ROI and Results: How to Quantify Word of Mouth's Sales Impact

and Uncover Actionable Insights

Greg Pharo| AT&T| Director, Market Research & Analysis, @greg_pharo

Ed Keller| Keller Fay Group| CEO|@kellerfay

Word of Mouth Matters! “It’s the most disruptive factor

in marketing”

2.1 Billion brand impressions via

word of mouth each day in America

“The revenue growth of brands with the

highest advocacy levels is far above the

industry average. Over time, the difference

separates the leaders from the laggards.”

WOM > Social Media

What % of WOM happens on social

media, blogs or chatrooms

IM/Text: 4%

Email: 3%

Social Media: 2%

Offline

88% Online

9%

Note: Percentages will not add to 100% because Other is not shown,

© 2014 Keller Fay Group, Source: TalkTrack® 2013

Marketing Plays Role in Driving WOM

© 2014 Keller Fay Group, Source: TalkTrack® 2013

…led by advertising (26%)

editorial (17%)

point of sale (11%)

websites (11%)

promotion (10%)

direct mail & email (5%)

58% of consumer brand conversations

refer to marketing or media

AT&T is a Highly Talked About Brand

© 2014 Keller Fay Group, Source: TalkTrack® 2013

1.

2.

3.

4.

5.

Top 10 most talked about brands in 2013

6.

7.

8.

9.

10.

AT&T earns

6.5 Billion

annual WOM

impressions!

AT&T Earns A Lot of WOM…

• Does WOM directly influence sales

volume, and to what extent?

• Where does word of mouth fit into the

“owned-earned-paid” media model?

• Is it really a metric of interest to

companies?

But, do these conversations drive sales?

Background- AT&T Marketing ROI

• AT&T is a leading Wireless services company

• Well-developed Marketing ROI program

• Uses Market Mix Modeling and other methods

to track & optimize media and messaging

• AT&T wanted to know if WOM impacts its sales

Does Word of Mouth Really Drive Sales?

We used a two step approach

1. Structural Equation Model

(“Purchase Funnel”)

2. Market Mix Model

(Regression)

First: Model Consumer

Behavior

AT&T created both a “Purchase

Funnel” model which identifies

which attitudinal and behavioral

metrics impact sales (gross adds),

both directly and indirectly

The model also shows what other

upstream metrics indirectly

impact key drivers of sales

Method- Create a Structural Equation Model

First: Analytical techniques are used to winnow the myriad of earned media &

behavioral metrics

– Highly-related metrics were grouped together using a cluster analysis

– A short-list of metrics that are most correlated with their group are selected

Second: These representative metrics are then input into SEM models

– Reduces the burden of incorporating potentially hundreds of metrics

– Ensures the earned media impact is not “diluted” by having related metrics in model

Used a one-two combo of clustering and SEM

Structural Equation Models:

Traditional regression assumes no

interactions among sales drivers

The SEM structure allows multiple interaction among sales drivers

Gross

Adds Paid Media

Brand Health

Word of Mouth

Gross

Adds Paid Media

Brand Health

Word of Mouth

They uncover complex relationships

TalkTrack: Source of WOM data

• Keller Fay Group’s TalkTrack®, a national syndicated program

measuring WOM in all forms

– Over 3 in 4 conversations occur face-to-face

• The study involves 36,000 online consumers surveyed annually,

– Yielding about 1,000 weekly mentions of brands

• Respondents are representative of the US population

– use a diary to keep track of their brand conversations, then

complete an online survey to gather detailed information

about these conversations

Mode of Conversations

Across All Categories

Face-

to-Face

77%

Phone

13%

Online

8%

Other

2%

It measures WOM in all forms

Attitudinal Metric #1: Awareness

Attitudinal Metric #2: Network

AT&T Gross Adds (Sales)

WORD OF MOUTH: POSITIVE MENTIONS

STRONG Relationship

Advertising Message Metric #2

STRONG Relationship

Advertising Message Metric #1

Moderate Relationship

STRONG Relationship

AT&T Media Weight

Moderate Relationship

STRONG Relationship

Competitor Perception Metric

STRONG Relationship

Structural Equation “Purchase Funnel” Model

Concluded that WOM is a strong and direct sales driver

The model also identified metrics which influence WOM

Word of Mouth- Positive Mentions

Strong Moderate Weak

Strength of Relationship

Customer Service Perception #1

Network Perception #3

Network Perception #2

AT&T Gross Adds (Sales)

Willingness to Recommend

Additional Insights:

Finding from Structural Equation Model:

The number of positive WOM “mentions” in TalkTrack® proved to be one of the more powerful metrics directly influencing “Gross Adds” (sales)

Unaided Advertising Awareness, a top-of-funnel metric, was also a strong driver of Gross Adds

In turn, the Structural Equation Model identified which metrics influence Word of Mouth and Unaided Advertising Awareness

Paid media drivers are also included, as they directly impact Gross Adds, Word of Mouth and brand health metrics

Word of Mouth is a major sales driver

In contrast, online/social buzz

and NPS are weaker signals

We’ve tried other metrics

besides Word of Mouth:

• Online Buzz (social media)

• NPS

While they provide some

insights, they aren’t as strong or

reliable for explaining sales as

Word of Mouth

And it gets even better

We also constructed a

structural Equation Model for

AT&T Disconnects

It shows what causes customers

to leave AT&T

Guess what we found …

Structural Equation Model for Disconnects:

Negative sentiment WOM is a factor

Network Metric #2

Word of Mouth, NEGATIVE MENTIONS

Disconnects

Network Metric #1

Value / Pricing Factor #4

AT&T & Competitive

Media

Customer Service Metric #3

STRONG Relationship

STRONG Relationship

Moderate Relationship

STRONG Relationship

Moderate Relationship

STRONG Relationship

The Second Step

Introduce Word of Mouth into a

Market Mix Model

It provides a more precise

quantification of the sales

impact

Market Mix Models

TV

Radio

Cinema

Online Display

Outdoor

Content Search

Base Plan

Optimized

• AT&T constructed market mix

models for itself and key

competitors

• Each model uses Gross Adds as

dependent variable

• Media, pricing, product innovation,

messaging performance,

competitive, other relevant

marketing/ environmental factors

incorporated as ind. variables

Market Mix Model results Word of Mouth is a powerful and

statistically significant sales driver in

Market Mix Models

• Word of Mouth explained over

10% of sales volume through

positive comments, and over

10% of lost/unrealized sales

volume due to negative

comments

• Paid Media remains #1 sales

driver, contributing ~30% of sales

– but WOM is a close second

WOM: Positive &

Negative Impact

AT&T Conclusions

Word of Mouth is an impactful, relevant variable for

influencing sales in the Wireless category

WOM metrics belong on a CMO dashboard as a key

performance indicator

WOM drives sales and its impact can be measured

Keller Fay Observations

• Today, Over Half of WOM is influenced

by marketing, including 26% by paid

advertising

• These numbers ought to grow as

marketers adopt WOM as an objective

“Conversation” should be a marketing objective

© 2014 Keller Fay Group, Source: TalkTrack® 2013

Think about

providing

“triggers”

Keller Fay Observations

Ways to stimulate WOM

• Focus on messages that are “talkworthy”

• Target consumers who are able to carry the message

• Favor marketing & media channels

that will maximize WOM

Opportunity for marketers to

think of all media as “social”

Seek out

“influencers”

17.2

18.2

18.4

18.7

21.6

The Blacklist

America's Got Talent

Dancing with the Stars

60 Minutes

The Voice

Current Media Focus: “Impressions”

Most watched program by demographic target

IMPRESSIONS

Monthly Audience Size In Millions, Ages 18-49

Source: Nielsen TV/TalkTrack® Fusion, September 2013

17.2

18.2

18.4

18.7

21.6

The Blacklist

America's Got Talent

Dancing with the Stars

60 Minutes

The Voice

New Opportunity: Also Focus on “Expressions”

Target consumers talking about category/brand

IMPRESSIONS

Monthly Audience Size In Millions, Ages 18-49

Source: Nielsen TV/TalkTrack® Fusion, September 2013

Sleepy Hollow 16.8

EXPRESSIONS

Projected Weekly Auto Conversations in Millions

79.3

81.8

81.8

82.1

92.3

The Blacklist

America's Got…

60 Minutes

Sleepy Hollow

The Voice

Sleepy Hollow #7 in terms of

“impressions,” but #2 in terms

of auto WOM “expressions”!

Depicts programs that

do not surface on top

10 indexing list among

“affluent men”

Top Programs Among „Affluent Men Who Are Engaged in Consumer Electronics WOM‟ Shown: Top indexing shows among the top 100 programs reached across broadcast & cable.

Bring “Social” Audiences to the Forefront

Source: Nielsen TV/TalkTrack® Fusion, November 2013

174 160 159 157 154 154 147 145 145 144

Plan for “Expressions”

” Awareness is fine,

but advocacy will

take your business

to the next level. Joe Tripodi, CMO, Coca-Cola

Concluding Thoughts

• Word of Mouth is an impactful, relevant variable for

influencing sales in the Wireless category

– And, it’s impact can be quantified

• WOM should be a key objective for all marketing

• Use messaging, targeting and channels to stimulate WOM

• Plan for “expressions” in addition to “impressions”

PAY-OFF: CONVERSATION, ADVOCACY, SALES

Thank you!

Greg Pharo, @greg_pharo

Ed Keller, ekeller@kellerfay.com, @kellerfay