Saturday, September 6, 2008

Grow your brand with only one measurement tool

Peter Steyn
Managing Director, Aha! Research
Hong Kong, September 6, 2008


Market researchers have been measuring the impact of word-of-mouth for ages by asking consumers a simple question: “How likely is it that you would recommend [brand X or company Y] to your friends, family or colleagues?” We have always known that this is an important measure, but now in the era of Online Buzz, it may very well be the most important measurement tool you need to grow your brand.

“Buzzmeister” - the master of their domain

Ty Braswell, former V.P. New Media at Virgin Records who managed online campaigns for artists including Lenny Kravitz and Janet Jackson, says “Developing an online buzz requires capturing the attention of folks I call ‘Key Multipliers. Their social status is connected to finding something really cool and passing the buzz on to their friends. They find new stuff, bring it to their not-so-online friends, and this role as ‘buzzmeister’ keeps them popular in their peer group. They are defined by what they hunt.”

Buzzmeisters are masters of their domains, or fields of expertise. The ‘gadget guru’, the ‘travel teamster’, the ‘high-quality hunter’ and the ‘value finder’ all declare with pride and joy that “I love it – and so will you”. Online Buzz is digital word-of-mouth and it is flourishing in online social media.

Social Media

Wikipedia defines Social Media as “...the various activities that integrate technology, social interaction, and the construction of words, pictures, videos and audio. This interaction, and the manner in which information is presented, depends on the varied perspectives and ‘building’ of common meaning among communities, as people share their stories, and understandings.”

Word-of-mouth is no longer limited to gossip around the water-cooler or over the fence with neighbours. At the press of a button, Online Buzz via Social Media is global and brings with it both huge opportunities and major pitfalls for public relations, brand management, advertising and research professionals.

Bloggers are blogging and consumers are… advertising managers

A recent survey (May 2008) by Hong Kong-based Aha! Research and PR Consultancy firm, Text100, conducted among corporate news and technology bloggers across eight countries in Asia Pacific, found that 84% welcome information from PR firms and corporations. These bloggers prefer email and comments on their blog over other forms of contact. They want “opinionated responses by corporations to their blog posts“. It’s all about informal buzz rather than traditional marketing communications.

Informal online buzz can extend to consumers creating ads of their favoured or despised brands. These can generate a lot of media coverage for their innovation, creativity and audacity.

A recent California Management Review article, by Berthon P. et al, explores the factors that drive consumers to generate their own advertisements and the strategies available to companies to respond. The authors contend that the consumer is starting to run the show for marketers and the consequences are significant. Consumers are empowered with Online Buzz to make or break brands.

Good and bad Online Buzz

Happy consumers who truly own, nurture and promote a brand represent “good profits”. “Bad profits” are earned from customers who continue to purchase but who generate a negative and damaging buzz.

It is assumed that loyal customers keep purchasing a brand in the long term. Marketers have traditionally focused on loyalty and been satisfied with high scores of customer retention and continued purchasing as indicators. The problem is that various exit barriers such as price and marketing incentives may induce customers to continue purchasing even though they are unhappy with the brand. On the other hand, consumers who discontinue purchasing may not be unhappy with the brand but responding to other circumstances in their lives. Clearly, regular customers may not necessarily be solid drivers of growth.

If loyalty and customer retention are not good predictors of future growth or profitability what is?

A loyalist who is willing to put their own reputation on the line in recommending a brand to their friends, family and colleagues.

“Buzzmeisters” as “net brand promoters”

We need “promoters” who can drive positive buzz to take charge of our brands. Research by Reichheld FF, in the Harvard Business Review, shows a strong correlation between a brand’s growth rate and the percentage of its customers who are “promoters” of that brand. These “buzzmeisters” may be the most cost effective marketing managers for our brands.

Reichheld’s validated scale is a zero-to-ten semantic differential scale with “Extremely likely to recommend” at the one end and “Not at all likely to recommend” at the other end. Respondent answers are classified in the “promoters” of the brand, those who are “passively satisfied”, and those who are “detractors”. Subtracting the percentage of “detractors” from the “promoters” produces a “net promoter score”. It has been found that in most industries, this is the most important measurement and the one number you need to drive growth and profitability.

Calculating the one most important measure

Maintain a high level of reliability and reduce non-response bias by keeping your survey short and simple.
  1. Select a statistically valid sample of your customers, and ask them the all important question: “How likely is it that you would recommend [brand x or company y] to your friends, family or colleagues?”
  2. Subtract the percentage of “detractors” from the percentage of “promoters” to determine your “net promoter score”.
  3. Benchmark this score against your other brands, other branches, sales representatives, customer segments or whatever other factors make sense such as your competitors’ brands.
  4. Focus your marketing initiatives on improving your “net promoter score”.
Customer equity drives brand equity. Building brand “promoters” and converting “detractors” are key strategies for achieving sustainable brand growth. Monitoring and managing this one important number, in the era of Online Buzz, is now more important than ever.

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