Awareness versus Persuasion

In the early days of Home Shopping Network (live TV, not online), we were doing some ethnographic research and started to find “physical clusters” of customers – neighbors or people who worked together.  For example, one of these groups was nurses at hospitals,  especially nurses  who worked the night shift.

We looked for the most active member of the cluster (our “thought leader”) and asked them if they would help us with a “member get a member” program.  Would they be willing to distribute discount coupons to their friends, especially ones who were not already customers?  Time after time, the answer was:

“Honey, all my friends are already customers of yours”.

We launched the program anyway, because it was a pet project from upstairs  – I was a junior marketer at that point so I couldn’t kill it ;)  The program never, ever worked, no matter how hard we tried.  It generated very few new customers while giving lots of discounts to people who were already active buyers.  Basically,  the cost of those discounts overwhelmed the value of the new customers generated.

Apparently a similar thing happens online with Social marketing.

As part of a WAA program that reviews academic research for WAA members, I was able to take a look at a paper titled:  Firm-Created Word-of-Mouth Communication: Evidence from a Field Test by David Godes and Dina Mayzlin.

Here’s my Executive Summary:

The authors investigate the effectiveness of a firm proactively managing customer-to-customer communication.  In particular, they are interested in proving how, if at all, a firm should go about effecting a meaningful word-of-mouth (WOM) communications program.  This is done through two different data collection schemes: a large scale, 15 market test through BzzAgent with a client restaurant chain, and also through a controlled online experiment.  The results are somewhat counterintuitive and may change the way web analysts and Marketers should be thinking about WOM and social analysis, particularly if there is a hard monetary investment in the WOM program.

Specially, the researchers are trying to answer 2 questions:

1.  What kind of WOM maximizes incremental Sales?

The answer: WOM created by less loyal (not highly loyal) customers, and occurring between acquaintances (not friends).  Though perhaps surprising, this result is often found in Marketing program measurement; Sales would occur anyway without the program, especially among best customers.  These results demonstrate the pitfalls of not using control groups (people not exposed to the campaign) to measure Marketing effectiveness.

2.  Which people are most effective at creating the WOM above?

The answer: “Opinion Leaders” or “Fans” are not as effective in spreading WOM that drives incremental Sales because these efforts are “preaching to the choir”, per #1 above.  The networks that opinion leaders or fans have are likely to already know about the Product from pre-existing conversations, and spending money on creating a campaign to reach these people is ineffective because the social communication has already taken place.

In sum, if you want to invest in a WOM program that will drive Sales you would not have received anyway, you want the WOM conversations happening, as the authors say, “where none would have naturally occurred otherwise”.

Here’s a portion of my Review, where Awareness versus Persuasion is used as a framework to help explain the results:

The discussion of the difference between the need for a persuasive argument versus building awareness is something web analysts should keep in mind so they can make sure they understand the real needs of the Marketer or Product Manager.  For products with high awareness already, what is really needed to increase Sales is persuasion of the people already aware, not more awareness.  New products obviously need increased awareness.

Per this study, this persuasion versus awareness question affects the choice of who to recruit for WOM campaigns. Loyal customers are the best persuaders and are best used when the product already has high awareness.  If you want to drive sales through increased awareness – the goal of many WOM campaigns online – you should be recruiting less loyal customers and encouraging them to talk not to their friends, but to their acquaintances.  This approach appears to be contrary to the “opinion leader” or “fan” approach now thought of as best practices.

As is typical of academic research and testing, the paper contains an extensive review of the results of other WOM Marketing studies all the way back to the 1970’s upon which the hypothesis for this test was formulated.  If you are a WAA member, you can get a copy of the peer-reviewed paper from the journal Marketing Science (other versions are floating around) with all these footnotes listing previous test sources.   Instructions on how to do this are at the end of the Review.

————–

I’m not going to post the rest of my Review on the blog.  Rather, I’d like to ask some questions and get some discussion going on this topic, because I think this test and paper shines light on a fundamental flaw in the way people think about Marketing on the web.  So read the rest of the Review here if you’d like, then please come back and offer your opinions on these questions:

1.  Test results indicate if you’re going to maximize an investment in WOM, you should target less loyal customers talking to acqaintainces rather than loyal customers talking to their friends.  Do you understand this idea?  Believe in it?

2.  Do you think this is an important discovery?

3.  Do you think this general model – the idea that to maximize Sales, best customers should be treated differently than other customers - might apply to many different types of web / interactive marketing?

4.  Will you do anything with this information?  What’s first step?

Update: Prompted by the questions in Comments, I offer these additional links to previous posts.  Here is a more detailed explanation of  “lift” and “incremental”.  Those who might want want to go “up” to a macro model for how to think about Marketing in a Social or Relationship  mode should see Framework for Engagement.  If you want to go “down” to analysis or execution and are interested in “How do I Measure and take Action on these Ideas”, see the Measuring Engagement Series.  If you want to understand how this model integrates with the traditional offline Push model, see the Marketing Bands Series.

More questions?

11 thoughts on “Awareness versus Persuasion

  1. Great review, Jim. One question: Do you think the analysis is limited, at all, by the type of product(s) the analyzed firm sells? In other words, do you think the conclusions are extensible to other types of firms?

  2. Thanks Ron. I do think the results generally apply to most categories of products and services, because I have seen this same kind of effect repeatedly both offline and online.

    It’s probably easier to specify where you can safely ignore this idea – in any product or category that is launching (any awareness is good awareness) or is totally commodified (persuasion is not effective).

    It should be pointed out that unless you are actually investing hard dollars in the WOM program, this test data doesn’t really matter, there’s no spend thing to optimize so no way to lose. Just provide a great product and the WOM will take care of itself ;)

    And if you are investing hard dollars and you want awareness, Advertising might be a better alternative because you achieve the same outcome without the potential for creating social hostility through intrusiveness.

    In terms of execution, personally I’d lean towards only using paid WOM for products that already have a lot of awareness and need persuasion, because working a program with loyals + their friends has to be easier than trying to work a program with less loyals and their non-friends.

    If you know what I mean.

    An example that comes to mind is a product like LifeLock, which is all over paid media in terms of awareness, so probably would benefit significantly from persuasion by loyal customers.

    In other words, testimonials. They’re just not in the ads, they’re coming from a loyal customer that happens to be your friend.

  3. …target less loyal customers….rather than loyal customers ….Do you understand this idea? Believe in it?
    -Yes because that’s basically what many bloggers do. Although if they are receiving a free product some users would like full disclosures.

    Do you think this is an important discovery?
    -I’m indifferent about it seems obvious to me.

    Do you think this general model – the idea that to maximize Sales, best customers should be treated differently than other customers – might apply to many different types of web / interactive marketing?
    -Yes I think it applies to web marketing too. See above.

    Will you do anything with this information? What’s first step?
    -Keep doing what I’ve always done.

  4. David, thanks for the comment, and if I may say so, the majority of web marketers and analysts think you are dead wrong.

    I happen to think you are right.

    Those who think we are wrong live in Paradox, and I’m not sure how they can exist holding fundamental contradiction in their heads.

    If the web is about interactivity, engagement, then those who are active with you do *not* need to be marketed to, they need to be **serviced**.

    It is only when for some reason you drive people away, that you see dis-engagement or engagement fails to materialize, that you need to market to a person (or community).

    To do otherwise is incredibly wasteful of resources, and basically says you do not believe the web to be interactive, instead, you believe it to be a giant, one-way TV station.

    It’s new medium folks. Use it (and measure it) that way.

  5. I dont get it. Why wouldn’t less loyal customers with their friends work better than with their acquaintances? I get the most loyal segment (everybody around them is already comverted), but how come acquaintances would respond better than friends with less loyal/engaged customers who have less “at stake”?

    I LOVE counterintuitive stuff!

  6. It’s a timing issue, not a “response” issue. Remember, we are talking *incremental* behavior, not overall behavior.

    So, to put it in response terms, the loyal-friend combination would have the highest response rate Day 1, the day a product launched, and Awareness would spread like wildfire in that group. This is not a bad thing but largely happens anyway without any kind of effort required by the business.

    Problem is, all these folks are *already aware* by the time you get your social program in the field. So there is very little “lift” (incremental) awareness available in this group, no matter what you do. All you have left to drive incremental response is Persuasion.

    On the other hand, the less-loyal to aquaintance group has not participated in the original “awareness flash” because they are detached from the thought leaders, by definition. Therefore, it’s much easier to drive incremental awareness (lift) which would result in Sales.

    Follow? It’s about where the “base level” of awareness is when you start the program among each group, and in the case of Social, this boils down to a timing issue – you are bound to be way too late with the program to increase awarenss at all in the loyal – friend cohort.

    Meaning going after the loyal – friend cohort is a waste of money, because you get zero lift = negative ROI.

  7. Interesting situation and interesting questions
    1. Test results indicate if you’re going to maximize an investment in WOM, you should target less loyal customers talking to acqaintainces rather than loyal customers talking to their friends. Do you understand this idea? Believe in it?
    NO – I DO NOT here is why:
    Testers are of a specific “quality” people who have time for that, people who are paid to participate. You just DO NOT get the “real” influencer in those groups because they won’t spend the time, nor they are attracted by money to do so.

    2. Do you think this is an important discovery?
    >>> It is interesting to me that – preaching to the choir – is an obvious mistake – made over and over again.

    3. Do you think this general model – the idea that to maximize Sales, best customers should be treated differently than other customers – might apply to many different types of web / interactive marketing?
    >>> I think the aspect of TIME and EVOLUTION is just missing (you mentioned it in a comment a bit). In an early stage you need the few customers to build advocacy and a sound base of trust and support – over time in a maturing cycle you will need to focus resources to broad by focusing on the weaker ends.

    4. Will you do anything with this information? What’s first step?
    >>> Commenting here ;-) Then thanking Paul Ricket for pointing me here – then usining it in my sales lessen (teaching social selling in the Social Media Academy).

    Axel
    http://xeesm.com/AxelS

  8. Axel, thanks for the comment, I think we agree (?).

    I’m a bit confused by your reference to Testers, that seems like a 3rd group which are more professional in nature, not “Social”. Point is, if you make great products fans / loyals (some of which may be paid Testers, I guess?) will spread the word about the product very quickly to their friends anyway, so there really so no need to engage in any kind of paid efort to make this happen.

    On the other hand, if you produce a shitty product, there is a place in the middle where you have loyals / fans that will be unwilling to spread the word to friends. But I’m not sure a paid social program is the answer there either, a real influencer is not going to do it anyway.

    Better to focus efforts on getting the product right (a Marketing responsibility, by the way, not R & D) and taking advantage of the (free) natural inclination of loyals to spread the word. A properly designed product will create it’s own social promotion. Any paid social program should focus on what happens after that – how do we leverage the natural fan-loyal-friend social output into something that reaches less loyals and their aquaintances?

    Personally, I see this leveraging of existing loyal output happening a lot on message boards for more traditional products and Blogs / Facebook / Linkedin on more technically oriented products.

  9. Axel, your comment about what you call “testers” (i.e. people who participated in the study) are biased because they’re people who have time to do so, whereas “real” clients don’t, hence a bias in the studied population. I would suspect that the authors of the study Jim mentions made sure they sample was representative and valid.

  10. From everything I’ve seen this is spot on Jim. This is a great read. I’ve long felt that “influencers” idea in Social Media is heavily flawed based on the testing I’ve done around affinity targeting anyway but when you add the “preaching to the choir” aspect and throw in ROI this makes perfect sense.

    In my mind it really becomes a question of CRM vs. Acquisition. It’s a shame there is so little attention paid to CRM especially on the digital side of things where communication channels are multiple and targeted. Kind of like the “deep web” of web marketing that we’ve yet to crack outside of customer segmented email.

    So yes, all customers should be treated differently and that should be based on their buying patterns. Fingerhut was a company I worked with that did this very well. Rich CRM systems. I’d say in many ways cataloguers are/were ahead of the curve here.

  11. Jacques, I did have a bit of a problem understanding what Axel was driving at and if was as you interpreted, I can tell you this Tester cohort was not present in the study – after all, we’re talking about a restaurant, not a piece of software or hardware – so it’s more a matter of “Have you heard of this restaurant” and the usual hospitaility suspects: food, service, atmosphere. More a matter of “do you like” than a “test”.

    Jonathan, I think you’re correct but decided not to confuse an already complex issue with the Acquisition vs Retention debate, glad you brought it up. The thing is, if interactivity really exisits, if there is such a thing as “Pull”, then Acquisition should be downplayed relative to Retention because the ROI of the marginal dollar invested is so much higher with Retention.

    Getting customers is more a matter of developing great products and then customers will find you; there’s no need to beat people over the head. Conversely, as easy as it is to get customers, the downside is it’s dramatically more difficult to keep them, and this is why the ROI of measuring and acting on dis-engagement is so high.

    I’m not saying companies should blow off advertising to Acquire new customers, and especially so when they can see clear financial benefits. What I am saying is interactivity is different, and it should be treated that way; and the most efficient interactive Marketing model is one that weights Retention Marketing with a much higher value than is typically used Offline.

    The catalog model is in fact one of the earliest demonstrations of optimizing a relationship-based (or engagement-based, if you prefer) Marketing system. The catalog model has *always* been customer-centric and very sensitive to direct customer input as well as driven by behavioral analysis. This is one reason why the transition to digital was so well executed by the catalog / TV Shopping folks very early on – online literally was not a core business model change for most of these folks.

    If you think about it, one of the fundamental problems with a lot of online retail is the folks driving the bus came from the Retail / Push model rather than the Catalog / Pull model. And I think this is why so little attention is paid online to customer value and backend analysis – if the business is a “Store”, then all that matters is traffic and Sales – as opposed to Customers and Profit – and that’s why all they know how to do is Push.

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