Finally, Proof that Word of Mouth Isn't Just "Nice to Have," But Drives Measurable ROI - Ed Keller

For a number of years now, we have had strong evidence that word of mouth is highly valued by consumers and that it is ubiquitous. McKinsey has gone so far as to call word of mouth "the most disruptive force in marketing." CMO surveys by firms like IBM suggest that the overwhelming majority plan to increase their investment in social media, but ROI metrics have been hard to come by and CMOs say increasingly those will be the metrics by which they will measure success of their marketing efforts. According to IBM, "even among the most successful enterprises, half of all CMOs feel insufficiently prepared to provide hard numbers [for return on marketing investment]."

A new white paper by marketing analytics expert MarketShare and the Keller Fay Group, called "Quantifying the Role of Social Voice in Marketing Effectiveness" , provides new and compelling evidence that word of mouth (offline and online) drives sales to a considerable degree – providing both a direct and an indirect impact on sales, amplifying the impact of marketing as people talk about the marketing or share it via social media. And, it demonstrates that the impact can be measured. (For a free copy of the Executive Summary, contact me.)

The analysis looks at brands in four categories – beverages, auto, investments and brokerage – and seeks to determine how much impact "Social Voice" (defined as both online and offline word of mouth) has on marketing and on sales when compared with a range of other variables that might drive marketing effectiveness. (See below for more detail on what else was measured in this study.)

Among the key findings from the modeling are:

• Social Voice has a measurable direct impact on sales. It's not just a nice to have, but it directly moves the needle on sales. More specifically, a 10% increase in Social Voice resulted in sales lift of 0.2% - 1.5% directly in the cases that were studied. Further, offline WOM was seen to have a more significant impact on outcomes than online social media, suggesting that, "even in a highly connected world, old-fashioned word of mouth contributes more than social media in certain categories."

• Social Voice drives marketing effectiveness. A significant percentage of marketing's impact is delivered through Social Voice – in the cases examined, this ranged between 10% and 54%. According to MarketShare, this suggests "that Social Voice is a key element of the consumer decision journey. Social Voice helps bridge the distance between awareness, interest (driven by media), consideration, and, ultimately, sales."

• Social Voice is a driver of online search activities. Analysis has shown that search activity is closely correlated with sales, as people engage in search as they get closer to a purchase activity. The MarketShare study observed "both Online and Offline Social Voice driving organic online search activity, and that combined Online and Offline Social Voice can drive nearly as much organic search as traditional marketing activities on their own, when marketing activities are also present." Once again, the analysis finds that offline WOM drives more search activity than online social media.

How the model was built: Once the four product categories were selected (see above), MarketShare incorporated Social Voice data into several multi-year modeling data sets that incorporated a large number of potential drivers of sales, including:

• Media ad spend

· Non-media marketing spend (e.g., event sponsorships, PR, etc.)

· Offline WOM mentions (from Keller Fay's TalkTrack® solution)

• Online WOM mentions and sentiment
• Facebook metrics
• Google Search query volume
• Website traffic

MarketShare analyzed the data and developed multivariate and multi-equation econometric models to estimate short-and long-term advertising effectiveness through a series of interrelated equations.

The importance of this analysis is that it helps to move word of mouth from a nice to have activity – who wouldn't want people to say nice things about their brands? – to one that is understood to be a central driver of marketing effectiveness and sales. It acts as an amplifier of all types of marketing. Only when the role of offline and online word of mouth is understood and treated as a vital strategic asset can brands in today's consumer marketplace expect to achieve industry-leading return on investment from their marketing investment. Further, the analysis supports the notion – frequently proffered by Keller Fay, including in our recent book The Face-to-Face Book – that when it comes to social influence, offline WOM can play a bigger and more impactful role than online social media. The central importance of offline, face-to-face conversations and the forces that drive them must be understood and planned for by every marketer interested in maximizing their return on marketing investment.

Ed Keller, CEO of theKeller Fay Group, has been called "one of the most recognized names in word of mouth." His new book,The Face-to-Face Book: Why Real Relationships Rule in a Digital Marketplace, was recently published by Free Press/Simon & Schuster. You can follow Ed Keller onTwitter,FacebookandGoogle+, or contact him directly atekeller@kellerfay.com.

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