Archive for August, 2005

WOMworthy Reporter — Jeanne Meserve

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August 30, 2005 |  by  |  General  |  Comments Off on WOMworthy Reporter — Jeanne Meserve

I think Jeanne Meserve of CNN should be nominated for a Pulitzer Prize or an Emmy. She is the most incisive, articulate and human reporter on any network reporting on hurricane Katrina, maybe anywhere. The impact of the hurricane aftermath didn’t hit me until I heard her emotional report Monday night.

She just barely held it together as she described how people were trapped with rapidly rising water in their attics or on their roofs. Her voice choked as she talked about how people were calling out in the darkness for someone to help them, with her and her crew unable to do anything, and as she described how her cameraman worked all day with a broken foot. She clearly painted a pained picture of people on roofs waiting in vain, in the dark, to be rescued.

This is one situation where the appropriate emotional dimension added accuracy. It made me realize that the standard of “dispassionate” reporting can sometimes cause distortion. If she had dispassionaty reported on what she saw, I never would have understood the significance.

This was an amazing example of how word of mouth from a trusted source telling a human story was so much more powerful, believable and accurate than the usual “objective” sources.

George Silverman

President

Market Navigation, Inc.

Word-of-Mouth Marketing Consultants

www.mnav.com

Advertising Can Kill Word of Mouth!

Consider this:

1. You are exposed to thousands of ads and commercials a month and only act on a very small handful.
2. You are likely to act on about one in 3-5 recommendations from friends.
3. Therefore, WOM is hundreds to thousands of times as powerful as advertising.

OK, that’s the power. Now, how about the spread?

If 25 people tell 25 people 6 times, it’s the entire population of the world!
Once 25 x 25 = 625
Twice x 25 = 15.625
3x x 25 = 390,635
4x x 25 = 9,765,625
5x x 25 = 244,140,625 (order of magnitude of pop. of US!)
6x x 25 = 6,103,515,625 (population of the WORLD!)

Obviously, this assumes that no one tells someone who has already heard. In real life, there are many duplicates, creating the impression that “everyone is talking about it,” — which they are — making action even more likely.

So, while WOM can spread at viral rates of 1.1 times, successful WOM campaigns are explosive. Gladwell and everyone else got the math wrong. It’s not viral marketing, it’s nuclear marketing. Advertising (at least print) has miniscule pass-along rates. Broadcast commercials have none. Successful WOM is not only explosive, but thousands of times more powerful.

So, why would you ever want to kill WOM? Yet, that’s precisely what saturation advertising and sales campaigns do. Past a certain point of creating initial awareness, if advertising and other traditional marketing efforts are perceived as saturation campaigns — as they are with virtually all new drugs, for instance — they kill WOM. Why, especially when we always thought that good advertising stimulates and complements WOM?

Because people tell other people about things they think they don’t know about. If you tell someone about something that they already know about, you look stupid. So, for instance, a doctor is not going to tell another doctor about a drug that he/she already knows about. In other words, people stop talking about things that are no longer news. Certainly something that is getting saturation exposure is not going to get talked about.

I’ve been designing WOM campaigns for more than 35 years, yet only understood this in the last few years. It’s always been very hard to get WOM going when my client is sending salespeople around, sampling heavily, giving out coupons and taking double page spreads in every magazine in sight. My smaller clients have always done much better, and I never knew why.

So, advertising is not only increasingly ineffective, it is destructive to sales, even if it is increasing sales, and everyone is thrilled. It may be the case that if less advertising were done, more and better WOM campaigns could do much better.

Saturation advertising has other negative consequences. These days, it causes people to wonder, “If their product is so good, why do they have to keep reminding me?” and “Why are they wasting so much money on advertising? Why can’t they put the money into improving their product?”

Jeff Bezos of Amazon has the right idea. He has always found (he’s actually tested) that money put into surprising people with free shipping and other service improvements has a much better return than advertising (which also has a return, but much less).

The ad people will say, “Oh yeah, prove it.” I can’t, yet. The data I have can’t be released. So, at the moment, my case has to rest on common sense and experience.

If the WOM community can develop and release data, it would be devastating. So far, we are making the case that WOM is more powerful, spreads faster, and is a lot cheaper. But if clients saw that they were potentially killing the Golden Goose, instead of hedging their bets by running parallel traditional campaigns, the whole world of marketing would open up. In fact, I think that today’s savvy consumer would realize that ads are for me-too, unremarkable products, and that no product that was worth talking about would be wasting their time and money on saturation ads.

Am I saying, “Avoid all advertising and other traditional promotion.”? No. Advertising should compliment WOM (WOM being the primary medium). Ads shoud give testimonials, stories and other WOMworthy content. Ads should stimulate customers to talk to other customers, reminding them how happy their friends will be after they get the kind of demo, for instance, that only a friend can give. So, the right kind of advertising can support the WOM and be subservient to it. No ad should ever be considered that doesn’t contribute to WOM.

Now, I’ve done it. I won’t even be able to walk down Madison Avenue.

George Silverman,
President, Market Navigation, Inc.
Author, “The Secrets of Word-of-Mouth Marketing.”
wordofmouth.typepad.com
www.mnav.com

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Ford plans “restructuring”

August 24, 2005 |  by  |  General  |  No Comments

Ford plans restructuring: “Ford Motor Co. will soon announce a new restructuring plan to return its key North American vehicle operations to profitability, Chairman and CEO Bill Ford Jr. said Tuesday.”

(Via CNN/Money.)

Watch what is announced closely and read between the lines. I predict that it will be a structural/management restructuring, not a marketing, product or customer relationship restructuring.

What has killed Detroit is word of mouth. The only thing that can save it is word-of-mouth marketing.

Not price cuts in the form of “employee discounts.” Pathetic.

In 1972, around the time of the oil crisis, I wrote a report to the Detroit car manufacturers saying that they were extremely vulnerable to competition if they were not much more responsive to the desires of consumers for reliable, safe and efficient cars. My focus groups showed that Detroit’s image was a disaster and people were furious, but were afraid to buy foreign cars, with the exception of the Volkswagen crowd. (Remember the “Think Small” campaign? Where, oh where, have all the great ads gone?) I said that there here was a gigantic opportunity for a company to build reliable cars that got good milage — and to show them in comparative crash tests. They thought I was crazy. (Volvo later stunned autoland with a highly successful crash test campaign.)

I couldn’t understand why auto makers couldn’t see how frustrated and angry people were, until I was driven to lunch by a top executive of GM. His top-of-the-line Buick Park Avenue drove like it was on a cloud. He proudly said that it was brand new, and that he got a new one every three months. He mentioned that ALL the executives got a new car on a similar schedule. I realized that no auto executive drove a car more than a few months old! They never knew what it was like to have a problem! In the meantime, my three-year-old Thunderbird was falling apart! I was charged $90 to get a brake light changed because they had to remove the whole back panel to get to the bulb! I’m not exaggerating.

I thought Detroit was vulnerable to competition from John Deere, Mac Truck or International Harvester if those companies chose to go into car manufacture.

A few years later, Chrysler was rescued from bankruptcy by the government, then bought by Daimler. Now, people are openly discussing whether GM and Ford can survive. But they are wrongly focusing on the cost of American labor, pensions and health care.

NO!! The problems are with the lack of a close relationship with customers that causes extraordinary products that cause positive word of mouth.

Obviously, I was wrong about domestic companies providing the competition. (I’d still like to see a John Deere car: it would be green, run forever but a little slowly.) Now, the situation has reversed: American cars have the well-deserved image of being unreliable, unsafe and gas-guzzlers. Word of mouth has almost totally destroyed the American manufacturers.

Detroit is not going to be saved by lowering wages, restructuring the pension funds, reducing health insurance or getting rid of unions. It’s not going to survive by more robotics. (They actually need less robots among their executives!) Just like the airlines, they need a different way of doing business.

There are successful auto makers. There are successful airlines. Two industries that are beset by terrible problems. Their few winners all have one thing in common: customers who rave about them to their friends.

Let me tell you two quick stories to illustrate: A friend just bought a $62,000 Cadillac, after a succession of Lexi (Google says that’s the plural of Lexus) and Mercedeses. He hates the Caddy. It has a whole lot of little things wrong with it. When the electric mirror stared working jerkily, he asked the dealer to fix it. The dealer replaced it. It was a $600 repair that my friend was not charged for. It happened again. That this happened again is not the point. The dealer said something that my friend found appalling, “Listen, I can’t keep replacing these mirrors.” My friend said that he only wanted it fixed, not replaced. The dealer had him come back at a time when he could call a special dealer number and be guided through the repair. It broke again in a few days. Now my friend has a constant reminder of poor quality in a $62,000 car every time he adjusts the mirror.

On the other hand, I bought a Prius hybrid, after getting rid of my Audi A6. (See previous post). I didn’t expect to like it that much, but found my wife’s Prius surprisingly roomy, agile and peppy. More about the Prius in a future post, but the point here is a remark from my dealer’s repair manager. I asked him about the wait for maintenance. He said that routine maintenance could be done while I waited, but that he might have to take a little longer with any actual repairs, because he never sees Priuses!!! (Boy, the plurals of cars are really a problem.) I asked my local private mechanic wiz, who specializes in foreign cars. He said that he’s not that good with TOYOTAS across the brand, because he doesn’t see that many because they are so reliable. All my friends say the same thing about their Toyotas and Lexi. “It ran forever.” “Never had to get a major repair.”

By the way, I’m paying $1.30 a gallon for gasoline at the moment when almost everyone else is paying $2.60. How? I’m getting more than twice the milage (45 miles a gallon) with the Prius hybrid than I got with the Audi, and it’s more fun to drive (less acceleration but actually better handling) Everybody’s upset at the gas station. I’m smirking. Na nana na na.


The lesson here is that word-of-mouth marketing — indeed survival itself — starts with the product delighting, surprising, astonishing, wowing the customer.

THAT’S how Ford and GM need to restructure.



George Silverman

President

Market Navigation, Inc.

Word-of-Mouth Marketing Consultants

www.mnav.com

Brand = Reputation. Reputation = Brand

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August 23, 2005 |  by  |  General  |  Comments Off on Brand = Reputation. Reputation = Brand

p>Great Post by that name from Brand Blogger. Raises the question “But what is reputation?”

Glad you asked. Reputation is an expectation, particularly of performance. That’s why brand, or reputation, plays such a large role in decision making. When you see a brand, you think you know what to expect. This saves you a lot of time.

Reputation (Brand) is mostly spread by word of mouth. As I point out in my book, The Secrets of Word-of-Mouth Marketing, a large part of word-of-mouth marketing can be thought of as reputation management. Building a reputation is building a brand, and word of mouth is the key. Who are you going to believe about what to expect about the performance of a product, an ad or your friend, wife, mother, advisor?

I’ve been finding myself gradually moving over to Apple programs, largely because the brand is building quite a reputation with me and with other users. I keep finding things that their programs do that other programs don’t do: great power with simplicity. To be the subject of another post. But suffice it to say here that I just switched almost with blind trust from Entourage (Microsoft’s Outlook for the Mac) to Apple’s Mail, Address Book and Calendar programs, knowing they wouldn’t have the clumsiness that was so annoying with Entourage. I wasn’t disappointed. Simple, elegant, yet much more powerful. Easy to archive. Just also switched from Firefox to Safari to take advantage of its use of Services that Firefox lacked. Again, the brand was enhanced.

I know what to expect with some products (positive and negative). That’s why I’m willing to pay more for certain BRANDS: The Brand or Name has come to represent the expectation of superior performance.

I’ll gladly pay more for Toyota/Lexus, Apple, Nikon, Palm Treo, Go-Daddy, and Monteblanc

Others, like Audi, Microsoft, Earthlink, Verizon and many other brands that I used to love, I now expect inferior performance and service from and wouldn’t even use them at a deep discount.

Others, like Adobe and Continental Airlines, have annoyed me in the past with poor service and/or poor useability, but have turned around dramatically, greatly improving their product interfaces and have done some wonderful services favors for me lately. I find that they literally look different to me, and I go out of my way to use them. (It’s going to be interesting to see what happens with the Continental brand, now that an accountant has taken over as CEO. Prospects don’t look good, judging from the downsizing of their First Class cabins on many planes.)

>>> the brand builder blog: Brand = Reputation. Reputation = Brand.

Customer service horror stories

August 19, 2005 |  by  |  General  |  No Comments

An amazing example of negative WOM. This story has spread across the whole blogoshere and the mainstream press.

Customer service horror stories in this Chicago Tribune article.

(Via This Is Broken.)

Open letter to Audi — Why I can’t recommend Audi anymore

August 19, 2005 |  by  |  General  |  No Comments

After many years of both my wife and I owning Audi A6’s, I regret to say that I advise against buying Audi’s. The story provides many lessons in how to turn positive word of mouth into negative wom.

I used to love the Audi A6. I’ve owned several over the years.  However, the last two have had a series of repairs that I won’t bore you with. My wife’s last Audi finally died when water seeped into the electrical system because a dranage hole under the battery became clogged (inspecting it is not part of the standard maintenence), causing a short circuit. The entire electrical system was destroyed. The repair would have cost $11,000, but the insurance company chose to total the car.

On my car, the twin turbos both burned out, causing a repair that would have cost $9-11,000 if it were not covered by the lease.

However, the real reason that I can’t recommend the Audi is their attitude toward my return of my last car after the lease was up. They had always taken back my cars after the lease had expired without charging me for the normal wear and tear: a few dings and scratches that a three-year-old car typically has. This time, the wear and tear was the same, but the attitude was different. Since I didn’t agree to lease another car, they apparently decided to stick it to me. They decided to charge me for every ding, scratch and every other cosmetic deficiency on this three and one half year old car. In all fairness, where was a crack in the windshield that I expected to pay for (but not $600). They have refused to reach any kind of accommodation, thereby turning a staunch advocate into a bitterly disappointed ex customer. I actually intended to buy another Audi eventually. Now, I’ll do everything I can to discourage people from dealing with a company who wants to grab a few bucks short term and is obviously not interested in the long-term satisfaction of their customers.

I’m now about to try once again to negotiate with Audi to reach a fair accommodation. I’ll update this post to let you know what happens.

WOMworthy: the Pluot

Just ran across an inter­est­ing new prod­uct that is appar­ently catch­ing on by WOM: the Pluot®. It’s a cross (actu­aly an “inter­spe­cific,” which is more than just a blend) between a plum and an apri­cot and comes in many vari­eties. It tastes great, but our focus here is on inter­est­ing Word of Mouth stories.

To read an inter­est­ing WOM story about how the Pluot word of mouth is being trans­mit­ted by an expert and by ordi­nary peo­ple, see Emeril’s post about it here.

You can also read about the prod­uct from its devel­oper. Link. There, you’ll also read about another prod­uct, but I’ll let you dis­cover it for yourself.

Isn’t this a prod­uct that cries out for sam­pling and in-store tast­ing? Why haven’t I been offered a taste of this won­der­ful product?

Warn­ing: don’t just buy one to take home.

By the way, I go to a small Korean super­mar­ket (Orange Mar­ket in Orange­burg, NY) that will let me taste (actu­ally, they encour­age me to taste) any fruit that I’m think­ing of buying. Isn’t that the way to make the decision easy?

Lesson; Give them a taste. In showbiz, it’s called “Show ’em a little leg.”

Open letter to Pharmaceutical CEOs

I’ve decided to make public the letter I sent to the CEOs of the 50 top pharmaceutical firms urging a Word-of-Mouth (WOM) only launch of their next significant product.

So far, polite interest, but no action.

I’m posting it in the hope that some gutsy pharmaceutical marketer who wants to make history — and a lot of money for his/her company — with me will see it and take action.

If you know of any products that would be suitable, let me know, or — more importantly — let the relevant marketers know.

In the meantime, I’m working with several other companies who will be taking a modified version of this approach but who are not ready to let me go public with it. A couple of these will be very visible blockbusters that I think will make history. Stay tuned.

 

——— ———
CEO
XYZ Pharmaceuticals
Address
City, State Zip
Re: How to Solve the Current Pharmaceutical Crisis.

Dear ————,

You are in the midst of a major crisis. I have a solution.

I’m writing to you because this problem can only be solved at the highest level.

The problem: Physicians and patients are not paying attention to your messages. Traditional promotional costs have escalated to an intolerable level. This is inflating prices, causing a cascade of other crises.

I’m in a unique position to solve the problem: Thirty-five years ago I revolutionized pharmaceutical marketing by inventing peer influence groups. We’ve reached the end of an era. It’s now time for another major change.

With a fundamentally new approach you will cut spending on new drug launches from hundreds of millions of dollars to about $25-50 million with a greater effect than with traditional promotional efforts. The saved money will give you a higher profit margin while allowing you to lower drug prices. The launch will be twice as fast, cost one tenth as much and be multiples more profitable. The physician’s adoption cycle will be dramatically shortened. Physicians will use the drug more skillfully and more effectively, further driving its sales.

Here’s the solution: You announce that the next significant product will be launched totally by an organized word-of-mouth campaign, without traditional promotion. The only way that physicians can learn about the drug will be physician-to-physician communication: Instead of traditional advertising and detailing, physicians will be directed to a carefully orchestrated series of materials and events in which: the clinical investigators will communicate their experience with the super experts who in turn will communicate with the experts in each field. They will talk with specialists who will talk with generalists. All of this will be accomplished by a systematic approach that will move the physician quickly through the decision process with physicians’ enthusiastic cooperation, using a mix of teleconferences, web sites, e-mail, webcasts, podcasts, blogs, streaming media, roundtables, meetings, personal communication, etc. that weren’t possible as an integrated system even a couple of years ago.

The benefits are enormous for a pharmaceutical firm with the vision to be first. It will be perceived as the boldest move in the entire history of marketing, while in actuality the risks will be low. Physicians aren’t really listening much, their adoption using conventional promotional techniques is slow, and they mostly get convinced to use new drugs through physician-to-physician channels anyway. It will further be perceived as honest, open, and physician/patient oriented. Everybody wins.

I am not talking about leaving this to chance. I am talking about an organized, systematic approach. It’s based on an extensive analysis of how physicians really make decisions, all elements of which I have already executed successfully and outlined in my book, The Secrets of Word-of-Mouth Marketing: How to Trigger Exponential Sales Through Runaway Word of Mouth.

Why take this bold, new step? Aside from the positive PR that it will cause, there is another very sound and newly measured marketing reason. Word of mouth is 5,000 times more powerful than conventional marketing. It turns out that — contrary to common marketing belief — the more advertising and sales rep activity, the less the word of mouth! The reason is that people do not want to look foolish by telling their colleagues about things that they think they already know about from a huge amount of promotional activity. So, the more you advertise and detail, the more you are shooting yourself in the foot and the less efficient is your marketing.

I realize that this is going to take a huge amount of boldness and vision — an entirely new mindset. There are a lot of turfs that will be shaken up and vigorously defended. It will probably be tried first by a small to middle size David going up against a Goliath. But it might be a large firm that realizes that the old ways of promoting pharmaceutical products are dying, or whose sales force is stretched too thin.

I welcome the opportunity to sit down with you to discuss more of the details. I’m eager to work with a company that has the right kind of drug and is ready to make the right kind of commitment at the highest level, since that’s the only way it will work. I look forward to putting our heads together soon.

Cordially,

George Silverman,
President,
Market Navigation, Inc.