Embracing Consumer Buzz 1. Measurement Challenges for Marketers

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1 Embracing Consumer Buzz Creates Measurement Challenges for Marketers Insights from auto buyers and travelers illustrate the first step in measuring consumer generated media overview It s a brave new marketing world. Consumers are interacting with brands and participating in marketing on a scale that wasn t conceived by most marketers just a decade ago. CMOs and agency executives are migrating from measuring the impact of advertising on people to examining the impact of people on advertising and marketing 1. In the wake of this new paradigm, marketers face challenges in measuring the impact of media, generated by consumers, on their marketing programs. While there is no silver bullet for determining the influence of consumer generated media (CGM), there is a first step: quantify the impact of CGM on an individual buying decision. Embracing Consumer Buzz 1

2 influencing the influencers The opinion of other consumers has become a staple in the diet of online shoppers. Whether it is a friend, family member or blogger, shoppers are turning to their peers for advice more than they listen to brands and Madison Avenue. Sites such as Tripadvisor, Yelp and Amazon make it easy for people to share their experiences with others about the hotel service they received, new vehicle they purchased or the latest book they read. Consumers are eager to share this kind of information and actively participate in marketing as never before. Auto buyers and travelers provide two examples of this growing trend. Nearly 50% of recent auto buyers and travel purchasers visited a message board, forum, or online community within the past 60 days. One in three of these buyers say that CGM helped with their purchase decision. For brands who already track digital brand mentions, or the number of visitors to the latest YouTube video, they are just scratching the surface in understanding the impact of CGM on their industry or brand. The attitudes and behaviors of in market consumers are the key to unlocking CGM s impact. Measuring the true impact of CGM and marketing s ability to influence it requires addressing; whether in market consumers use CGM when considering a purchase; how influential CGM is; whether CGM is more or less influential than other media sources. This framework is the first step in marketing measurement programs that reflect today s marketing paradigm. the whole is larger than the sum of its parts Many savvy online shoppers already have an idea of what they want to purchase and use CGM to validate their idea, filtering out comments from people with an obvious axe to grind. In a recent survey of auto and travel purchasers, 51% say that they use CGM to help narrow their choice, 23% to confirm a choice and 15% to select a top choice. Personal testing and recommendations from friends still reign supreme among shoppers. But more than half also say that they find the opinions of other online consumers credible. CGM is just one research source for consumers in their overall shopping process, but it is an important one. In fact, CGM causes 24% of auto and travel buyers to change their mind about the type of vehicle/travel reservation they end up purchasing. Is it any wonder then that marketers are flocking to find ways to facilitate positive consumer discussion about the brands and products they care about? CGM is playing a role among consumers in market for everything from cameras to mobile phones to auto insurance. And these peer to peer advice seekers aren t just the kids next door. Three fourths of consumers surveyed are between the ages of 25 and 54. Among recent travelers and auto buyers who are online, 12% are over 65. The internet, and CGM, clearly isn t a young consumers playground anymore. I go by personal opinion first then family/friends then I check out what I have heard by researching it. Verbatim response from Compete CGM survey, third quarter 2006 Embracing Consumer Buzz 2

3 How likely would you be to use web sites where you can learn from others to research a purchase? (Percent of auto buyers and travelers who responded Likely or Very Likely) Camera Large Household Appliance TV Mobile Phone ipod or MP3 Player Automobile Wireless Service Plan Tivo/DVR Auto Insurance Small Household Appliance Video Game Mortgage Refinance Home Equity Loan Brokerage Account It is clear that the opinion of other online consumers has become a go to media source for in market shoppers. This shift requires that marketers improve their visibility into the influence of CGM on consumer engagement and purchase decisions, and begin measuring new marketing approaches that fuse elements of social computing with selling. Compete found that CGM does not influence every shopper, but it does have a measurable and significant impact on purchase decisions among many. Furthermore, these in market consumers have a viral effect on other buyers, influencing friends and family post purchase and magnifying the overall impact. cgm influence on auto and travel buyers To isolate the effect of CGM, Compete surveyed hundreds of automotive and travel buyers who had made a purchase within the past six months and who had visited a blog, review site, message board or online community during the past 60 days. Among the findings are: Nearly one quarter of these auto buyers and travelers say that consumer review sites influenced their purchase decision and 12% say that advice from other online consumers influenced them. Embracing Consumer Buzz 3

4 Among CGM influenced buyers (consumers influenced by consumer review sites and other online consumers), nearly half say that it actually caused them to change their mind about what they purchased. The majority (71%) of CGM influenced buyers say that CGM is credible, about on par with those saying they find experts credible (73%); what should worry marketers is that just 35% of these consumers find brands credible. Which of the following influenced your decision? (Percent among auto buyers and travelers surveyed) Advice from Family and Friends Company Websites Consumer Review Sites Advice from Consumers Online Magazines/Publications Ads/TV/Radio Company Blog The influence of CGM doesn t stop with the purchase itself; it continues post purchase. Among automotive and travel buyers whose purchase was influenced and effected by CGM, the majority shared their experience with a friend after buying a vehicle or booking a travel reservation. One quarter of these buyers say they posted a review on a consumer review site after making their purchase, double the pace of buyers not impacted by CGM. As marketing is changing, the traditional marketing principles of building customer loyalty and creating brand advocates are increasingly important. Post Purchase Impact of CGM (Percent) Told Friend Posted Blog Rated on a Consumer Review Site CGM Impacted Buyers % 25.4 Buyers Not Impacted by CGM One in Five Auto Buyers Influenced by Advice from Other Consumers Online Informational third party sites, such as Edmunds.com and Cars.com, dominate the top 10 automotive sites, surpassing most automotive branded sites in monthly traffic. AutoBytel and Edmunds (via CarSpace) offer consumer forums where shoppers can Talk about your car, see spy photos, ask questions, chat or join an owners' club. And there are a score of other auto blogs, forums and message boards such as automotiveforums.com (441,047 unique visitors in October) and autoblog.com (211,844 in October), which make it easy for car enthusiasts and shoppers to share feedback with other consumers. Top 10 Automotive Sites (October 2006) KBB Autotrader Edmunds Carsdirect Cars Unique Visitors 6,223,459 5,564,966 4,216,261 4,136,977 3,603,126 Honda Fordvehicles Chevrolet NADAguides Toyota 12 Unique Visitors 2,555,677 2,015,679 1,948,790 1,933,244 1,850,027 Embracing Consumer Buzz 4

5 Approximately 80% of auto buyers use the internet to research vehicles before making a purchase. Compete found that auto buyers use blogs, message boards, online review sites and communities to narrow their choice (47%) and to help confirm that the choice they are making is a good one (26%). The vast majority are online savvy shoppers over 35 years old who navigate the web confidently and spend more than 10 hours online each week. cost of nearly $500 per booking, there is more than $2 billion annually being impacted by CGM 2. Clearly understanding the impact of online media sources, consumer and brand generated, is critical for travel marketers. Which of the following influenced your purchase decision? (Among travelers surveyed) Percent Among auto buyers surveyed: Recommendations from trusted friends and family is the top influencer; 49% say friends and family influence their decision. About one third (35%) say that consumer reviews and ratings sites influence their decision, more than company websites (32%) and car dealers (32%). One in five says that advice from other consumers online is an influence. Among CGM influenced buyers, 70% say that CGM impacts their decision. Online Travel Agencies Friends and Family Company website Consumer Review/Ratings site Advice from consumers online Magazines/offline pubs Television/advertisements Travel Agency Company Blog For automotive marketers already embracing consumer buzz and monitoring digital mentions, better understanding CGM influenced buyers is a logical next step in improving marketing measurement programs. CGM Impacts More than $2 Billion in Travel Purchases Each Year Travel is the single largest e commerce industry; more than 50 million U.S. consumers plan and research travel online each month, and 5 million make travel reservations online. Among travelers who say CGM influenced their purchase decision, two thirds also say it had an impact. At an average Among travelers surveyed: One in five travelers say consumer review/ratings site influenced them. This compares with 37% who said online travel agencies influenced their decision to make a travel reservation, about on par with family and friends (36%) and well above the traditional influences from magazines (9%) and TV/advertisements (7%). More travelers find recommendations from friends and family credible (77%) than the brands themselves (36%), expert reviews (53%) or other consumers (56%). Two thirds of CGM influenced travelers say that their purchases were impacted by CGM, slightly less than the 72% who say they were impacted by friends and family. Embracing Consumer Buzz 5

6 Travelers overwhelmingly say that they would recommend to a friend that s/he check out consumer reviews and opinions online before making a purchase. Among the sites that they would recommend are TripAdvisor, epinions, Travelocity and Hotels.com. Savvy travelers are connected to friends that defy the traditional boundaries marketers have come to know. About half of travelers have visited an online community with the past 60 days. Understanding the impact of social networks and CGM will be difficult but imperative as traditional marketing footholds become less effective. take aim As consumers have become increasingly involved in brand conversations, measuring the impact from CGM has become increasingly complex. The currency of modern marketing is data 3. Here s how to begin creating your own currency around CGM: Analyze in market consumers. Companies like Milwaukee s Best illustrate that CGM (3 million hits on its YouTube video and 197 blogs 4 ) doesn t necessarily boost sales. Why not? Just because consumers are in community doesn t mean they are in market. Evaluating the impact of CGM on sales goes beyond using buzz tracking tools that monitor digital brand mentions from any consumer across the internet to determine if product messages are resonating. Analyze in market consumers, who are close to the point of purchase, to better understand how CGM fits into their lives and the role it plays. Implement both behavioral and qualitative monitoring programs. Examine in market consumer behavior online. Are these consumers frequent visitors to blogs, forums, message boards and other CGM? Conduct a behaviorally targeted survey of connected, in market consumers to understand the impact CGM has on their product preferences and motivations. Measure the influence of CGM on purchase decisions. Quantify how many in market consumers changed their minds about the products they purchased, as a result of CGM, and ended up purchasing your product over a rival s. Measure CGM influenced buyers engagement with your brand online. Marketing remains a complex discipline that is one part psychology, one part science and one part art. The internet offers an unprecedented level of real time information to fuel all three components of the marketing equation. Marketers that embrace consumer generated media by developing online, or offline, campaigns to stimulate positive consumer discussion and then use a measurement methodology to apply to their own marketing have nothing to fear from losing control of the marketing message. They have a lot to gain. When it comes to finding out if a product works for you, I can't think of a better resource than those that have used it everyday, and have taken the time to write about it, and let others know what they thought. Verbatim response from Compete CGM survey, third quarter 2006 Embracing Consumer Buzz 6

7 Footnotes 1 AAAA/ARF Consumer Engagement Conference, October Compete clickstream data reveals that 5 million consumers make travel reservations online each month. Our traveler survey indicates that nearly half of consumers booking reservations have visited a consumer review site or online community. 16% of travelers say CGM has an impact on their purchase. With an average amount spent per purchase of $468, there is $183 million being impacted by CGM per month, or more than $2 billion each year. 3 Bob DeSena, Managing Partner Director of Active Engagement Mediaedge:cia 4 Beer Cannon Generates Web Hits but Not Sales, Advertising Age, October 11, 2006 For more information: Cynthia Stephens cstephens@compete.com Compete, Inc. Four Copley Place Suite 700 Boston, MA (617) Embracing Consumer Buzz 7