Death by Word of Mouth Marketing’s New Reality Don Peppers Direct Marketing Club of New York 16 S eptember 2010

1. Death by Word of Mouth Marketing’s New Reality Don Peppers Direct Marketing Club of New York 16 September 2010 @DonPeppers

2. Accelerate Natural Dietary Supplement ENERGY BOOST Impact Guaranteed Technological Progress is Accelerating

3. driving faster and faster economic growth

4. By 1960, growth increased again, to about 2.3% p.a. By 1900, the rate of growth had climbed to 1.5% p.a. Around 1700, steady economic growth started, at about 0.75% p.a. • For 100,000 years, the average human being lived on the equivalent of $400 to $600 p.a.

5. Malthus was wrong People are 30 times wealthier today, per capita, than 200 years ago Population growth accelerates progress, it doesn’t inhibit progress The more brains are available, the more creativity is unleashed The more innovations we have, the faster we discover new ones Thomas Robert Malthus, Jr.

6. 20 million+ Google searches every hour, 24/7 Technology Changes Everything

7. New technical information now doubles every two years. By 2015 it will be doubling every 72 hours Technology Changes Everything

8. 80% of U.S. companies use Linked In to recruit employees Technology Changes Everything

9. Generation Y considers email old-fashioned Technology Changes Everything

10. 1 out of every 8 U.S. couples married in 2008 met each other online Technology Changes Everything

11. Generation Gap? • Scary thought: • Gen Y consumers now outnumber Baby Boomers

12. Or Technology Gap? 96% of Gen Y consumers belong to a social network

13. Ask a Gen Y about privacy… Privacy protection will soon be a dead issue

14. “The future is already here. It’s just not evenly distributed yet.” William Gibson

15. 84% of consumers trust the recommendations of their friends • >70% trust online recommendations from complete strangers • Only 5% of consumers trust advertising Source: “Your Brand: At Risk? Or Ready for Growth?” Alterian White Paper, 2010

16. Two Requirements For Earning Customer Trust Intention to act in the customer’s interest Competence to carry out that intention

17. Acting in the customer’s interest Earning trust often requires trading a short-term loss for a long-term gain

18. Earning trust in B2B relationships Microsoft SQL server installations for enterprise customers Included vouchers for key personnel training But fewer than 20% of vouchers were redeemed Costs only 20% – so is that good or bad? • Good for marketing budget, bad for customers • Microsoft now sends reminders to customers • Voucher redemption is 60% or higher, and trust is up too

19. The “man with the folding chair”

20. Lack of trust slows transactions down and imposes frictional costs When more trust is required, business thrives, as obstacles are reduced The Need for More Trust Has Boosted Business

21. works because customers are social animals Bees and ants communicate new discoveries to benefit the group

22. In the absence of communication among your customers, advertising rules But when customers talk to each other, it’s the customer experience that counts Now suppose you were a food source for bees…

23. Screw up today, and the “news” will be permanent “You can’t un-Google Yourself” Linda Kaplan Thaler, CEO, Kaplan Thaler Group

24. “You can't take something bad off the Internet. That's like trying to take pee out of a swimming pool.” Grant Robertson, blog post, May 1, 2007

25. Customers go online to talk about brands and their experiences with them Do you host the conversation your customers are having? Or does someone else? Where is your brand’s “community?”

26. Death by word of mouth… Box office receipts down 40% the day after release!

27. In social media: Apply the “1-9-90 Rule” • Some of the guests initiate most discussion • Others “hang on” and like to contribute • Still others just listen 1% 9% Social media is like a cocktail party 90% Most people don’t talk much but they still enjoy the party!

28. Network influence varies by individual DoubleClick analyzed 6,000 Web users 1,000 influencers with certain traits Use the Web more than twice as much Pay more attention to online ads, and want more relevance But also more likely to clear their cookies regularly, as well as to fast-forward through video commercials “People often ask my advice about…” “I am an expert in certain areas…”

29. Within Social Networks The only way to succeed in a networked world Build and maintain a reputation for trustability influencers and connectors are curious and inquisitive people. We want to know, but we don’t want to be sold to.

30. Tools for making sense of social networks and peer-to-peer communications Network analysis: To identify and quantify the influencers and the influenced Sentiment analysis: To understand conversations, attitudes and dominant opinions in social media

31. Social networks evolve by “preferential attachment” Preferential attachment can create a “cascading” effect

32. In 2007 the Wall Street Journal Examined 25,000 user posts on six “sharing & collaboration” websites Cascading is inherently unpredictable

33. Netscape has a million collaborating members But 13% of Netscape’s “most popular” postings were done by a single user In 2007 the Wall Street Journal Examined 25,000 user posts on six “sharing & collaboration” websites Cascading is inherently unpredictable

34. Netscape has a million collaborating members But 13% of Netscape’s “most popular” postings were done by a single user 900,000 registered users on Digg, but one third of all home-page postings come from just 30 users In 2007 the Wall Street Journal Examined 25,000 user posts on six “sharing & collaboration” websites Cascading is inherently unpredictable

35. 900,000 registered users on Digg, but one third of all home-page postings come from just 30 users In 2007 the Wall Street Journal Examined 25,000 user posts on six “sharing & collaboration” websites Reddit’s most widely read user, Adam Fuhrer, has millions of page views, including MS Vista reviews Cascading is inherently unpredictable

36. In 2007 the Wall Street Journal Examined 25,000 user posts on six “sharing & collaboration” websites Reddit’s most widely read user, Adam Fuhrer, has millions of page views, including MS Vista reviews Cascading is inherently unpredictable Adam Fuhrer is 12 years old!

37. Therefore: Word of mouth is also inherently unpredictable Just 15% of WOM programs show positive results!

38. Be careful with “WOM marketing” Despite its customer-friendly architecture, the press portrayed Speak Easy as sneaky and manipulative You can’t manufacture “authentic” word of mouth If it isn’t spontaneous, then it isn’t authentic!

39. One research study of customers separated “spending” value and “referral” value LTV = CSV + CRV (i.e., spending plus referrals) But what about your brand advocates? What are they actually worth? • Surprise: Best references aren’t always the highest spenders! Source: “How Valuable is Word of Mouth?” Harvard Business Review, October 2007

40. A telecom company Most valuable referrers Most valuable spenders Source: “How Valuable is Word of Mouth?” Harvard Business Review, October 2007

41. Alterian’s Social Engagement Index(SEI) 100 = Average Super Bowl 2010 Google reached ~103.5M Top 10 account for 50% 34 (of 46) below average

42. SEI changed over time Pre-Game Game Day

43. SEI changed over time Game Day Post Game Some brands showed better persistence

44. Sentiment analysis: Making sense of written and spoken language Analyzing attitudinal information requires evaluating the “valence” of words Conspire Benefit Caution: Analysis also has to account for modifier words like “not” or “might” or “barely” Brave versus Catastrophe Boost Cowardly

45. Michael Jackson dies Heath Ledger dies Gross National Happiness Index

46. Sentiment analysis: “Voice of the customer” in real time Tapped customer search requests, along with comments in blogs, YouTube, and Twitter, to advertise its Lotus business software Used online searches of consumer comments in launching Windows 7 Uses feedback from TripAdvisor, Twitter, and Facebook to position its casino brands

47. Why the sudden surge of negative blog sentiment after a rain-delayed game? Stadium officials mistakenly told hundreds of fans the game had been canceled But StubHub denied requests for refunds, because the game had actually been played Sentiment analysis tool spotted trouble brewing online So company offered discounts and credits to affected fans

48. Alterian’s Social Sentiment Engagement Index(SSEI) Super Bowl 2010

49. Sentiment helps explain persistence

50. Monitoring social media mentions • Listen for mentions of your brand (and your competitors’ brands!) • Who is talking about the brand? • What are people saying about the brand? • Where are they talking about the brand?