Word of Mouth – A Prescription for a Bad Economy A Presentation by Agent Wildfire – Canada’s Word of Mouth Experts

This economy is bad…like really bad…

It looks like we’re in the big R…

Yikes, Advertising is taking it on the chin... - Group M forecasts media spending down 3.2% in 2009 - Zenith Optimedia forecasts 5.7% down in 2009 - Morgan Stanley could envision a +10% drop in spending depending on the economy

How will we carve up the media pie?... Well, we’ll be eating less media: 93% of CMOs believe the economy will have a significant/moderate impact on their budgets 70% of CMOs plan on reducing their marketing spending Source: Epsilon

Well, we’ll be eating less media:

93% of CMOs believe the economy will have a significant/moderate impact on their budgets

70% of CMOs plan on reducing their marketing spending

Perhaps a premature announcement, but why wait. 2009 Anticipated Declines: 15% Newspapers - 13% Consumer Magazines 10% Terrestrial Radio 4% Network TV Source: Jack Myers Media Report The Long Slow Decline into Irrelevance

Perhaps a premature announcement, but why wait.

2009 Anticipated Declines:

15% Newspapers

- 13% Consumer Magazines

10% Terrestrial Radio

4% Network TV

Smart Marketers are Now Rethinking Traditionally Held Views...

Crisis requires radical shifts in thinking

Another Change You Can Believe In Is Coming …

Here Comes the Next Wave of Marketing & Media…

The Fastest Growing Marketing/Media Segments Expected 5 year Compound Annual Growth Rate Word of Mouth 27% Internet/Mobile 14% Branded Entertainment 13% Custom Publishing 11% Out of Home 10% Source: Veronis Suhler Stevenson

Expected 5 year

Compound Annual Growth Rate

Word of Mouth 27%

Internet/Mobile 14%

Branded Entertainment 13%

Custom Publishing 11%

Out of Home 10%

Word of Mouth is Catching On…in All Its Forms Buzz Marketing Social Media Customer Collaboration Brand Communities Influencer Marketing User Generated Content Influencer Marketing Social Networks Referral Programs Grassroots/Cause Marketing Experiential Marketing Viral Marketing

Fact - Most Traditional Media is an Inefficient Cost… … Word of Mouth is a Wise Investment

12 Reasons Why Word of Mouth Deserves Your Consideration In This Economy

Advertising Attention Deficit Hurdles 3,000 ads get pushed at us each day - 6 times the volume vs. 40 years ago…the tougher it is to breakthrough, the more we do and invest

Reason #1 – Word of Mouth Gets Noticed 4% any ad recall from last TV show watched(down from 34% in 1965) Source: NBA 70% of people frequently consume multiple media simultaneously Source: eMarketer 93% of people believe word of mouth is the most reliable way to find out information about products and services (up +26 pts. Vs. 25 years ago) Source: NOP World

4% any ad recall from last TV show watched(down from 34% in 1965)

Source: NBA

70% of people frequently consume multiple media simultaneously

Source: eMarketer

93% of people believe word of mouth is

the most reliable way to find out information about products and services (up +26 pts. Vs. 25 years ago)

Source: NOP World

One-Way Communication Hurdles Customers demand interaction and customization, Marketers require it

Reason #2 – Word of Mouth Taps The Values of New, Customer Participation Culture Mass Media Word of Mouth Customers Now Want: Freedom Customization Scrutiny Integrity Collaboration Entertainment Speed Innovation Participation Values Grade 2/10 2/10 3/10 2/10 1/10 8/10 5/10 2/10 Participation Values Grade 9/10 8/10 9/10 9/10 10/10 8/10 8/10 9/10 Evaluation Score 25/80 70/80

In a bad economy, marketing has to punch harder and create action…

Reason #3 – Word of Mouth Stimulates Action 90% - proportion of people who can skip ads, do skip ads 69% - percentage of people who are interested in skipping ads completely Source: Yankelovich 70% - percentage of people affected by word of mouth conversations - 37% buy it/try it - 24% consider it - 9% avoid it Source: Keller Fay

90% - proportion of people who can

skip ads, do skip ads

69% - percentage of people who

are interested in skipping ads completely Source: Yankelovich

70% - percentage of people affected by

word of mouth conversations

- 37% buy it/try it

- 24% consider it

- 9% avoid it

Source: Keller Fay

Lifetime customer value trumps short term lift

Reason #4 – Word of Mouth Has Longevity Over 30% of the broadcast content we see in mass media is advertising or promotion - How much is conscious? Low - How much is attentive/lean forward? Low - How much is well-received? Low - How much is retained? Low - How much is banked in memory? Virtually nil Average people have 17 word of mouth conversations each day - How much is interactive? High - How much is spoken? High - How much is internalized? High - How much is retained? High - How much is behaviour altering? High Brand Communities don’t reach full maturity to 18 months 82% of community members refer more people to a brand after joining

Over 30% of the broadcast content we see in mass media is advertising or promotion

- How much is conscious? Low

- How much is attentive/lean forward? Low

- How much is well-received? Low

- How much is retained? Low

- How much is banked in

memory? Virtually nil

Average people have 17 word of mouth

conversations each day

- How much is interactive? High

- How much is spoken? High

- How much is internalized? High

- How much is retained? High

- How much is behaviour altering? High

Brand Communities don’t reach full maturity to 18 months

82% of community members refer more people to a brand after joining

Ad inflation is running wild In a down economy, advertising is a tougher discretionary expense to justify

Reason #5 – Word of Mouth Costs Less Per Impact - Cost to Produce a National TV Ad $360,000 Min. Media Cost to Air a National Campaign in Canada $1,200,000 Typical Research Cost Associated with TV Campaign $25,000 - $100,000 Choose Your Flavour: Year Round Community - $100-500k 26 week Word of Mouth Campaign - $40-150k Blog/Social Media Outreach $30-100k Advisory Panel - $15-75k Buzz Marketing Tactic $5-100k

- Cost to Produce a National TV Ad

$360,000

Min. Media Cost to Air a National Campaign in Canada

$1,200,000

Typical Research Cost Associated with TV

Campaign

$25,000 - $100,000

Choose Your Flavour:

Year Round Community - $100-500k

26 week Word of Mouth Campaign - $40-150k

Blog/Social Media Outreach $30-100k

Advisory Panel - $15-75k

Buzz Marketing Tactic $5-100k

In a bad economy, few markets increase, it’s a battle for share growth

Reason #6 – Word of Mouth is a Competitive Advantage - Canadian advertisers spend $19 billion on media - $674 per adult Advertising is spent on very similar formats: TV – 30 second ad Print – Full page, ½ page Web – Banner, Search Radio – 30, 60 seconds 10% - Percentage of CFOs who believe marketers can assess impact of budget on sales Source: Canadian Marketing Association, MMA - Only 1-2% of marketing budgets are currently spent directly on creating word of mouth Marketers are just beginning to activate word of mouth variants, but still low - Influencer programs - 22% of marketers executing - Buzz/Stunts - 15% - Branded Entertainment 14% A 7% increase in positive word of mouth equates to 1% business growth Sources: VSS, Agent Wildfire, London School of Economics

- Canadian advertisers spend $19 billion

on media - $674 per adult

Advertising is spent on very similar formats: TV – 30 second ad

Print – Full page, ½ page

Web – Banner, Search

Radio – 30, 60 seconds

10% - Percentage of CFOs who believe marketers can assess impact of budget on sales

Source: Canadian Marketing Association, MMA

- Only 1-2% of marketing budgets are

currently spent directly on creating word of mouth

Marketers are just beginning to activate word of mouth variants, but still low

- Influencer programs - 22% of marketers executing

- Buzz/Stunts - 15%

- Branded Entertainment 14%

A 7% increase in positive word of mouth equates to 1% business growth

Sources: VSS, Agent Wildfire, London School of Economics

In today’s connected economy, grassroots influence is key Less than 10% of your customer base controls a big chunk of what the rest of us buy, think and do… why not target them?!

Reason #7 – Word of Mouth Targets Influence - With rare exception (i.e. magazines), mainstream media has a tough time targeting audiences and specifically influencers - 70% of Wikipedia’s content is produced by 1.7% of its audience Top ranked Influencer belief – “I love talking to others about things I’ve just discovered” Influencers are 2x more active, more conversational and/or more brand-involved than the mainstream consumer Sources: Agent Wildfire, Keller Fay

- 70% of Wikipedia’s content is produced by 1.7% of its audience

Top ranked Influencer belief – “I love talking to others about things I’ve just discovered”

Influencers are 2x more active, more conversational and/or more brand-involved than the mainstream consumer

Need for ROI for marketers in a bad economy is a mantra

Reason #8 – Word of Mouth is More Measurable and Linked to Growth Mass media has challenges auditing its own traffic Mass media weight cannot be linked to sales When measured, it only measures presumed eyeballs not real engagement Word of mouth activities have much better measurement ability because of their digital nature and opportunity to mine relationship with customer/member - The #1 factor linked to business growth is word of mouth referral - Word of mouth measures the key business drivers of engagement and advocacy Sources: Agent Wildfire, Bain

Mass media has challenges auditing its own traffic

Mass media weight cannot be linked to sales

When measured, it only measures presumed eyeballs not real engagement

Word of mouth activities have much better measurement ability because of their digital nature and opportunity to mine relationship with customer/member

- The #1 factor linked to business growth is word of mouth referral

- Word of mouth measures the key business drivers of engagement and advocacy

Trust has eroded in our institutions, a bad economy will accelerate this contempt … but we still trust our friends and “people like me” Source: Edelman Trust Barometer

Reason #9 – Word of Mouth is More Trusted 60% of people have a much more negative view of marketing and advertising than a few years ago 27% trust manufacturers 14% trust ads 8% trust celebrities Word of mouth is the #1 trusted source, up 50% vs. a generation ago 61% of people claim to buy the same brands as their friends (+28 pts. Vs. 4 years ago) 90% trust their spouse 82% trust their friends Sources: Yankelovich/Henley Centre Sources: Keller Fay/Yankelovich/Henley Centre

60% of people have a much more negative view of marketing and advertising than a few years ago

27% trust manufacturers

14% trust ads

8% trust celebrities

Word of mouth is the #1 trusted source, up 50% vs. a generation ago

61% of people claim to buy the same brands as their friends (+28 pts. Vs. 4 years ago)

90% trust their spouse

82% trust their friends

Who do you trust?

The Customer is the New Battleground Word of Mouth gets you closer to your customer frontlines Percentage of executives who believe the Customer Experience is the new battleground - 95% Percentage that believe they are delivering a positive customer experience - 80% Percentage of their customers who agree - 8%

Reason #10 – Word of Mouth is More Customer Centric Entertainment Value Information Value Entertainment Value Informational Value Explicit value (rewards) Intrinsic value (feeling of belonging) Extrinsic value (ego/reputation) Experiential value (immersion) Social value (making connections) Talent value (expressing skills/creativity) Service value (adds to the product) Collaborative value (1+1=3) Mass Media Provides: WOM Provides:

Entertainment Value

Information Value

Entertainment Value

Informational Value

Explicit value (rewards)

Intrinsic value (feeling of belonging)

Extrinsic value (ego/reputation)

Experiential value (immersion)

Social value (making connections)

Talent value (expressing skills/creativity)

Service value (adds to the product)

Collaborative value (1+1=3)

CEOs are Expecting More From their Marketers – Marketers need to be Leaner and Keener Word of Mouth accommodates those needs

Reason #11 – Word of Mouth Simply Provides More Communication Communication Advocacy Ambassadorship Buzz Insight Real world feedback Solutions Innovation Support Operational Improvements User Generated Content

Communication

Communication

Advocacy

Ambassadorship

Buzz

Insight

Real world feedback

Solutions

Innovation

Support

Operational Improvements

User Generated Content

Marketers want WOM for a variety or reasons Internal External Hard Measure Soft Measure Awareness/Buzz 35% Referrals/Leads/Members 32% Participate in a conversation 26% Drive brand loyalty 32% Seed influencers 32% Launch a product 22% Build a better customer experience 21% Accelerate sales 19% Target tough to reach audience 19% Generate user generated content 19% Support a cause 6% Support a cause 6% Deliver visitors/traffic 17% Enhance credibility 14% Get Insight /solutions 10% Provide learning 6% Source: Agent Wildfire Question - What are the top 3 objectives for launching a word of mouth based initiative?

Don’t skate to where the puck is , skate to where it is going to be

Reason #12 – Word of Mouth is the Now & the Future Canadian Marketers plan on spending more/less in 2009: More Less Newspaper 5% 32% Radio 5% 33% TV 4% 37% Magazines 3% 39% Social Media 23% 16% 58% of marketers agree that word of mouth influence will overtake traditional media influence within a generation 73% of marketers believe marketers will become much more important in an organization by leveraging word of mouth strategies and tactics Source: Veritas Source: Agent Wildfire

Canadian Marketers plan on spending more/less in 2009:

More Less

Newspaper 5% 32%

Radio 5% 33%

TV 4% 37%

Magazines 3% 39%

Social Media 23% 16%

58% of marketers agree that

word of mouth influence will overtake

traditional media influence within a generation

73% of marketers believe marketers will become much more important in an organization by leveraging word of mouth strategies and tactics

A Palette of New Strategies & Tactics Await Source: Agent Wildfire What forms of word of mouth will experience the most growth in the next few years ? (top 3 choices) Social media marketing 37% Social network marketing 35% Mobile marketing 34% User-generated Content 31% Influencer marketing 28% Brand communities 20% Customer forums 17% Branded entertainment 16% Cause-related marketing 14% Brand microblogging 14% Buzz marketing 13% Corporate/brand blogging 11%

Recap – The 12 Reasons Why Word of Mouth (WOM) is Primed for this Economy 1 ) WOM Gets Noticed 2) WOM Taps Participation Values 3) WOM Stimulates Action 4) WOM has Longevity 5) WOM has Less Cost/More Value 6) WOM is a Competitive Advantage 7) WOM Targets Influence 8) WOM is More Measurable 9) WOM is More Trusted 10) WOM is More Customer Centric 11) WOM Provides More 12) WOM is the Future ChristaJean

… Don’t Despair

We plan, seed, incubate execute, measure, live and breathe the spectrum of word of mouth Integrated Brand Community-building Advisory Panel Influencer-driven Challenge/intervention Referral-driven Grassroots sponsorship/cause-driven Offline Experiential Buzz/Guerrilla Online Social Media Production/Outreach Social Network Production/Outreach Viral Affiliate/Referral -driven User-generated Advergaming

Integrated

Brand Community-building

Advisory Panel

Influencer-driven

Challenge/intervention

Referral-driven

Grassroots sponsorship/cause-driven

Offline

Experiential

Buzz/Guerrilla

Online

Social Media Production/Outreach

Social Network Production/Outreach

Viral

Affiliate/Referral -driven

User-generated

Advergaming

Let’s Start Your Next Brand Conversation… Inquire: info (at) agentwildfire.com Phone: 416-255-4500 URL: www.AgentWildfire.com Join: www.TheInfluencers.ca Blog: http ://BuzzCanuck.typepad.com / http://www.spreadslikewildfire.com/ Explore: The Buzz Report (e-newsletter) Signup at www.AgentWildfire.com Learn: Executive, WOM Seminars