Placing Word of Mouse in the Context of Traditional Word of Mouth and Loyalty

Placing Word of Mouse in the Context of Traditional Word of Mouth, Service and Loyalty
John Goodman, Vice Chairman, TARP Worldwide
WOMMA
February 9, 2011

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Agenda
The Problem:
Social media is hot and gets all the resources hurting traditional WOM generators
Other parts of the customer experience can undermine the good feelings and can even poison the social environment
How can you quantify the relative payoff of WOM initiatives to include basic product experience and service experience
Placing WOMouse in context – understanding other generators of WOM
Measuring impact vs. other means of attracting new customers – method and results
Linking WOM impact to revenue and getting CFO acceptance
Identifying cheap delighters and thinking outside the box
Enlisting allies within the company

4
About TARP
Founded in 1971—40 years delivering dramatic impact
White House sponsored studies of client service (instigated 800#s)
Assisted 6 Baldrige winners and 43 Fortune 100 companies
Initiated concept of “word of mouth” (TARP/Coca-Cola 1978 Study) and “word of mouse” (eCare and Click & Mortar studies 1999)
Credited with developing approach for quantification of impact of service and quality on revenue for companies like Neiman Marcus, USAA, Pepsi, Toyota/Lexus, Chick-Fil-A, Qualcomm, Allstate and Motorola
Measure, manage and enhance:
Customer service
Customer experience
Voice of the customer processes

5
Respond to
individual customers
Identify sources
of dissatisfaction
Improved
product and service
quality
Conduct root
cause analysis
Feedback on
prevention
Formula for Maximizing the Customer Experience, Loyalty and WOM
MAXIMUM CUSTOMER
SATISFACTION & LOYALTY
EFFECTIVE
CUSTOMER
CONTACT
MANAGEMENT
DOINGTHE JOB RIGHT THE FIRST TIME
+
=
Customers will:
Buy again
Buy more
Tell others to buy
Buy your other products and services

6
Placing WOM and WOMouse in Context
Generators
Basic product interaction – Moments of Truth (MOT)
Marketing and sales interaction
Remarkable event or action
Service interaction, broadly defined
Combination of the above
Product interaction
Positive, negative or neutral
Build emotional connection component into MOT – fast food, insurance
Fun, frustration, delight – new product or innovation – phone vs. gaming
Service interactions
No unpleasant surprises – airline and utility
Emotional connection
Delight via education or value added
WOMouse and social media is just WOM via another channel
Illustrating the importance of WOM - % of new customers from WOM – 20%-75%!

7
Personal Interaction Has 20 Times as Much Impact as Advertising and Sponsorships (Retail Finance Customers)
How many of those told took action on your referral? 1 out of 4 !!!

8
WOM Is Still The Majority Of Recommendations
Why customers and employees don’t complain:
Hopelessness
Fear
Don’t know where
What you don’t hear about often does the most damage, e.g. sales issues
You need to aggressively solicit complaints

9
Customer Expectation: Key Factors Driving a Great Customer Experience
No Unpleasant Surprises
If Trouble Encountered
Accessibility, Taking ownership, Apology
Clear, believable explanation
Creating an emotional connection when the customer wants it
Money is often not the best solution
Timeliness and Keeping promises

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Eliminating Unpleasant Surprises
Understand who the customer is
Welcome packages, labels and calls
Encourage questions before customers get into trouble.

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Explaining a Policy

12
Linking WOM to Revenue and Measuring Impact
Managing WOM: DIRFT, remarkable DIRFT, great service
Measuring impact on loyalty and WOM
Where new customers are coming from
Remarkable events (positive and negative)
Outcome of events
WOM magnitude, direction and depth (casual or detailed)
Direct impact on loyalty and purchases (stated and validated when possible)
Extended impact on purchases
Value of customer
Impact (quasi-controlled experiments where possible)
Longitudinal purchases by same customers
Sources of new customers
Overall sales in impact areas

13
Measuring the Relative Impact of WOM vs. Other Means of Attracting New Customers

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x
x
20%
delighted
Avg WOM
8.0
=
16,000
10,000
customers
80%
satisfied
Avg WOM
1.0
=
8,000
24,000
1 Actions
30 Referrals
= 800 New customers
24,000 Referrals X
Quantifying the Impact of an Experience on Positive Word of Mouth and Sales

15
Sales Experience is Best Predictor of Long Term

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50%
Satisfied
95%
Repurchasing
2,000
25%
Complain
30%
Mollified
70%
Repurchasing
6,000
200,000
Customers
with
Problems
20%
Dissatisfied
50%
Repurchasing
9,000
60%
Repurchasing
75% Do Not
Complain
37,500
54,500
Total Customers At Risk
Demonstrating cost of less than perfect support to the CFO, CMO and the General Counsel
=
=
=
=
=
Understand Impact of Problems and Service
At $1,000 per customer, $54.5 million at risk
Three strategies: DIRFT, Solicitation of Complaints and Improved Service

17
Show Finance Great Experience Leads to Higher Margins
Percent of customers dissatisfied with fees rises with number of problems.
% Dissatisfied with price or fees

18
-15
-295
-6,562
-3,250
9,814
Word Of Mouth From Some Problems Can Swamp Many Great Experiences
x
x
x
x
10% Nonpurchase
Due to WOM
40%
Satisfied
5% Not
Repurchasing
Avg WOM
1.0
=
30%
Complain
35%
Mollified
25% Not
Repurchasing
Avg WOM
3.0
15% Nonpurchase
Due to WOM
=
25,000
Customers
with
Problems
25%
Dissatisfied
25% Nonpurchase
Due to WOM
70% Not
Repurchasing
Avg WOM
6.0
=
70% Do Not Complain
45% Not
Repurchasing
Avg WOM
2.0
20% Nonpurchase
Due to WOM
=
100,000 Have Great Experience
Each Tells Average of 6 Persons
10% Of Those Told Are in market
30% Of those Told Take Action
50% Spread Substantive WOM
=
=
-1,022
Net Lost Customers

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Case Study - Technology
Managing WOM – parties to introduce game followed by coupons and easy purchase and use instructions
Measuring – follow up email survey to attendees
Evaluation of experience
Purchase of product
Channels used to spread WOM
How many others told about game ~number by channel
Number on buddy list
Knowledge of actions of those told
Impact
Estimated sales due to WOM in areas
Actual sales data

20
Case Studies 2 and 3 CPG and Snack Foods
Managing WOM – product improvements and line extensions
Measuring WOM – longitudinal panel
Motivator to first purchase product
Evaluation of experience with products
Purchase of product including share of wallet
Channels used to spread WOM – differ by gender
Intensity – casual vs. detailed
How many others told about product ~number by channel – differ by gender
Number on buddy list or listserve
How many responded to WOM or posting
Knowledge of actions of those told
Impact
Estimated sales due to WOM
Shift in share of wallet
Actual sales data

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Identifying Cheap Delighters
Some events are effective but expensive
You can create micro-bursts of connection and delight during routine transactions
Trying to delight everyone is not cost effective
Your basic product and service delivery process can create inexpensive delight and positive word of mouth

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Impact of Delightful Experience on Top-Box Loyalty by Type of Action

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Enlisting Allies Who Worry About Revenue, Loyalty and Risk
CMO
Sales
Service
Quality
Risk
Finance

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Questions to Ask to Focus Everyone on Full Range of WOM
What percentage of new customers from referrals?
What is the overall current word of mouth magnitude and polarity from product purchase and delivery to service?
What events produce the most WOM?
Is WOM casual or detailed?
What percentage of those told who act on WOM?
Which inexpensive experiences lead to high positive WOM?
What is the cost of traditional marketing per new customer vs. WOM?

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Summary
WOMouse is just another channel.
Look at end to end WOM as well as WOMouse.
Determine the source of new customers and cost by source
Quantify the revenue impact of points of pain and delighters
Quantify the value of customers in a conservative manner
Eliminate unpleasant surprises and deliver psychic pizza
Outlined in detail in Strategic Customer Service published by AMACOM
jgoodman@tarp.com or 703-284-9253

Placing Word of Mouse in the Context of Traditional Word of Mouth and Loyalty

by Word of Mouth Marketing Association on Feb 09, 2011

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Placing Word of Mouse in the Context of Traditional Word of Mouth and Loyalty — Presentation Transcript