"Making Sense of IWOM" Topic 3: How Brands Can Participate in Online Communities

Contents Overview 3 Do netizens want companies to listen to IWOM 5 and participate in online communities? How should companies participate in online 9 communities? What kinds of online campaigns will attract 13 netizens’ participation? About IWOM White Paper 19 About CIC 20 2 © 2009 CIC

Overview In topics 1 and 2 of CIC’s “Making Sense of IWOM” white paper series, we discussed how IWOM is playing an increasingly important role in the consumers’ purchase decision-making process. Consumers not only search for and pay attention to IWOM, but also generate and disseminate IWOM, building the process of IWOM circulation and user interaction. However, do internet users want companies to listen to IWOM and participate in online communities? If so, how should companies participate in online communities? Which kinds of online campaigns inspire and motivate users to participate? We will analyze these issues in this latest topic of CIC “Making Sense of IWOM” white paper series- “How Brands Can Participate in Online Communities” We have found that with the fast development of the internet, companies participating in online community not only meet the trend of modern marketing, but are meeting the expectations of most netizens at the same time. 52.7% of respondents want companies to pay attention to their conversations about brands and products, while 47.2% of respondents hope companies participate in online communities and communicate with them directly. By participating in online communities, companies have the opportunity to gain immediate insight into consumer preferences and product feedback. Companies can also identify IWOM issues before they become crises and access ideas for brand and product improvement. Additionally, participating in communities can improve the relationship between brands and consumers thus enhance customer loyalty. However, about 40% of respondents are somewhat indifferent to companies listening to IWOM and participating in online communities and expressed concern over the sincerity and motivations of the companies. They doubt companies’ ability to respect and understand the needs of netizens in order to actually meet their needs. Therefore, companies still need to further research and identify the most appropriate platforms and approaches for successfully participating in online communities. To be more accepted by the online community and its members and create a positive impact, companies must identify the appropriate online communication platform and approach. We found that netizens cared most about the “interaction” and “credibility” of the communication process which should be based on transparency and fairness. According to our research, 68% of respondents identified third-party BBS as the most appropriate platform for online communication between brands and consumers, followed by company BBS on official website (37.3%), company blog on official website (24.5%) and company blog hosted on a third-party website (10.8%). Netizens emphasized that openness and transparency are the most important factors when companies participate with them. Based on these findings, companies should consider being transparent about their participation and let the netizens know they are in the community. Moreover, companies should respect the current natural and pure online community culture. 3 © 2009 CIC

Overview With the rapid development of social media, marketing campaigns have now extended from offline to online. Therefore, creating an attractive online marketing campaign is one way to further capture consumers’ attention. Among the seven online activities presented to the respondents, netizens prefer entertainment-driven activities most, followed by product experience-driven activities. Therefore, netizens prefer to get enjoyment out of joining the activities as well as practical rewards or experience using the product. Incentives play an important role in attracting netizens to actively participate in online activities. In terms of gender, male netizens care more about the emotional satisfaction of being recognized during the activity while female netizens prefer more practical incentives such as financial incentives or experience opportunities. Based on the research findings and CIC’s long-term experience in IWOM research and consulting, we have outlined the key elements of online campaigns which drive consumer participation: creation and innovation, closely related to specific products or brands, convenient for interaction and low barrier to entry, unexpected findings throughout the process, and attractive incentives. Web 2.0 platforms are not only rich and innovative media outlets, but are also centralized and segmented online community environments. With the evolution of online communication, internet users are not just passive readers, but have become creators and disseminators of content. This level of communication has triggered the innovation of the traditional marketing model. As a pioneer in leveraging internet and new media for market research in China, CIC has witnessed the development of various internet media in China. At the same time, CIC has built long term partnerships with many industry leaders to provide them with strategic marketing solutions based on internet marketing intelligence. By growing alongside clients, CIC is able to help them “listen”, “know” and “participate” with consumers in the online community which are reshaping the relationship between brands and consumers, thus finding a win-win strategy for both brands and consumers. 4 © 2009 CIC

Do netizens want companies to listen to IWOM and participate in online communities? In Topic 4 of last year’s CIC “The Internet is THE Community” IWOM white paper series “Reshaping the Relationship between Brands and Consumers”, we mentioned that “The power of the Internet Community levels the playing field between brands and consumers. This means that traditional agencies are no longer a necessity for brands to aggregate and connect with consumers. Brands can directly learn from and connect to targeted, relevant, communicative and empowered consumers by going to the Internet Community. Brands can look to consumers directly for Insight, for Inspiration and for Collaboration.” Now, forward-thinking companies have recognized the importance IWOM plays in reshaping the relationship between brands and consumers. They have successfully increased brand awareness and improved their reputation by listening to IWOM and interacting with consumers in online communities. Their success also proved CIC’s IWOM insights. Then what do netizens think about companies’ listening to IWOM and participating in online communities? We found that 52.7% of netizens interviewed responded positively to the idea of companies listening to IWOM. In particular, they hope companies listen to their discussions about brands, products and services. 43.4% of respondents are indifferent to companies listening to IWOM. While only 3.9% of respondents don’t want companies to listen to IWOM. Figure1 Netizens’ attitudes towards companies listening to IWOM Data source: CIC, 640 BBS/Blog users 5 © 2009 CIC

Do netizens want companies to listen to IWOM and participate in online communities? To delve into the reasons behind netizens responses, we conducted focus group interviews with online community users in different cities. We found that the 52.7% of users that responded positively think that it is of great value for companies to understand consumers’ feedback towards brands and products, in a timely manner, thus improving their products and services. They mentioned listening to IWOM is also necessary for companies to identify IWOM crises and maintain a positive brand image. Netizens with an indifferent attitude towards companies’ listening mentioned they had no way of knowing if companies were listening to them. Besides, they expressed doubt that companies would actually respect their needs and thus take action to improve their products or services. The netizens with a negative attitude mentioned that online communities are their private places for communication and do not want to be disturbed by companies. Sample quotes  “When I have questions about products, I wish there was someone from the company that could give me suggestions and solve my problems.”  “There is indeed much room for improvement, and if the companies don’t find out what needs to be improved the progress will be very slow. Most of the IWOM in online communities is real since most people won’t waste time writing fake messages.”  “A company’s integrity and overall quality will show by its response and reaction to negative posts.”  “Companies should listen to IWOM, but I am not sure whether it impacts the company’s decisions.” 6 © 2009 CIC

Do netizens want companies to listen to IWOM and participate in online communities? Most netizens are open and welcome to the companies listening to IWOM. However, how do they feel about companies participating in online communities? We found that 47.2% of respondents do want companies to participate in online communities so that they can communicate with the companies directly. 40.6% of respondents do not care whether the companies participate in online communities or not. And finally, 12.2% of respondents don’t want companies to participate in online communities. Therefore, while the majority of netizens are positive towards company participation in online communities, overall, the responses were still somewhat conservative. Figure 2 Netizens’ attitudes towards companies participating in online communities Data source: CIC, 640 BBS/Blog users 7 © 2009 CIC

Do netizens want companies to listen to IWOM and participate in online communities? Why do netizens feel this way? Through our focus group interviews, we found that the netizens who responded positively to companies’ participation think users need to communicate with companies directly to solve problems both pre and post purchase. These respondents felt that companies that communicate with netizens are more credible and are preferred by consumers. While netizens with an indifferent attitude were concerned about the sincerity of companies participating in online communities and worried that they would simply mislead them to make purchase decision through disseminating exaggerated or false information. They felt this type of activity would destroy the purity of the online community. Additionally, some netizens were concerned about companies’ ability to spend sufficient time in online communities, thus hurting their feelings by appearing indifferent and inattentive. From the analysis above, we can see that most netizens want companies to listen to IWOM and participate in online communities. They think it is necessary for companies to further understand consumers’ needs and enhance consumer loyalty. However, they are still concerned over the sincerity of companies and the actual impact of the companies’ participation. They feel companies still need to evaluate the best ways for understanding netizens’ needs and online community culture as well as how to best participate. While these concerns are the great obstacles that hinder consumers to accept their participation. Sample quotes  “At least it shows the integrity of a company. Because if a company recognizes the need and takes action to participate, that’s better than others. When making a purchase decision, I will consider this a priority.”  “If the participation is sincere and its products are of high quality, I think I can accept the company’s participation in the community.”  “The company will always introduce the most expensive products that will give them the highest profit rather than the ones that really fit you.”  “I will be so hurt because the company will act indifferently towards me.” 8 © 2009 CIC

How should companies participate in online communities? To participate in online communities, the first step is to build an appropriate online communication platform. With the move from web1.0 to web 2.0, companies started to notice that the netizens are more willing to express and share their own opinions, rather than just read information. As a result, companies started to build online platforms for consumers to express their opinions freely. Over the past few years, more and more companies have launched official blogs or BBS on their own website or join third-party websites to communicate with netizens. According to CIC’s research findings, netizens like to communicate on BBS over blogs. In terms of BBS, netizens prefer third-party BBS to company BBS hosted on official websites. However, in terms of blogs, the result is opposite. Netizens prefer to communicate on a company blog hosted on an official website rather than a company blog on a third-party website. Figure 3 Netizen’s preference to different online platforms Data source: CIC, 640 BBS/Blog users 9 © 2009 CIC

How should companies participate in online communities? Why do netizens’ preferences vary across different communication platforms? Through our research, we found that netizens think BBS is a better platform for interaction than blogs. Besides, they are more familiar with using BBS than blogs. Furthermore, blogs can be easily utilized for pushing products or advertisements thus becoming similar to an official company website. As for BBS, third-party BBS are considered more objective and approachable than company BBS on official websites because it is managed by an independent party. Netizens feel more free on third party BBS to express their opinions and communicate with brands on an equal level. In terms of blogs, netizens feel that blogs represent the official voice of the company, so the blog articles released on official website are found to be more credible than those released on a third-party website. We also found that blogs created by the fans of brands are more attractive than the official blog since they include real product experiences and are therefore more credible and interesting. Overall, we found that regardless of the platform, netizens are most concerned with the level of interaction with the brands and credibility of the information, and in particular, that brands are fair and transparent when communicating with them. Sample quotes  “The official company platform is too driven by company interests while the third-party platform is more objective because it is managed by an independent party.”  “It is easy for a blog to become a personal stage for the company, so BBS is better.”  “I am worried that negative posts will be deleted and IDs will be forbidden on official company BBS.”  ”Many Apple fans will upload product related articles on their own blogs. Most of the information in official company blogs can also be found on company website.” 10 © 2009 CIC

How should companies participate in online communities? After understanding netizens’ communication platform preferences, we evaluated their opinions toward how companies participate. According to our qualitative research findings, netizens prefer companies use relatively formal expressions when communicating with netizens and avoid using either an arrogant official tone or an overly casual manner with net language. However, most importantly, companies should be transparent about their participation and let the netizens know they are in the community and willing to communicate with them. Regarding complaints or questions about product quality, companies should respect each netizen and give specific and useful advice objectively. When clarifying a question, companies should try to use reliable data to support their advice. In addition, companies should respond in a timely manner in order to create and maintain a positive brand image. Sample quotes  “Using relatively formal expressions is important to ensure the professional and authority of the brand. Expressions that are too official will sound too sales-oriented while using too casual net language will create a sense of a lack of authority. It is better to be friendly, sincere and humorous at the same time.  “Companies should give useful and valuable advice. Do not copy paste or auto reply, or ask customer service. There should be one person that gives specific replies to questions, or gives formal replies to similar questions.”  “Reply in time, within 24 hours. Give timely replies to whichever products the netizen is asking about, regardless of whether they are cheap or expensive.”  “Use reliable support when clarifying complaints. It is not enough to just have the company validate the quality. It should provide third- party proof.” 11 © 2009 CIC

How should companies participate in online communities? In the past few years CIC has provided various kinds of consulting services on IWOM participation for international companies. We have summarized the following principles as important when participating with consumers online. (Figure 4) Figure 4 E-Community Participation Principles Be transparent and let netizens know that you are participating in the community. Use a friendly tone when communicating with netizens. Try not to cheat consumers or be too arrogant. Try not to publish false information or advertisements in the communities in order to maintain the purity of the conversation. Respect efluencers’ independence and freedom of speech. Don’t delete negative information or try to mislead netizens. Be fair to the netizens and give reasonable and reliable explanations in response to complaints. Don’t shirk responsibility and cover the truth. In summary, to gain acceptance within online communities and win over its members, companies should be honest and fair when communicating with consumers. Most importantly, companies should be transparent about their participation. When communicating with netizens, companies should use formal yet friendly expressions and be cordial. In addition, companies should respect the independence of netizens and their opinions as well as help to solve their problems and respect their different needs. Furthermore, companies should not disturb the health and purity of online communities and its culture. 12 © 2009 CIC

What kinds of online campaigns will attract netizens’ participation? Choosing the appropriate online communication platform is a good start to participating in online communities. But in order to attract netizens’ attention and bring more value to the brands, companies need to interact with netizens directly and they can do this through online campaigns. With the rapid development of the online community, online activities are becoming more and more important in marketing initiatives. As the leader in IWOM industry, CIC releases “IWOM watch” regularly to analyze the trends and dynamics in the IWOM industry. The following case study of Lancôme’s recent “Pink Lady” competition is a representative example taken from a recent CIC IWOM watch report. Lancôme “Pink Lady” campaign: In April, Lancôme leveraged the popularity of SNS site-- Kaixin to launch their online beauty contest campaign "Pink Lady". The purpose of the campaign was to promote and encourage users to join Lancôme’s fan group in Kaixin. The beauty contestants were voted for by Kaixin users. In the voting process, the candidates were recommended to the voters’ friends in order to gain the most supports. Lancô me interacted with the users to provide skin-type tests or share beauty knowledge. Besides, both the successful candidates and their referrers received rewards from Lancô me. In total, more than 10,000 netizens participated in the campaign, with the vote count reaching over two million. Finally hundreds of thousands of netizens joined Lancô me fans group. Through the campaign, L’Oreal successfully built a broad consumer foundation and online platform for brand communication. Case source: CIC, IWOM watch, 2009 first half year edition 13 © 2009 CIC

What kinds of online campaigns will attract netizens’ participation? Attractive online campaigns can strengthen brand awareness by targeting specific consumers and interacting with them, as well as allowing consumers to interact with each other. This new way of communication is effective for increasing brand awareness and promoting new products. There are different categories of online campaigns such as entertainment driven activities, experience driven activities, event-driven activities and the like. But which of these activities motivates netizens to participate? Based on the findings of our quantitative survey of 640 BBS/Blog users (Figure 5), we found netizens prefer entertainment-driven activities the Note: most. They want to derive enjoyment from joining these activities. Entertainment-driven Product experience driven activities are also welcomed by netizens, activities: interacting with especially when combined with products, branding and corporate culture. netizens through entertainments, such as wining Netizens responded favorably to opportunities to receive free product trials rewards through playing games, and try products prior to making purchase decisions. However, the and uploading photos or videos. participation rate of product experience activities is still relatively low, so Event-driven activities: there is still potential for brands to explore new ways for designing and related to specific events or implementing these types of activities. Additionally, event-driven activities causes, such as the torch relay are also welcomed by netizens. Since it is connected with specific events, for Olympic, signature for it is easy to attract sympathetic responses from netizens thus forms a environment protection. trend for a period of time. By associating with events or issues that the Lottery-driven activities: consumers are already passionate about, brands can tap into the interacting with netizens by hosting a lucky draw, such as emotional needs of consumers and attract much attention. In all, company offering prizes for completing a should consider both the entertainment value of the activity as well as its questionnaire, registering for a overall contribution to netizens. The L’Oreal “Pink Lady” competition is a membership or answering good example that combines both fun and value. questions. Product experience activities: Figure 5 Netizen’s preference to different online activities I product related experience, such as trying new products, testing new cars, etc. Communication-driven activities: interacting with netizens directly by joining discussions in online communities using videos, online chat or posting messages. Knowledge sharing activities: interacting with netizens through knowledge sharing, such as practical information about car maintenance or taking care of babies. Creation-driven activities: interacting with netizens by collecting original content from netizens, such as ideas, videos or slogans. Entertainment- Event- Lottery- Product Knowledge Creation- Communication- driven driven driven experience sharing driven driven activities activities activities activities activities activities activities Data source: CIC, 640 BBS/Blog users Score 1: dislike extremely Score 5: like extremely 14 © 2009 CIC

What kinds of online campaigns will attract netizens’ participation? In terms of gender, female respondents preferred product experiences and event-driven activities, while male respondents had more passion towards communication-driven activities and lottery-driven activities. In terms of age, netizens between the ages of 15 and 35 prefer entertainment-driven activities. However, netizens between 36 and 60 prefer product experience activities. As a more mature and experienced group, they care more about activities that help them make educated purchase decisions. Breaking it down further, netizens between 15 and 17 are passionate about all types of activities except for event-driven activities. This group is curious about a variety of online activities and is more passionate about participating overall; netizens between 25 and 30 showed the lowest passion across most types of campaigns except for entertainment-driven and product experience activities. Based on these findings, this group reacts more rationally in most campaigns while only have passion on particular ones. Figure 6 Netizens preference to different online activities II Data source: CIC, 640 BBS/Blog users Score 1: dislike extremely Score 5: like extremely 15 © 2009 CIC

What kinds of online campaigns will attract netizens’ participation? Online activities contributing fun and value are preferred by most netizens. In order to have the greatest chance of attracting them to actively participate, companies may also want to consider offering attractive incentives. But what kinds of incentives attract netizens’ to participate in campaigns? From Figure 7 below, we can see that generally economic rewards attract netizens the most, while the opportunity to join offline activity ranks second. In terms of gender, male netizens care more about the emotional rewards such as the satisfaction of being recognized during the activity. Female netizens prefer practical rewards such as cash, gifts or opportunities to participate in offline activities. In terms of age, netizens from 15 to 17 care about practical economic incentives, online virtual rewards as well as meeting celebrities; netizens between 25 and 30 show the lowest interest in opportunities to join socially activities compared with other age groups; while those between the age of 31 and 35 not only care about knowledge sharing, but are also willing to make friends; Netizens over 35 care about knowledge sharing but are less interested in making friends. Therefore, to motivate netizens to participate in online activities, companies should consider the preferences of different consumers and design the incentives based on their target consumer. Figure 7 Netizens preference to different rewards of online activities Score 1: dislike extremely Score 5: like extremely Data source: CIC, 640 BBS/Blog users 16 © 2009 CIC

What kinds of online campaigns will attract netizens’ participation? We combined the above findings on consumer activity and reward preferences with CIC’s client experience, to summarize the key elements of online campaign preferred by netizens. (Figure 8) Figure 8 Key elements of online campaign preferred by netizens 17 © 2009 CIC

What kinds of online campaigns will attract netizens’ participation? This is just a general analysis of online communities and its members’ preferences. In reality, online communities are much more complicated, especially when comparing across different industries and categories. It is important to understand the online culture of the target industry and category, in order to build a solid foundation for communication and interaction. Therefore, there are many challenges to participate in online communities and implement influential online activities. As a pioneer in leveraging internet and new media for market research in China, CIC has witnessed the development of various internet media in China. At the same time, CIC has built long term partnerships with many industry leaders to provide them with strategic marketing solutions based on internet marketing intelligence. By growing alongside clients, CIC has accumulated rich experience in online communities across different categories and industries and has a proven research methodology and model. CIC will continue to accompany its clients and help them to understand the Internet’s unique culture and find potential business opportunities thus bringing more value to both companies and netizens. 18 © 2009 CIC

About IWOM White Paper About CIC IWOM White Paper In the past five years, CIC led by our Intelligence Center has continued to share our latest research and findings about IWOM in China with industry clients and friends. Based on our insights and experiences from working in the Chinese IWOM research industry for almost 5 years, our CIC IWOM Whitepapers also incorporate thinking from areas such as marketing communications, IT, sociology and statistics. In publishing these whitepapers we aim to create a resource which monitors and catalogues the developments in the IWOM industry and in doing so helps to move the whole industry forward as a result. From last year’s IWOM Whitepaper series titled the “Internet is the Community” to this year’s series titled “Making Sense of IWOM,” we have shown how powerful the Internet and IWOM is in reshaping the relationships between brands and consumers and that consumer comments have now become the key factor in influencing purchase decisions. For more information about the Chinese Internet and the rapid development of IWOM in China please visit iwommaster.com or our blog seeisee.com, or to see all our previous whitepapers please visit our slideshare site. About “Making Sense of IWOM” White Paper series This 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, whose survey results include feedback from 640 BBS/blog users, 8 focus groups discussion and 32 in-depth interviews with efluencers. CIC will leverage these results and combined with its unique and leading perspectives on Chinese IWOM development, to create a total of 3 in-depth installments including “the Role of IWOM in Purchase Decisions”, "How IWOM is generated and disseminated" and “How Brands Can Participate in Online Communities." 19 © 2009 CIC

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 (CIC Company blog in English). 20

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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"Making Sense of IWOM" Topic 3: How Brands Can Participate in Online Communities

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"Making Sense of IWOM" Topic 3: How Brands Can Participate in Online Communities — Document Transcript