Landmark Study Values Consumer Word of Mouth at $6 Trillion Per Year – Brad Fay

Many companies -- from McKinsey andBoston Consulting Group to Nielsen and my own company, the Keller Fay Group -- have produced evidence that positive word of mouth is a marketer’s most valuable resource. Nothing persuades brand trial, adoption and loyalty better than a recommendation from another consumer, particularly a trusted friend or family member. Few will argue with this logic, but until now it’s been extremely difficult to put hard numbers to that value.

This month, the Word of Mouth Marketing Association (WOMMA), for which I am board chairman, unveiled third-party research that measures the total marketplace impact at $6 trillion dollars, and found that the value of a word of mouth impression is anywhere from 5 to 100+ times more valuable than a paid media impression.

And while the study values an earned impression at a very high level, it further it shows that word of mouth often works hand-in-hand with paid advertising, amplifying advertising’s impact by 15%. Paid media have the potential to generate a lot of highly valued word of mouth conversations and recommendations.

This is exactly the sort of research that marketers need to begin getting truly serious about their use of both online and offline word of mouth marketing strategies and tactics. Indeed, it is the first comprehensive study to show the business value of both online and offline word of mouth, finding that two-thirds of this social influence happens offline (face to face or over the phone) and one third online (through social media of various kinds, including social networking sites, ratings and reviews, blogs and the like).

The research was undertaken by the top modeling firm Analytic Partners, under the supervision of Sequent Partners, both highly-respected independent research companies. Participating in the study were major brands that contributed their confidential business data and funding, including AT&T, Discovery Communications, Intuit, Pepsico and Weight Watchers. Funding also came from agencies Brains on Fire, House Party, Ogilvy and Zocalo Group.

The implications of the study are nothing short of revolutionary for marketers:

1. We now know that using the right data and analytic techniques, marketers can expect to show the ROI of their social media and offline word-of-mouth investments. A “social strategy” no longer needs to be undertaken on a purely experimental basis.

2. We can begin to make decisions on marketing investment levels. At the low end, for fast moving consumer goods, offline word of mouth is worth five times more than a paid media impression. For higher consideration categories it’s more than 100 times more valuable. That means marketers can start confidently making bigger investments in a wide range of word of mouth techniques: experiential marketing, social media campaigns, referral programs and greater efforts to improve customer service and other touch points that can drive positive as well as negative word of mouth.

3. We better understand the synergy between paid advertising and word of mouth. Right now, word of mouth amplifies paid media by 15%, which means it’s a key factor in increasing the effectiveness and efficiency of advertising. The study also raises the tantalizing question of how much more amplification could be obtained if advertising were specifically designed to trigger conversation and advocacy, either as a result of changes in market messaging or media planning.

4. The study also shows there’s wide variation in how word of mouth works by category and brand. It thus poses a new challenge for marketers to undertake their own analysis to discover exactly how word of mouth works in their categories. Each of the participants in this study gained valuable insights that go beyond the summary conclusions released by WOMMA this month.

The Word of Mouth Marketing Association is celebrating its 10^th anniversary with the release of this landmark study. Based on the findings, the next 10 years should be an exciting new era for marketers who embrace the consumer-to-consumer influence revolution that’s been underway for more than a decade.

Brad Fay is the Chief Operating Officer of the Keller Fay Group, Chairman of the Word of MouthMarketing Association (WOMMA) and President of the Market Research Council. He is also the co-author, with Ed Keller, ofThe Face-to-Face Book: Why Real Relationships Rule in a Digital Marketplace, published by Free Press. The Keller Fay Group is the first market research firm dedicated to understanding and measuring word of mouth, which drives $6 trillion in consumer spending annually, according to a study conducted by Analytic Partners for WOMMA.

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