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“Making Sense of IWOM”: IWOM White Paper on the Role of Internet Word of Mouth in Driving Purchase Decisions
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“Making Sense of IWOM”: IWOM White Paper on the Role of Internet Word of Mouth in Driving Purchase Decisions

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The research, conducted by CIC, is the first of its kind in China and is based on comprehensive qualitative and quantitative offline research in Beijing, Shanghai, Guangzhou and Chengdu. The study …

The research, conducted by CIC, is the first of its kind in China and is based on comprehensive qualitative and quantitative offline research in Beijing, Shanghai, Guangzhou and Chengdu. The study looks to uncover the role and level of importance of netizens’ recommendations and opinions in the consumer purchase decision making process. This report is the first in a series of three reports based on the same research set. The following two installments include “How IWOM is generated and disseminated” and “How brands can participate in online communities.”
HIGHLIGHTS:
1. Do consumers pay attention to IWOM?
2. Why do consumers pay attention to IWOM?
3. How does IWOM influence consumers’ attitude towards brands?
4. How does IWOM affect purchase decisions?

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  • 1. Making Sense of IWOM Topic 1: The role of Internet Word of Mouth (IWOM) in purchase decisions June 2009 © 2009 CIC
  • 2. Contents Overview 3 Do consumers pay attention to IWOM? 5 Why do consumers pay attention to IWOM? 7 Can IWOM influence consumers' attitude 8 towards brands? How does IWOM affect the purchase decision 10 process? About CIC 12 © 2009 CIC 2
  • 3. Overview For the past 5 years, CIC has been studying the Chinese consumer through systematic observation and analysis of social internet platforms such as blogs, BBS and social networks using a unique methodology that combines quantitative and qualitative approaches, including online ethnography, as well as cutting edge text mining technology. Through systematic observation and analysis of online platforms, their users and other essential elements, we have come to understand consumers’ online behavior and culture. Our white papers focused on IWOM around automobile, mobile phones, notebook computers, sports as well as our various trend watches are all testament to this effort. In CIC’s most recent whitepaper series, “The Internet is THE Community,” we stressed the importance of IWOM and its influence on reshaping the relationship between brands and consumers. Brands which leverage IWOM can have not only more effective communications, but also gain strategic insights for product development and overall strategy. For our latest white paper series, Making Sense of IWOM, we look at consumer behavior, motivation and influence of IWOM. We use a more traditional approach with comprehensive offline research in Beijing, Shanghai, Guangzhou and Chengdu from late 2008 to early 2009. The research included a telephone survey of 640 BBS and blog users to study the influence of IWOM on the purchase decision process. We also conducted 8 focus groups and 32 in-depth interviews with BBS/blog users (including online opinion leaders) to further explore consumers’ online behavior and motivation for engaging IWOM. Utilizing CIC’s combined expertise on IWOM research and deep strategic understanding of IWOM, our team analyzed the data and identified interesting and valuable findings which we will be sharing in 3 separate parts for the series: “The role of IWOM in purchase decisions,” “How IWOM is generated and disseminated” and “How brands can participate in online communities.” To understand the depth and nature of IWOM’s influence, this first paper in the series seeks to answer this primary question: “What is the role of IWOM in purchase decisions.” We answer this question from these angles: “Do consumers pay attention to IWOM,” “Why do consumers pay attention to IWOM,” “Can IWOM influence consumers’ attitude towards brands” and “How does IWOM affect the purchase decision process.” 3 © 2009 CIC
  • 4. Overview “Do consumers pay attention to IWOM”: Our research shows that over 81% of BBS/blog users search IWOM when making purchase decisions, suggesting that reviewing IWOM before purchasing is becoming a regular habit for consumers. Based on a further study of 520 BBS and blog users who sought out IWOM for purchasing products in the past year, we found that IWOM was most influential in the mobile phone, consumer electronics, cosmetics and baby care categories with at least 50% of respondents seeking out IWOM when looking to purchase. Even when not looking to make a purchase, 89.8% respondents still pay attention to IWOM. Respondents mentioned check the IWOM around their favorite brands, specific industries or products of interest, as well as brands with attractive promotion activities or major negative incidents. “Why do consumers pay attention to IWOM”: We found that the primary motivation is to reduce the purchase decision risk (71.5% of all respondents). In addition, for very active online consumers, building community around shared interest of particular brands and categories such as mobile phone or automobile is a major driver. “Can IWOM influence consumers’ attitude towards brands”: IWOM can affect, even change consumer’s attitude towards brands. Nearly 50% of respondents agree that positive IWOM can influence them to decrease or totally change their negative perception of a brand, while 43.6% said that negative IWOM can reduce or change their originally positive perception. Clearly, paying attention to and taking care of IWOM is a “must have” for brands. “How does IWOM affect the purchase decision process”: We discovered that IWOM also plays a particular role in the overall purchase decision making process. While the majority of consumers place friends’ recommendation as the most important source of purchase information, IWOM is the second most important source. Ads.& mass media campaigns and sales persons’ introduction is of minor importance. During the whole process, IWOM has remarkable affect on “brand awareness” and “purchase decision,” with 56.3% of respondents getting to know the brand through IWOM and 58.7% of respondents making the purchase decision based on IWOM. What is more interesting, after purchase, consumers are still interested in IWOM, with 47.5% of respondents seeking out IWOM to share their user experiences and express their opinions. If brands can interact with the consumers during this critical time, it has the potential to bring substantial benefits to the brands’ new product development as well as marketing communication. 4 © 2009 CIC
  • 5. Do consumers pay attention to IWOM? In order to better understand Chinese consumers’ awareness and level of attention on IWOM, we conducted a survey of 640 BBS/blog users between the ages of 15- 60 from Beijing, Shanghai, Guangzhou and Chengdu. The result shows that 81.2% of BBS/blog users search IWOM before making a purchase. To explore how IWOM influences consumers’ purchase decisions, we further studied 520 BBS/blog users who sought out IWOM before purchasing certain products in the past year. We found that checking IWOM before purchasing is becoming a habit for consumers that frequent BBS and blogs. Figure 1 shows IWOM is most influential within the mobile phone, consumer electronics, cosmetics and baby care categories with at least 50% of respondents seeking out IWOM when looking to purchase a product. Figure 1 Percentage checking IWOM when purchasing particular product categories 数据来源: CIC, 520位最近一年内购买产品时查询过网络口碑的BBS/博客用户 Data Base: 520 BBS/blog users who sought out IWOM for purchasing certain product in the past year 5 © 2009 CIC
  • 6. Do consumers pay attention to IWOM? It is clear that consumers pay attention to IWOM when looking to make a purchase. However, is IWOM influential even when not looking to make a purchase? From Figure 2, we see that even when not looking to make a purchase, 89.8% respondents still pay attention to IWOM. Figure 3 shows different kinds of IWOM consumers will pay attention to even with no purchase intent: 48.7% respondents check IWOM for their favorite brands, 44.4% are attracted by various promotion activities, and 40.8% look for information about specific industries or products of interest. In addition, the IWOM around brands with major negative incidents, well- known brands and the brands they have used before also drives more than 30% of respondents’ attention. Figure 2 Do you pay attention to IWOM when not looking to purchase? Data Base: 520 BBS/blog users who sought out IWOM for purchasing certain product in the past year Figure 3 What IWOM do you pay attention to when not looking to purchase? Data Base: 520 BBS/blog users who sought out IWOM for purchasing certain product in the past year 6 © 2009 CIC
  • 7. Why do consumers pay attention to IWOM? 71.5% (Figure 4) of respondents cited “reducing the purchase decision making risk” as the primary reason for paying attention to the IWOM of brands. In our qualitative research we found checking IWOM has become built into the purchase process: • “It’s a sort of reference, especially when my friends and I don’t know much about the product.” • “Before purchasing, checking others' user experience and appraisal can help to reduce purchasing risk. After the purchase, we look to solve problems.” One interesting phenomenon: for general BBS/blog participants, (i.e. BBS/Blog users who read but don’t create’ content), the main purpose of seeking out IWOM is to reduce purchase decision making risk; but for active BBS/blog users (i.e. more active content creators), finding friends with shared interests and sharing personal opinions is also a major driver. • “I love Apple’s products, if there is anything about Apple online, I will take a look at it.” • “What he writes really feeds my appetite, so I add him into my favorite list and read his articles regularly.” • “I will always look for and like to read the cool IDs who always write good content.” While it is not surprising to find that there are some very active BBS/blog users with strong opinions, in China what is particularly important to understand is the strength of the community of these active users and the extension and influence of these bonds offline through elements, including offline meet ups and even online group purchase. In the following whitepaper, we will give more detailed analysis on why active BBS/blog users are more passionate in expressing and building community around shared interests. Figure 4 Why do you pay attention to IWOM Data Base: 520 BBS/blog users who sought out IWOM for purchasing certain product in the past year 7 © 2009 CIC
  • 8. Can IWOM influence consumers' attitude towards brands? From our qualitative research, we found that if a consumer already has a good impression of a brand, then positive IWOM will strengthen his or her affinity and trust for this brand. What if the original impression is a negative one? Will positive IWOM alter the consumer’s opinion? According to the survey results (Figure 5), 25.8% of the respondents said their negative impression would be minimized, 15 .6% said their perception would actually shift to slightly positive and 5% said it would even shift to extremely positive. All told, positive IWOM shifts a previously negative impression to a positive one for 46.4% of all respondents. For 39.9%, however, positive IWOM would not cause a change in opinion, 4.5% said it would worsen their negative image and 9.2% said they wouldn’t believe positive IWOM due to the possibility of fake messages placed by brands or agencies as we discovered in the qualitative research. In all, we can see that positive IWOM has a 50% chance of influencing consumers to change a negative impression of a brand. Figure 5 How positive IWOM affects your negative perception towards brands Data Base: 520 BBS/blog users who sought out IWOM for purchasing certain product in the past year 8 © 2009 CIC
  • 9. Can IWOM influence consumers' attitude towards brands? When we look at how negative IWOM influences consumers who originally had a positive impression towards brands, we see a similar result. According to Figure 6, negative IWOM shifts the positive impression to a negative one. 43.6% said that negative IWOM can reduce or change their original positive perception suggesting that negative IWOM of a brand has a very strong potential to change consumers’ mind on selection of products. Clearly, paying attention to and taking care of IWOM is a “must” for brands. Figure 6 How negative IWOM affects your positive perception towards brands Data Base: 520 BBS/blog users who sought out IWOM for purchasing certain product in the past year 9 © 2009 CIC
  • 10. How does IWOM affect the purchase decision process? Through our qualitative research, we found that consumers look to four sources when researching during the purchase process: friends’ recommendation, IWOM, Ads & mass media campaigns (TV, magazine etc.) and salesperson’s introduction. Figure 7 shows the four typical scenarios. When we presented these four scenarios via decision tree analysis on our survey, we found that the majority of consumers choose the first scenario. While the majority of consumers place friends’ recommendation as the most important source of purchase information, IWOM is the second most important source. Figure 7 Four typical scenarios for consumers’ research during purchase decision process Philip Kotler, considered by many to be the father of modern marketing, proposed that the general consumers purchasing decision making process includes 5 steps: problem recognition, information search, evaluation of alternatives, purchase decision and final post-purchase behavior. With the increasing power of IWOM, we see that this model can be modified to fit the modern purchase process. Based on our qualitative research findings, we have updated the model and divided the consumer purchase decision making process into 6 steps (Figure 8). Figure 8 Consumer purchasing decision making process 10 © 2009 CIC
  • 11. How does IWOM affect the purchase decision process? In addition, we also evaluated how IWOM affects each step of the purchasing decision making process. Figure 9 shows that during the whole process, IWOM has the strongest affect on “brand awareness” and “purchase decision” with 56.3% of consumers first learning about the brand through IWOM and 58.7% of consumers making the purchase decision based on IWOM. After purchasing, consumers are still interested in IWOM, with 47.5% of consumers still seeking IWOM online. During the post-purchase stage, consumers mainly shared their user experience and expressed their new requirements. Figure 9 IWOM’s influence on each step of the purchasing decision making process Data Base: 520 BBS/blog users who sought out IWOM for purchasing certain product in the past year 11 © 2009 CIC
  • 12. About CIC CIC is the thought leader in Internet Word of Mouth (IWOM) with over 4 years experience in China working with cutting edge clients across multiple industries on a retainer basis. With a proven approach and case studies, CIC is the first and best option in China to help clients make sense of the buzz. CIC coined the term IWOM and has pioneered the concept of IWOM, redefining the relationship between brands and consumers. CIC is committed to both providing objective third party strategic advice to clients and promoting the healthy development of the Internet Community in China. CIC's research and discussion of IWOM's impact and best practices can be found on its company blogs, in its IWOM white papers and IWOM watch reports and through its IWOM roundtable events such as IWOM summit and IWOM classroom. CIC offers customized and syndicated reports as well as an industry leading IWOM analytics dashboard which is supported by proprietary Chinese language based text mining technology (patent pending), data processing technology and data visualization technology. CIC's retainer relationships stretch over multiple years with multinational clients from Fortune 500 companies. CIC's continual development and evolution is driven by an unique, powerful and open mindset and learning culture which at its foundation continually seeks to understand how the Internet, and IWOM, is redefining the relationships between brands and consumers. For more information, please visit • www.iwommaster.com (CIC IWOM master intelligence service platform) • www.ciccorporate.com (CIC website), • www.seeisee.com (CIC Company blog in Chinese) • www.seeisee.com/sam (CEO's company blog in English). 12
  • 13. Address: Room 108, Building A, UDC Innovative Plaza No.125, North Jiangsu Road Shanghai, 200042, China Phone: 021-52373860 / 61 / 62 / 63 Fax: 021-52373632 Email: info@cicdata.com This report is copyrighted material owned by CIC. Any improper use of this document or its content will be considered a violation of CIC IP copyright and CIC has the right to take legal action. © 2009 CIC

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