How Companies Turn Buzz Into Sales

The good word from devoted customers may not always be the most effective promotional tool.

In recent years, firms have turned to non-traditional marketing campaigns to generate buzz about their products and services. Indeed, positive word-of-mouth is anecdotally cited as the secret behind such successes as Chrysler’s PT Cruiser and the revival of Pabst Blue Ribbon beer. Knowing that the average consumer often listens to what trendsetters say, marketers go after specific groups of influential consumers.

But they may be missing the mark. Recent research reveals that the most obvious targets for a marketing campaign —loyal customers and tastemakers — may not create the best buzz for the marketing buck. David B. Godes and Dina Mayzlin, assistant professors of marketing at the Harvard Business School and the Yale School of Management, respectively, conducted a field study of a chain store’s word-of-mouth campaign. The store had a small promotion agency recruit 1,073 participants, dubbed “agents,” in 15 U.S. markets. Some agents were solicited from among the store’s frequent-buyer cardholders; others were recruited by the agency but had never heard of the chain before signing up. Agents were asked to spread the word about the chain among friends and acquaintances over a 13-week period and to report each occasion they whispered in someone’s proverbial ear, in exchange for small prizes.

The word-of-mouth campaign definitely worked, say the authors, in that personal communication about the store’s merits, and the corresponding excitement it generated, turned into real sales. But the authors wanted a more precise look at who exactly was doing all the talking. So a key element of the research, as described in a July 2004 Harvard Business School marketing research paper, Firm-Created Word-of-Mouth Communication: A Field-Based Quasi-Experiment, was to identify the characteristics of the most successful agents so that firms can better understand at whom to target their buzz marketing.

Marketers might be tempted, for example, to spur their most loyal customers into evangelizing for them. But the 381 agents who happened to already be loyal customers of this particular chain — the loyalty cardholders — did not create additional sales through the word-of-mouth campaign. Why? Because loyal customers, posit the authors, are devoted fans who have already told their friends and acquaintances about the product. Marketing dollars might be better spent elsewhere. “It’s somewhat counterintuitive on the surface,” says Godes. “But it’s perfectly reasonable when you think about it. Loyal customers are already doing their work for you.

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