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Is social media, and the data it produces, overvalued? As companies continue to struggle the ROI from their social initiatives, some are starting to suggest that social's impact might have been overestimated.

But social media proponents say not so fast: social media is the digital channel for word-of-mouth, and although word-of-mouth has historically been hard to quantify, its importance is rarely questioned. Which raises an interesting question: instead of talking about social media, should we be talking about word-of-mouth?

According to Ed Keller, the CEO of Keller Fay Group, we may be doing just that in 2013.

In an AdAge piece, Keller suggests that word-of-mouth is going mainstream, and that "marketing's not-so-silent partner" is now more measurable than ever. He points to a study conducted by marketing analytics firm MarketShare, which concluded that offline and online word-of-mouth "increased marketing effectiveness up to 54%, and a 10% increase in [word-of-mouth] resulted in a sales lift of up to 1.5%."

The big question for marketers: how to harness and measure word-of-mouth conversations.

Media, or product?

Keller notes that traditional platforms, such as television, "are the dominant drivers of word-of-mouth", but suggests that the rise of social media has finally encouraged companies to think about the "shareability" of their messages. In fact, Keller predicts that "in 2013, shareability will go mainstream as all forms of media trumpet their power to drive word-of-mouth."

But what is word-of-mouth really about: media or product? In other words, when an individual talks about a brand, or recommends a product to a friend, is she doing so because of the media or the product?

In some cases, of course, the media is the message. Super Bowl ads are the perfect example of this. Brands spend millions to grab the attention of consumers, but it's far likelier that a well-received Super Bowl commercial will produce shallow water cooler chat than a flood of new high-value, long-term customers.

Acquisition versus retention

But even if we assume that media can drive word-of-mouth, and that media-induced word-of-mouth can in turn drive sales, companies would be wise to consider that successful businesses are built on retention, not acquisition. Put simply, even though customer acquisition can be hard, it's typically far easier to master than customer retention. Which is why so many companies mistakenly prioritize acquisition over retention.

The truth of the matter is that word-of-mouth conversations are not created equal. Shareable media might spark conversations that net a company a lot of buzz and some sales. On the other hand, great products and customer experiences are not only far more likely to produce the kind of heartfelt recommendations that generate sales, but also to produce new customers who go on to recommend a company's wares to their friends and family members.

Put simply, companies should recognize that the best way to encourage shareability and virality is to focus on product and customer experience, not on media that sparks water cooler conversations. Proving this point: as Dave Wieneke of ISITE Design recently pointed out in an Econsultancy guest post, the top ten companies in the U.S. for customer experience, as determined by Forrester Research, have grown much faster over the past three years than the nation's top-spending advertisers.

Making measurement easier

The good news for marketers is that when word-of-mouth is seen as the dividend received from customer satisfaction, and not the creation of catchy ads and content, measurement becomes far less vexing a challenge.

Instead of trying to measure sales lift from a single campaign, or to use to social media monitoring as a proxy for word-of-mouth, companies will see what they need to see in metrics that are more easily obtained, such as revenue, revenue growth, repeat orders, purchase frequency and customer lifetime value.

Patricio Robles

Published 6 February, 2013 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

2379 more posts from this author

Comments (2)

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CustomPromoProducts

So true. Word of mouth is so much more effective when you just get to the point!

over 3 years ago

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Artem

Yes, word of mouth is what Amway people use to grow their company...

over 3 years ago

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