Most marketers agree that positive word of mouth is an important tool to drive growth. Recent studies underscore this importance: An April 2008 study by Zenith Optimedia found that recommendations from family and friends trumped all other customer touchpoints in influencing purchasing behavior. Not surprisingly, social network users are three times as likely to trust their friends and peers rather than advertising when making purchase decisions. However many misconceptions exist. Let’s debunk a few:
1. Your most valuable customers are your most passionate advocates. Logic would follow that your most loyal and lucrative customers are the most satisfied, and therefore would be most likely to recommend. However a 2007 study by V. Kumar and colleagues published in the Harvard Business Review discovered that customers with the highest lifetime value were not the most likely to refer. Instead, a customer’s referral value (the value of the revenue they generate through recommendation) is not significantly related to their traditional LTV. The authors submit that true customer value is a combination of LTV and CRV, and provide examples in Telecom and Financial Services in which their highest tier customers are actually less valuable than a lower-tier customer with high referral value. Kumar confirmed via email that they’ve replicated the findings across a broad array of industries.
2. Customer satisfaction drives WOM.High customer satisfaction ratings do not guarantee word of mouth. As with many human behaviors, eliciting the action requires a trigger. In this case, the disconfirmation of expectations is most likely to result in recommending or dissuading. At Virgin we often used the phrase “surprise and delight,” and in fact both the element of surprise and delight are necessary conditions to drive positive WOM. If you’re in a category with generally high customer satisfaction, such as commercial banking (pre-2009) and e-commerce, it is more challenging to create an experience which defies customer expectations positively. In categories with low satisfaction, such as airlines in the 1990′s, Jet Blue defied customer expectations of the category by offering friendly service and in-flight TVs. This delta between expectations of the category and actual experience was more likely to result in word of mouth.
3. All word of mouth is equal. I’ve attended several meetings over the years where the ambiguous goal “drive WOM” was uttered. In fact, the type of referrer matters. According to a study by Yankelovich, consumers trust friends above experts in product purchases. 65% trust friends, 27% trust experts, and a mere 8% reported trusting a celebrity. There is some variance by category, as studies have found consumers are more likely to rely on expert opinion in technology more so than other categories.
So, a few questions:
1. Do you truly know who your referrers are?
2. Have you designed industry-defying moments into your customer experience? Investing in a memorable positive point of difference may have higher returns than end-to-end “OK” for both products and services.
Click on the word “comment” below to share your thoughts. Next week: profiles of a few exciting new companies that enable word of mouth.
My nomination of the latest jargon we can live without:trimessaging.
