. The

FTC stated that it would pursue violators on a case-by-case basis. Consequences

for violators may include cease-and-desist orders, fines or civil penalties.

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Traditional Advertising Media

Newspapers As An Advertising Media

Pros1. Newspapers get 21.5% of all advertising expenditures.

2. Newspaper ads rank highest for believability for all media.

3. High local coverage and immediate [daily] delivery of your message.

4. Excellent mass media [almost everybody reads the newspaper].

5. An interactive medium [people hold it, save it, write on it, cut coupons, etc.].

6. Flexibility in production: low cost, fast turnaround, ad shapes, size, excellent

quality for inserts.

7. Special targeted sections and shopping guides.

8. Extraordinarily high Sunday readership.

Cons1. Very busy/cluttered competitive environment [must compete against other

ads and the newspaper copy].

2. Little control over ad placement.

3. Low production quality.

4. Hard to target your specific audience.

5. Short life span [24 hours].

Radio As An Advertising Media

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1. Radio gets 8% of all advertising expenditures.

2. Immediate delivery of message and high frequency of message [you can

repeat several times per day].3. Local audience. Selectivity by format. High availability.

4. Low cost per thousand [CPM] exposures.

5. Low cost production.

6. Reach an exclusive and captive [mobile] audience.

Cons

1. Limited to audio message.

2. High channel switching.

3. Your message expires immediately [no shelf life].4. High advertising clutter.

Television As An Advertising Media

Pros

1. Broadcast and cable television combined get 23.4% of all advertising

expenditures.2. Immediate delivery of message and high frequency of message [you can

repeat several times per day].

3. Very high impact TV is the best for stimulating the senses.

4. High mass audience coverage, high prestige.

5. Low cost per thousand [CPM] exposures.

6. Local regional emphasis, cable audience availability, some audience

selectivity.

Cons

1. Very high costs of production and airtime.

2. Limited audience selectivity.

3. Your message expires immediately [no shelf life].

4. High advertising clutter.

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5. High channel switching.

Direct Mail As An Advertising Media

Pros

1. Direct mail gets 19.2% of all advertising expenditures.

2. Highest response rate of all media.

3. Highest level of selectivity of all media.4. High quality control.

5. A measurable media for cost and response. Easy to test.

6. High personalization.

7. Creative flexibility.

8. Long life span.

9. No advertising clutter [once they open your piece].

Cons

1. Highest cost per exposure.2. Over-saturation of market - people get a lot of mail.

3. Negative connotations about buying through the mail.

4. Negative connotations about junk mail.

Magazines As An Advertising Media

Pros

1. Magazines get 5.3% of all advertising expenditures.

2. Excellent photo reproduction in full color.

3. Long shelf life with high pass-along readership.

4. High readership rates and reader loyalty.

5. High ability to select audience.

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6. Regional editions for a more local audience.

7. Proven selling power. High prestige.

Cons

1. Long lead times. Unable to deliver your message immediately.

2. High CPM for mass audience advertising.

3. Heavy advertising clutter - often half of a magazine is advertising.

4. Poor local coverage.

5. Cant deliver your message with a high frequency.

Outdoor As An Advertising Media

Pros

1. Outdoor get less than 1% of advertising expenditures.

2. Highest reach of all media.

3. Lowest CPM of all media.

4. Neighborhood level selectivity.

5. Very high frequency of reach.

6. Potential high impact because of size.7. Some good location of message availability.

Cons

1. Only very short, simple messages work.

2. Some image problems with poor locations.

3. Hard to measure results.

4. High initial costs.

5. Negative connotations about visual pollution.

Yellow Pages As An Advertising Media

Pros

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1. Yellow Pages get 5.9% of all advertising expenditures.

2. Very high percentage of new buyers [over 50%].

3. Very high percentage of active buyers [over 88%].4. Completes the marketing process by bringing customers in.

5. Second highest media for believability.

6. Reaches 76% of U.S. adults in the average month. [Available in almost

every home and business.]

7. Longest shelf life. Open 24 hours per day.

8. A measurable media for cost and response. Easy to test.

Cons

1. Highest advertising clutter [100% ads].2. High cost for competitive positioning.

3. High CPM [but highest active buyers].

4. More directories mean lower reach per directory.

5. More headings mean lower reach per heading.

6. You can only change your ad once per year.

Using Advertising Media In Combination:

Large advertisers almost always use a combination of different media to promote

their products. This strategy makes sense for a number of reasons, but mainly

because it is cost effective. So, is this a good idea for a small, local business?

The answer is a resounding YES, but on a slightly different scale. You certainly

want to maximize your marketing through coordination.

Lets take a look at how your advertising reach is increased when you use different

media in combination.

Consider the percentage of people in your total target audience that you reach

when you advertise in the newspaper. Here is a good example of what is going on

in the real world:

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With a newspaper ad you reach 25% of your total target group. Add a yellow page

ad, and you reach an additional 18% of the people. Add a direct mail piece, and

you reach an additional 19% of the people. Add television advertising, and youreach an additional 15% of the people. Add radio, and you reach an additional 8%

of the people.

By using multiple media outlets you have reached more of your target audience

with your marketing and advertising. You have also reached them multiple times

because they get messages from different places.

Your messages reinforce each other. The result is an overall higher response at a

lower cost. You have created synergy with your marketing and advertising.

It works because different people pay more attention to [and have more faith in]

different types of media. When seriously reviewing ads for a product, about 25%

of people review and trust the newspaper. 18% consider direct mail, 21% the

yellow pages, 8% television, 4% radio, and 4% magazines.

The numbers in these examples are only an approximation of what really happens

in the marketplace, and they change according to product category. But it is clear

that by using different kinds of media [like the yellow pages and direct mail

together], or even different media outlets, [like multiple newspapers], you can and

will reach more potential customers more effectively with your marketing andadvertising.

There is the matter of overlap between the different media to consider. You have to

assume that the different media will duplicate your message with a percentage of

your target audience beyond the effective frequency level required.

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Primary Research

Objective:

The research would throw light on importance of various word of mouth

communication sources in the context of different product categories by

understanding the consumers perceptions towards them:

(A) To present solid data proving the significance of WORD OF

MOUTH.

(B) To understand consumer psychology that drives the use of WORD

OF MOUTH.

(C) To explore the effects of WORD OF MOUTH on consumer

behaviour.

(D) To study in detail the extent of relation between movies and WORD

OF MOUTH as a tool of advertisement.

(E) To study in detail the extent of relation between MP3 Players and

WORD OF MOUTH as a tool of information.

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Marketing Research problem:

To study about the consumer psychology and effects of word of mouth on

movies,mp3 players.

Problem Components:

To find whether consumers believe in various new sources of word of mouth

like mobile, website etc.

While taking purchasing decision, Do consumers notice and consider the

information given in advertisements?

Do consumers like the innovative and technological sources of

advertisements or they want to stick on traditional one?

Sampling:

Universe: The universe is entire group of items the researchers wish to study andabout which they plan to generalize. For this, the universe consists of people of

Delhi, Noida and Gurgaon who involves in purchasing of any of three categories

(consumer appliances, FMCG or Automobiles).

Target population: General consumers of different age groups and gender

Sample Size: 75

Sampling Technique: Quota sampling where control characteristics will be: Sex,

Age.

Quota Sampling may be viewed as two stages restricted judgmental sampling. The

first stage consists of developing control categories, or quotas, of population

elements. First, researchers have to list relevant control characteristics and

determine the distribution of these characteristics in the target population.

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Sample Composition

Control

Characteristic

Percentage Number

Sex:

Male 48 36

Femal

e

52 39

Age:

< 25 52 39

26-40 26.67 20

41-55 13.34 10

Over 55 8 6

Sources of primary and secondary data:

Since the research aims at finding the attitude of people towards the different

media of advertising, a conclusive research was conducted. The data collection

form was designed in the form of a standard questionnaire because it is more

reliable than unstructured format. By reducing the chance or the sample to

influence results through different questions and through different judgment of

answers and what to record, the structured questionnaire produces more reliable

results i.e. if the research project is repeated in the same manner, similar results

will be obtained.

Most of the questions asked in the questionnaire were closed ended with a few

open-ended questions also, to know consumers general views. Some questions are

designed for the purpose of cross checking the samples genuineness in filling the

questionnaire.

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For the purpose of analysis, ranking scale (Likert Scale) is used to rank the

preferences of attributes of the customers.

A brief flow-chart is given in the next page to sum up all the research process:

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Data Analysis:

1. Respondents categorised according to their gender.

2. Respondents categorized according to their age.

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61%

39 %

Male in % Female in %

- -


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In our sample size of 80:

46.25% belong to the age group of 18 25,

28.75% 26 30,

21.25% 31 40

3.75% in 40+

3. Before buying a new product or innovation, how influential do you

think is each of these sources?

A. Trade Magazine.

B. Professional Meeting.

C. Internet.

D. Mass Media

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0

0.2

0.4

0.6

0.8

A B C D E F

0.40.33

0.61

0.77

0.63

0.05

EXTENT OF INFLUENC


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E. Peers/colleagues.

F. Others.

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4. How reliable do you feel is the information obtained from other

individuals?

5. How often do your colleagues / peers look to you for information about

products?

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0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

A

0.66

Re libility of in

18%

69%

13%


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6. What percentage do you think of all your conversation is about an

organisation, brand, product or service?

7. After having received negative comments about a product/ service, how

likely are you to go ahead and buy it?

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0% 10%

42%33%

15%

o% 1-10% 11-40% 41-70% more than 70%

02 04 06 08 0

N o C h a ns o m ep o s s i b i l i

G o o dP o s s i b i l i

A l m o s t S

2 8 . 4

6 3

6 . 1 7 2 . 4 5

% O F A p p r o v a l w i th t


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8. What are you most likely to do if you are dissatisfied with a product/

service as a customer or with the organisation as an employee?

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17.5

28.75

25

28.75

0

5

10

15

20

25

30

35

put up shift complain share negativecoments

% Approval with the option


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9. Listed are a few products/ services. Which of these would you NEVERbuy without consulting your colleagues / experts?

A. Banking

B. Hotels

C. Consumer

D. Internet

E. Holiday

F. Cars

G. Any other.

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40

32

39

38

36

44

8

0 10 20 30 40 50

banking

hotels

consumer

internet

holiday

cars

any other

approvals rate


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10. If you are a satisfied customer of a product and you happen to hear a

negative comment about it from your friend, you are most likely to:

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11.How important is it for you to visit a Multiplex or a stand- alone theatre

to watch a movie?

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0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

A

0.64

Importance of multipleximportance


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12.Please indicate the rank of the following members whose opinion holdsimportance for you before you decide to watch a movie

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0.75

0.38

0.5

0.42

0.06

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8

Friends

Parents

Any other

ImportanceImportance

AnyOther

Friends

Parents


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13.Now thinking about each of the following specifically, how frequently doyou accompany them in watching a movie?

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0

10

20

30

40

50

60

70

80

Mostly Sometimes Never

29.4

56

11

75.3

19.4

5.1

13

34

41

2

14

65

Family Friends Colleges Alone

Mostly Sometimes Never


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Interpretation and Conclusion:1.You are exposed to thousands of ads/commercials a month and only act on avery small handful.

2. You are likely to act on about one in 3-5 recommendations from friends.

3. Therefore, WOM is hundreds to thousands of times as powerful as advertising.

If 25 people tell 25 people 6 times, its the entire population of the world!

Once 25 x 25 = 625

twice x 25 = 15,625

3x x 25 = 390,635

4x x 25 = 9,765,625

5x x 25 = 244,140,625 (order of magnitude of pop. of US!)

6x x 25 = 6,103,515,625 (population of the WORLD! Approx.)

Obviously, this assumes that no one tells someone who has already heard. In real

life, there are many duplicates, creating the impression that everyone is talking

about it, -- which they are -- making action even more likely.

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Scope and Limitations

The sample size being very small, that is only seventy five

respondents, limited the scope and study of the project.

Time constraints put boundaries to the sample area and hence limited the

extent of the study.

Mostly people do not tell what exactly they think.

Some just purchased on spot, no effect of advertisement or

references.

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Bibliography:

http://en.wikipedia.org/advertising_sources

http://www.valueresearch.com

http://www.acnielsen.com

the future of advertising By Joe Cappo

Marketing Communications By Tom and Drucker

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http://www.valueresearch.com/http://www.valueresearch.com/


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Annexure

QUESTIONNAIRE

WORD OF MOUTH- THE NEW MEDIA

1. Before buying a new product or innovation, which source do you think is the most

important? (Rate on 1- 5 scale)

1- very important

5- very unimportant

Trade magazines- -----------

Professional meetings- ------------

Internet- -----------

Mass media- ----------

Peers/ collegues- ---------

Others ( specify)- --------------

2. How reliable do you feel is the information obtained from other individuals?

(Rate on a 1 to 10 scale)

1- very reliable

10- very unreliable

Information obtained from other individuals Rating: _________

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3. How often do your colleagues / peers look to you for information about products?

(Tick mark the box applicable)

NEVER

SOMETIMES

FREQUENTLY

4. What percentage do you think of all your conversation is about an organisation,brand, product or service?

________________________%

5. Do you try to convince / persuade a skeptic (One who thinks negatively about

something) if you are loyal to that same brand or are positive about the company?

YES

NO

( If YES, please continue. If NO please proceed from Q. no. 9)

6. Would you continue to talk about a specific product with your peers if their interest to

know about the product is low?

YES

NO

7. What questions would you anticipate from a skeptic?

___________________________________________________________

___________________________________________________________

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8. How would you answer their objections?

___________________________________________________________

___________________________________________________________

___________________________________________________________

9. After having received negative comments about a product/ service, how likely are

you to go ahead and buy it?

NO CHANCE

SOME POSSIBILITY GOOD POSSIBILITY

VERY PROBABLY

ALMOST SURE

If yes why?

10. What are you most likely to do if you are dissatisfied with a product/ service as a

customer or with the organisation as an employee?

Put up with it till it is possible

Shift to another alternative immediately

Complain about it to the organisation

Share your negative experience with others

11. What kind of products/ services would you NEVERbuy without consulting your

colleagues / experts?

___________________________________________________________

___________________________________________________________

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12. If you are a satisfied customer of a product and you happen to hear a negative

comment about it from your friend, you are most likely to:

Ignore it

Try to convince your friend about your opinion

Get influenced by your friend

13. Do you usually recommend to others the brands you are loyal to?

YES

NORegarding yourself, to what extent do you agree or disagree with the following statements: ( Rate

on a 1 to 10 scale)

1- strongly agree

10- strongly disagree

14. It is easy to make a mistake while buying an expensive product

1 2 3 4 5 6 7 8 9 10STRONGLY STRONGLY

AGREE DISAGREE

15. I am nervous about choosing a product about which I dont know much

1 2 3 4 5 6 7 8 9 10

STRONGLY STRONGLY

AGREE DISAGREE

16. I like to try out new products even if I know little about them

1 2 3 4 5 6 7 8 9 10

STRONGLY STRONGLY

AGREE DISAGREE

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17. I prefer to stick to the product I know well

1 2 3 4 5 6 7 8 9 10

STRONGLY STRONGLYAGREE DISAGREE

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