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The Art & Science of Retention – Part 5 – Word Of Mouth

WoM – Intimate HeadsUp notice or SPAM: Consider that in this increasingly (social-graph) connected world there is the potential for a growing sensitivity to positive and negative Word of Mouth (WoM) referrals. Or is there?

While WoM is the central linchpin of marketing 2.0, it is not yet clear that WoM/Buzz campaign results can be individually attributable, repeatable, scalable or lasting. Part of the problem lies in the credibility and vested interests of the source. The resulting conundrum we face today is that the more powerful the desired impact, the more intimate in scale it tends (needs?) to be.

According to the Retail Customer Dissatisfaction Study – 2006, “The Jay H Baker retailing initiative at Wharton and The Verde Group, Jan 2006 noted that 79% of customers will commit to deeper product or service relationship with a brand after a satisfying experience. But give people a platform to %$#@!!!! ….only 6% of shoppers who experienced a problem contacted the company, 31% went on to tell their friends who went on to tell their friends… and to make matters worse, the story tends to become more ‘embellished’ with each iteration.

Many agree that while having feedback from one’s inner circle of friends is of higher value, the threshold relevancy of the message, its recency and the cost/benefit of following the notice will be the final determinant for action. Moving outside that circle places a greater premium on the credibility/expertness of the source, although there will be specific cases where the expertise of the source may be the ultimate barometer – in which case its not exactly a WoM referral anymore. Mass WoM campaigns will devolve to SPAM unless they are able to solicit some intrinsic cachet and transition to viral.

Navigating the “he said-she acted” is fraught with difficulties so it is perhaps not surprisingly there are few studies that can map out the linkages. This study appears to maps out the retention->customer satisfaction->WoM link in both a B2B and B2C context.

Retention is Relevancy

It stands to reason that the stronger the result – the more ‘relevant’ the program must have been to the customer. The only problem is the notion of relevancy is often invoked like a magical incantation to ‘explain’ post mortem response rates.

What one deems to be relevant is defined by a particular intersection of time, space and needs/wants. What is relevant now ceases to be a few moments later, or just inches away. Understanding what your customers will consider to be relevant is undoubtedly the major preoccupation of marketers the world over. But how can one simultaneously manage the “IT DEPENDS” of relevancy on any scale when it can encompass anything and everything from image to price, from fun to fear, from individualism to conformity.

Fortunately for marketers a large part of this problem will be ‘solved’ by a nexus of technology and propensity algorithms that will link offers to consumers in more times and places than ever before.

For example a Jupiter research/eDialog study of the email channel (The Relevance Trajectory)

showed that:

  1. consumer triggered offers achieved a 7.4x profit lift versus the base line (mass broadcast email)
  2. life cycle offers (i.e. new customers, established customers, inactivation customers) achieved a 15.0x profit lift
  3. targeted offers that have a more complete understanding of the customer groups needs/wants are able to craft messages/offers that yielded a 16.2x profit lift and
  4. click-stream programs achieved a 31.5x profit lift.

Another way of achieving this is via a clear and consistent EDLP/EDZP (Every Day Zone Pricing) policy. Doing so effectively takes price off the table from active deliberation and (re)balances the value chain dynamics. The idea of Zone Pricing is to determine the range at which the brand’s pricing is ‘good enough’ to solicit a normative response – the price level at which ‘sufficient’ customers are prepared to accept the brand’s value proposition over the competition.

Perhaps the most prudent measure is to develop balanced programs that leverage a blend of communication, experience and pricing/promotion (overture) events in support of brand purchases. (see Anatomy of a Brand Purchase)

Next: Retention – Disruptive Innovation – Owning the cost of entry

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