Word of Mouth – A Prescription for a Bad Economy

A Presentation by Agent Wildfire – Canada’s Word of Mouth Experts

This economy is bad…like really bad…

It looks like we’re in the big R…

Yikes, Advertising is taking it on the chin...

- Group M forecasts media spending down 3.2% in 2009- Zenith Optimedia forecasts 5.7% down in 2009- Morgan Stanley could envision a +10% drop in spending depending on the economy

How will we carve up the media pie?...

Well, we’ll be eating less media:- 93% of CMOs believe the economy will have a significant/moderate impact on their budgets- 70% of CMOs plan on reducing their marketing spending Source: Epsilon

Perhaps a premature announcement, but why wait.

2009 Anticipated Declines:

- 15% Newspapers- 13% Consumer Magazines- 10% Terrestrial Radio- 4% Network TV

Source: Jack Myers Media Report

The Long Slow Decline into Irrelevance

Smart Marketers are Now Rethinking Traditionally Held Views...

Crisis requires radical shifts in thinking

AnotherChange

You Can Believe

In Is Coming

…

Here Comes the Next Wave of Marketing & Media…

The Fastest Growing Marketing/Media Segments

Expected 5 year Compound Annual Growth Rate

Word of Mouth 27%Internet/Mobile 14%Branded Entertainment 13%Custom Publishing 11%Out of Home 10%

Source: Veronis Suhler Stevenson

Word of Mouth is Catching On…in All Its Forms

Buzz Marketing Social MediaCustomer Collaboration Brand Communities

Influencer Marketing

User Generated Content

Influencer Marketing Social Networks Referral Programs

Grassroots/CauseMarketing

ExperientialMarketing

Viral Marketing

Fact - Most Traditional Media is an Inefficient Cost…

…Word of Mouth is a Wise Investment

12 Reasons Why

Word of Mouth

Deserves Your

Consideration

In This Economy

Advertising Attention Deficit Hurdles

3,000 ads get pushed at us each day - 6 times the volume vs. 40 years ago…the tougher it is to

breakthrough, the more we do and invest

Reason #1 – Word of Mouth Gets Noticed

- 4% any ad recall from last TV show watched(down from 34% in 1965)

Source: NBA

-70% of people frequently consume multiple media simultaneously

Source: eMarketer

- 93% of people believe word of mouth isthe most reliable way to find out information about products and services (up +26 pts. Vs. 25 years ago)

Source: NOP World

One-Way Communication Hurdles

Customers demand interaction and customization,Marketers require it

Reason #2 – Word of Mouth Taps The Values of New, Customer Participation Culture

Mass Media Word of Mouth

Customers Now Want:FreedomCustomization ScrutinyIntegrityCollaborationEntertainmentSpeedInnovation

Participation Values Grade2/102/103/102/101/108/105/102/10

Participation Values Grade9/108/109/109/10

10/108/108/109/10

Evaluation Score 25/80 70/80

In a bad economy, marketing has to punch harder and create action…

Reason #3 – Word of Mouth Stimulates Action

- 90% - proportion of people who canskip ads, do skip ads

- 69% - percentage of people who are interested in skipping ads completely Source: Yankelovich

- 70% - percentage of people affected byword of mouth conversations

- 37% buy it/try it- 24% consider it- 9% avoid it

Source: Keller Fay

Lifetime customer value trumps short term lift

Reason #4 – Word of Mouth Has Longevity

- Over 30% of the broadcast content we see in mass media is advertising or promotion

- How much is conscious? Low- How much is attentive/lean

forward? Low- How much is well-received? Low- How much is retained? Low- How much is banked in

memory? Virtually nil

- Average people have 17 word of mouth conversations each day

- How much is interactive? High- How much is spoken? High- How much is internalized? High- How much is retained? High- How much is behaviour altering?

High

-Brand Communities don’t reach full maturity to 18 months

- 82% of community members refer more people to a brand after joining

Ad inflation is running wild

In a down economy, advertising is a tougher discretionary expense to justify

Reason #5 – Word of Mouth Costs Less Per Impact

- Cost to Produce a National TV Ad- $360,000

- Min. Media Cost to Air a National Campaign in Canada

- $1,200,000

- Typical Research Cost Associated with TV-Campaign

- $25,000 - $100,000

Choose Your Flavour:- Year Round Community - $100-500k

- 26 week Word of Mouth Campaign - $40-150k

- Blog/Social Media Outreach $30-100k

- Advisory Panel - $15-75k

- Buzz Marketing Tactic $5-100k

In a bad economy, few markets increase, it’s a battle for share growth

Reason #6 – Word of Mouth is a Competitive Advantage

- Canadian advertisers spend $19 billionon media - $674 per adult

- Advertising is spent on very similar formats: TV – 30 second ad

Print – Full page, ½ pageWeb – Banner, SearchRadio – 30, 60 seconds

- 10% - Percentage of CFOs who believe marketers can assess impact of budget on sales

Source: Canadian Marketing Association, MMA

- Only 1-2% of marketing budgets arecurrently spent directly on creating word of mouth

- Marketers are just beginning to activate word of mouth variants, but still low - Influencer programs - 22% of marketers executing - Buzz/Stunts - 15% - Branded Entertainment 14%

- A 7% increase in positive word of mouth equates to 1% business growth

Sources: VSS, Agent Wildfire, London School of Economics

In today’s connected economy, grassroots influence is key

Less than 10% of your customer base controls a big chunk of what the rest of us buy, think and do…

why not target them?!

Reason #7 – Word of Mouth Targets Influence

- With rare exception (i.e. magazines), mainstream media has a tough time targeting audiences and specifically influencers

- 70% of Wikipedia’s content is produced by 1.7% of its audience

- Top ranked Influencer belief – “I love talking to others about things I’ve just discovered”

- Influencers are 2x more active, more conversational and/or more brand-involved than the mainstream consumer

Sources: Agent Wildfire, Keller Fay

Need for ROI for marketers in a bad economy is a mantra

Reason #8 – Word of Mouth is More Measurable and Linked to Growth

- Mass media has challenges auditing its own traffic

- Mass media weight cannot be linked to sales

- When measured, it only measures presumed eyeballs not real engagement

-Word of mouth activities have much better measurement ability because of their digital nature and opportunity to mine relationship with customer/member

- The #1 factor linked to business growth is word of mouth referral

- Word of mouth measures the key business drivers of engagement and advocacy

Sources: Agent Wildfire, Bain

Trust has eroded in our institutions, a bad economy will accelerate this contempt

…but we still trust our friends and “people like me”Source: Edelman Trust Barometer

Reason #9 – Word of Mouth is More Trusted

60% of people have a much more negative view of marketing and advertising than a few years ago

27% trust manufacturers

14% trust ads

8% trust celebrities

Word of mouth is the #1 trusted source, up 50% vs. a generation ago

61% of people claim to buy the same brands as their friends (+28 pts. Vs. 4 years ago)

90% trust their spouse

82% trust their friends

Sources: Yankelovich/Henley Centre Sources: Keller Fay/Yankelovich/Henley Centre

Who do you trust?

The Customer is the New Battleground

Word of Mouth gets you closer to your customer frontlines

Percentage of executives who

believe the Customer Experience is the new

battleground - 95%

Percentage that believe they are

delivering a positive customer experience

- 80%

Percentage of their customers who agree

- 8%

Reason #10 – Word of Mouth is More Customer Centric

Entertainment Value Information Value

Entertainment Value Informational Value Explicit value (rewards) Intrinsic value (feeling of belonging) Extrinsic value (ego/reputation) Experiential value (immersion) Social value (making connections) Talent value (expressing skills/creativity) Service value (adds to the product) Collaborative value (1+1=3)

Mass Media Provides: WOM Provides:

CEOs are Expecting More From their Marketers – Marketers need to be Leaner and Keener

Word of Mouth accommodates those needs

Reason #11 – Word of Mouth Simply Provides More

Communication Communication Advocacy Ambassadorship Buzz Insight Real world feedback Solutions Innovation Support Operational Improvements User Generated Content

Marketers want WOM for a variety or reasons

Internal External

HardMeasure

SoftMeasure

Awareness/Buzz 35%

Referrals/Leads/Members 32%

Participate in a conversation 26%

Drive brand loyalty 32%

Seed influencers 32%

Launch a product 22%

Build a better customer experience 21%

Accelerate sales 19%

Target tough to reach audience 19%

Generate user generated content 19%

Support a cause 6%

Support a cause 6%

Deliver visitors/traffic 17%

Enhance credibility 14%

Get Insight /solutions 10%

Provide learning 6%

Source: Agent Wildfire Question - What are the top 3 objectives for launching a word of mouth based initiative?

Don’t skate to where the puck is , skate to where it is going to be

Reason #12 – Word of Mouth is the Now & the Future

Canadian Marketers plan on spending more/less in 2009:

More LessNewspaper 5% 32%Radio 5% 33%TV 4% 37%Magazines 3% 39%Social Media 23% 16%

58% of marketers agree thatword of mouth influence will overtake traditional media influence within a generation

73% of marketers believe marketers will become much more important in an organization by leveraging word of mouth strategies and tactics

Source: Veritas Source: Agent Wildfire

A Palette of New Strategies & Tactics Await

Source: Agent Wildfire

What forms of word of mouth will experience the most growth in the next few years ? (top 3 choices)

Social media marketing 37%Social network marketing 35%Mobile marketing 34%User-generated Content 31%Influencer marketing 28%Brand communities 20%Customer forums 17%Branded entertainment 16%Cause-related marketing 14%Brand microblogging 14%Buzz marketing 13%Corporate/brand blogging 11%

Recap – The 12 Reasons Why Word of Mouth (WOM) is Primed for this Economy

1 ) WOM Gets Noticed2) WOM Taps Participation Values3) WOM Stimulates Action4) WOM has Longevity5) WOM has Less Cost/More Value6) WOM is a Competitive Advantage7) WOM Targets Influence8) WOM is More Measurable9) WOM is More Trusted10) WOM is More Customer Centric11) WOM Provides More12) WOM is the Future

…Don’t Despair

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Integrated Brand Community-building Advisory Panel Influencer-driven Challenge/intervention Referral-driven Grassroots sponsorship/cause-driven

Offline Experiential Buzz/Guerrilla

Online Social Media Production/Outreach Social Network Production/Outreach Viral Affiliate/Referral -driven User-generated Advergaming

We plan, seed, incubate execute, measure, live and breathe the spectrum of word of mouth

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Let’s Start Your Next Brand Conversation…

Inquire: info (at) agentwildfire.com

Phone: 416-255-4500

URL: www.AgentWildfire.com

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