The Value of Word-of-Mouth in Consumer Buying Behavior

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Word-of-Mouth (WOM) is the primary factor behind 20% to 50% of all purchasing decisions. Its influence is greatest when consumers are buying a product for the first time or when products are relatively expensive (factors that tend to make people conduct more research, seek more opinions, and deliberate longer than they otherwise would).  And its influence will probably grow because the digital revolution has amplified and accelerated its reach to the point where word of mouth is no longer an act of intimate, one-on-one communication. Today, it also operates on a one-to-many basis:  that is, product reviews are posted online and opinions disseminated through social networks. Some customers even create Web sites or blogs to praise or punish brands.

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Very interrelated to WOM is customer loyalty.  Although the need to provide an after-sales experience that inspires loyalty and therefore repeat purchases isn’t new, not all loyalty is equal in today’s increasingly competitive, complex world. There are 2 types of loyalty:  Active loyalists, who not only stick with it but also recommend it; Passive loyalists, who choose to stick to the brand either because of complacency or confusion caused by too many choices,  and stay with a brand without being committed to it.  Despite their claims of loyalty, passive consumers are open to messages from competitors who give them a reason to switch.    

Some key concepts related to WOM

3 Main Classifications:

Experiential

WOM is the most common and powerful form, typically accounting for 50% to 80% of word-of-mouth activity in any given product category. It results from a consumer’s direct experience with a product or service, largely when that experience deviates from what’s expected. (Consumers rarely complain about or praise a company when they receive what they expect.) Complaints when airlines lose luggage are a classic example of experiential WOM, which adversely affects brand sentiment and, ultimately, equity, reducing both receptiveness to traditional marketing and the effect of positive WOM from other sources. Positive WOM, on the other hand, can generate a tailwind for a product or service.

Consequential

Marketing activities also can trigger WOM. The most common is what we call consequential WOM, which occurs when consumers directly exposed to traditional marketing campaigns pass on messages about them or brands they publicize. The impact of those messages on consumers is often stronger than the direct effect of advertisements, because marketing campaigns that trigger positive WOM have comparatively higher campaign reach and influence. Marketers need to consider both the direct and the pass-on effects of WOM when determining the message and media mix that maximizes the return on their investments.

Intentional

A less common form of WOM is intentional—for example, when marketers use celebrity endorsements to trigger positive buzz for product launches. Few companies invest in generating intentional WOM, partly because its effects are difficult to measure and because many marketers are unsure if they can successfully execute intentional WOM campaigns.

Measuring Word-of-Mouth Equity

A starting point has been to count the number of recommendations and dissuasions for a given product. There’s an appealing power and simplicity to this approach, but also a challenge: it’s difficult for marketers to account for variability in the power of different kinds of WOM messages. After all, a consumer is significantly more likely to buy a product as a result of a recommendation made by a family member than by a stranger. These two kinds of recommendations constitute a single message, yet the difference in their impact on the receiver’s behavior is immense. In fact, our research shows that a high-impact recommendation, from a trusted friend conveying a relevant message, for example, is up to 50X more likely to trigger a purchase than is a low-impact recommendation.

Loyalty Platforms and Social Loyalty Platforms

The growth of online social media networks such as Facebook, Twitter, LinkedIn, Pinterest, Instagram, Youtube has made online word of mouth a channel for businesses to acquire customers.  Offering your customers membership to loyalty rewards club can incentivize your customers to spread positive reviews and experiences about your product.    For the first time ever, merchants can have their loyal customers share their activity on Facebook to bring in new customers. The cloud based loyalty platform saves merchants IT costs versus existing desktop server solutions.  Sign up today to learn how Social Loyalty can save you 88% on new customer acquisition cost. Visit SocialLoyaltyApps.com to learn more.

 

 

Why Page Publishing Should be Your Business’ Core Competency

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According to FB report, the best ads come from posts on your Page, so our best practices for Page publishing apply to Page posts and to ads and sponsored stories.  Here are some Posting best practices recommended  by FB:

Get the basics down.

Be succinct. Posts between 100 and 250 characters (less than 3 lines of text) see about 60% more likes, comments and shares than posts greater than 250 characters.

Post regularly. Post at least five times a week to stay top of mind for fans. Consistency is also key. For example, post new product announcements on the same day every week so fans know what to expect and can look forward to hearing from you.

Post at the optimal time. Only you know what’s right for your business, and you can use your Page Insights to figure out what’s working (for instance, try posting at different times of day and see when you get the most engagement).   For example, FB reports show that restaurants post from 7am-12pm when people are making plans for the day, while retailers post in the 8am-2pm window. User engagement with Facebook Pages is highest from 9-10pm and the 18-24 demographic is the most engaged during this time.*

Be specific and relevant.

Know your specific audience. When posting to your page, your message will reach fans who are likely to be familiar with your brand, so insider content can make them feel in the know.  To reach new audiences, you should create an ad from your page post and keep the content more general while still using your brand voice.

Be seasonable and timely. Fans are more likely to engage with topics that are already top of mind, such as current events, holidays or news. For example, posts mentioning Independence Day on July 4th generated about 90% more engagement than all posts published on that day.

* All engagement data and statistics are based on internal Facebook studies and represent average results.

Be relevant.  For example, local businesses can reference community events, while national businesses can link to articles that their community will care about.

Make a visual impact.

Post photos and videos. Posts including a photo album, a picture or a video generate about 180%, 120%, and 100% more engagement than the average post, respectively.*

Use bold visuals. Grab your audience’s attention by using simple images with a clear focal point. Images with highly saturated colors also help the creative stand out against the site’s white background.   An internal study showed that top performing ads (those with >.3% engagement in the form of likes, comments and shares) feature close-up images and a single color that stands out.*

Feature images that capture your brand. Ideally your profile image will be your logo or other brand  symbol, but people should also recognize your brand in the images you feature. An internal study showed that when a brand was immediately identifiable in an ad, it performed better in terms of recall and purchase consideration.

Craft compelling content.

Speak from your specific brand voice. Include key words that are unique to your brand identity. If your brand has a fictional spokesperson, use their voice. If not, imagine how your brand would sound if   it was a person.

Position your brand as a hero or problem solver. Highlight a specific product feature, such as anngredient or the convenience factor, and the impact it made. Reinforce this in the image if possible.  An internal study showed that this was a characteristic of top performing ads.

Give fans exclusive access to content, products, events, and offers. Fans are 2x more valuable than non-fans, so you should reward them for their loyalty.* Take fans behind the scenes of events and product launches to make them feel special. Announce new products to fans on Facebook before anywhere else, give fans early access to sales, or post exclusive photos from events.

Deliver value to fans. Post limited-time offers or coupon codes, or use your Page to promote a sweepstakes or giveaway.  Social loyalty rewards programs would make an excellent strategy.

How to Make a Successful Facebook Conversion Funnel

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The keys to leading a person from being a casual visitor to Liking a FB fanpage, and through making a purchase, depend on having a solid social strategy and compelling offers that get your community excited about. So how can your company make a successful conversion?  Let’s go over some of the key factors and talk about how they can be applied to marketing on the world’s largest social network:

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The Fewer, The Better – Liking with Limited Quantity

Scarcity is a powerful tool. Offering a product with limited time period or quantity can be very enticing.  This is what drives impulse buys in social commerce. If your customers know they can’t get it anywhere else and there’s only a few left, they are much more likely to buy. Scarcity will attract new Likes (and customer acquisition) by word of mouth.

Quality Over Quantity

Popularity may be awesome but can be a tricky thing.  A brand with 20,000 fans on Facebook is popular compared to one with 100 fans, but pales in comparison to the brand with 20 million fans. The real lesson is what you do with your fans and less about how many you have.   So engage with your fan base and continue to offer a unique and awesome experience. In turn, your community will grow. The bottomline is that authenticity, consistency, and great content that generates a reaction are big drivers in developing a community. Posts with photos and powerful videos encourage sharing, and therefore expand a brand’s reach. An authentic brand voice will build trust, leading the casual brand fan to have a deeper sense of personal connection and ownership.  This makes them pay more attention to your updates that appear in their news feeds.

Go Directly to Your Customers – Remove the Middle Man

So you have a community of fans.  They are there for a reason – they like your products,  your customer service, your stores, your marketing, etc. You are the authority on your brand and your fans want to directly deal with and buy from you.  So take out the middle man and go directly to your fans. That way, you’re in control of the experience. Fans appreciate that direct experience much more than just buying your products at a big retailer. This is a big factor in the conversion funnel. People buy from the direct source because the sense of trust is very high. They know that the direct source cares more for the customers more than anyone else.  Thus, a great social experience that ends with a sale builds affinity and is an opportunity for brands to build repeat business.  The keyword here is “experience”.  The experience flows all the way from the initial introduction to the offer through the message a person receives after the transaction.  The experience ensures repeat customers.

Friends get Rewards

Reward your fans for being loyal to your brand and you can easily turn them into your evangelists or advocates of your brand or products.  This is the beauty of the social loyalty program.  You don’t only retain your existing customers. (Remember, new customer acquisition costs 8 times more than retaining your existing customers.)  In essence, your evangelists give free testimonials and help you acquire new customers.  You get free advertising.  And for the first time ever, Facebook makes it so much easier to do word-of-mouth marketing and use existing fans to acquire new customers. Find what reward system works for your brand and make it a part of your overall strategy.  It does not only drive down your costs, but it is a very effective marketing tool.

Be Consistent

The key to success in any endeavor is consistency – Show Up!  When it comes to Facebook Commerce, you need to just stay on top of it. Your fan base is built over time.  This can be accomplished in the form of polls, photo caption contests, giveaways, quotes, choosing a fan of the day, anything that engages your fans or get them involved.  Facebook Commerce is about building a community. When used well, the Facebook conversion funnel is a loop. By being smart with the offer and providing a great experience along the way, you can build your audience’s expectation and make them shop through your Facebook page.  So what else are you waiting for?  It is right at your fingertips!

Social Loyalty App and Token Economy : The Psychology of Loyalty Revealed

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What is Token Economy?

A token economy is a system of behavior modification based on the systematic positive reinforcement of target behavior. The reinforcers or rewards are symbols or tokens that can be exchanged for other reinforcers. Token economy is based on B.F. Skinner’s principles of operant conditioning (or stimulus-response conditioning) and can be situated within applied behavior analysis or behaviorism.

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The Psychology of Rewards
In the token economy system, the basic premise is that reward drives behavior – the carrot and stick formula.  Thus, when applied to social loyalty program, we reward the consumers when they respond appropriately to a behavior we want (e.g., refer your store to 10 more friends) and not reward them when they don’t respond accordingly.  However, paradoxically, while a big reward reinforces desired behavior better than a small reward, when rewards are discontinued, those who have received big rewards are more likely to return to the old buying pattern than those who received small rewards.   So make sure NEVER let your best customers feel that you are withdrawing privileges from them.

The identifying token

There are several ways of tracking or monitoring customers' purchases in order to later provide them with a reward especially now that the Social Loyalty Program is available on Facebook.  Whether the reward is a simple discount, a more targeted discount, points which lead to a gift from a catalogue or later money-off offer, or even extra services, there has to be some means of recognizing each customer at the point of sale. This is usually an identifying token or badges that the customer presents when making a purchase. So when applied to the Social Loyalty Program, the rewards (stimulus), in theory, are not only aimed at eliciting the right behavior (response), but also should reinforce it so that it ultimately becomes part of the consumer’s shopping psyche.  However, eliciting the right response is not just the function of the rewards offered, but all also includes a lot of other factors including the overall buying experience such as frequency of rewards, ease of use, emotional value of the rewards, and the like.

The Necessity of a Social Loyalty Program

By being the member of a loyalty program, the consumer by default becomes part of a larger community. Like every group, this community is also guided by certain norms and rules-predominantly set by the business that owns the program. The points accrual and redemption system forms the basic rules while the repeated strategic promotions that have a different set of rules become the advanced rules to get the members of the community to keep coming back. In a successful loyalty program, while the community formation is the first step, the successful conversion of the members into a “psychological-crowd” remains the key.

Psychological crowds are by nature extremely prone to the power of suggestibility. This vulnerability towards suggestion can be achieved by constant and relevant communication.   Thus, social loyalty program available on social media networks such as Facebook becomes very powerful and effective because of the availability of the community management system while keeping operating costs very low.  In marketing terms, the tactical and strategic promotions that are used to constantly communicate to the members serve the function of active suggestion. The online physical and emotional proximity between the members can be achieved by creating activities such as a family day-out, movie premiere, tickets for a play etc. These activities re-assure each member that there are many of people out there who think, behave and feel like them thus, validating their membership to the group.

What applies to an individual applies to a group.  Hence, successful loyalty programs are those that leverage the emotions that guide human behavior and channel them towards limited behavior modification resulting in regular and incremental financial returns for the business. The human mind craves for routine and any incentive that allows one to profitably) continue dealing with the store or business through rewards and incentives is the winner.

Loyalty programs are dictated by market dynamics. It is no longer a luxury but a necessity and a vital tool for survival for any business across industries. This is easy to understand when we realize that the market resides nowhere but in the collective consciousness of consumers.

It follows that the reward is a crucial part of any loyalty program. It has to be desirable enough to change the behavior of customers. In fact, if the reward is really well chosen, it will be attractive to the target group of customers, and not attractive to customers who are not really valuable to the business. It also has to be affordable, and balancing the two sides of the desirability/affordability equation is tricky. Next week, we will examine the key functions of a loyalty reward, offering sound advice on what consumers might value, and what might disappoint them. It also walks you through the properties or attributes that are always found in successful loyalty rewards.

If you like to be contacted about how a cloud-based Social Loyalty platform can improve the customer experience and enhance the revenues of your organization or your clients, please fill out the form on the right.

Word of Mouth Marketing is More Powerful Online

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Word-of-mouth marketing (WOMM), is an unpaid form of promotion—oral or written—in which satisfied existing customers tell other people how much they like a business, product, service, or event. Word-of-mouth is not new at all.  It is in fact one of the oldest yet most credible forms of advertising because people who don't stand to gain personally by promoting something put their reputations on the line every time they make a recommendation.

George Silverman, a psychologist, pioneered word-of-mouth marketing when he created what he called “teleconferenced peer influence groups” in order to engage physicians in dialogue about new pharmaceutical products. Silverman noticed an interesting phenomenon while conducting focus groups with physicians in the early 1970s. “One or two physicians who were having good experiences with a drug would sway an entire group of skeptics. They would even sway a dissatisfied group of ex-prescribers who had negative experiences!”

Now that we are in the online space, Digital Word-of-mouth marketing can influence the consumers’ buying decision. All of us are influenced by the word-of-mouth in one way or the other. Just think back to the time you asked for advice or an opinion from your friends and peers before purchasing a relatively expensive commodity. Or think about the last time you did online research to finalize your service provider or to purchase a product.  In my case, by default, I would read online reviews from previous customers when buying things at Amazon or Ebay for instance.  All these are the outcomes of  the digital word-of-mouth marketing.

So, let’s go a step ahead and explore what modes of digital word of mouth marketing are available to us:

1. Share with a Friend

Social networking websites provide us a great platform to connect with our family and friends located anywhere across the globe. Facebook,LinkedIn, Twitter etc. have now become a part and parcel of our daily lives. Happy, sad or confused- our status can spread the word within our network.   For example: – on purchase of every product from your website, give an option to your customers to share that with their connections on the social networking websites.

2. Reviews & Testimonials

Whether going out to dine at a restaurant, or about to purchase a laptop, or intending to hire a web consultant, etc., we all tend to go through the testimonials, reviews and ratings prior to making our purchase.  This is the power of asking for a review or a testimonial from a customer .  The previous buyer would give a review, which can then be shared with others.  This would be a good referral mechanism to build trust on your company without incurring additional costs.  These testimonials serve as effective marketing collateral for your website that can potentially increase more traffic to your website or fanpage.

3. Fan Page

Creating a Facebook fan page is an excellent and cost-efficient way to connect with your clients, prospects and business partners. A number of activities can be done through Facebook apps that can aid you in doing your digital word-of-mouth marketing.  Things such as status updates on Facebook, adding photos and videos to catch the eye of the target group, creating events and inviting your fans to attend, interactive activities such as games, online contests, promotions, etc. to engage your fans and the like, are some of the ways to do viral marketing organically through Facebook.

These are just some of the online ways of opportunities to do digital word-of-mouth marketing. For businesses, customer evangelism using entrenched advocates is one of the most affordable marketing channels; yet it provides some of the highest return on investment. More and more companies expand their reach thanks to the help of existing customers.  And the existence of Social Media like Facebook only allows the WOMM to grow virally in an exponential way.  This is what Social Loyalty or Digital Word-of-Mouth Marketing is all about.