Two groups - BzzAgent, a Boston-based WOM agency, and ChatThreads, a Boston research group - have calculated that word-of-mouth conversations for brands are worth around 50 cents each. But nobody seems to agree on the right way to measure WOM. The main challenge is measuring the true value of viral media.
"I don't know if we'll come up with a single standard or there's two or three different ways," Ed Keller, president and CEO at the Keller Fay Group and head of the Word of Mouth Marketing Association, told Brandweek. "By the end of the year, marketers will have a better way about it."
The industry is hoping to come up with a standard equal to the TV network's CPM (cost per thousand).
"It's a very hot topic," says David Bank, an RBC Capital Markets analyst. "I might think I'm paying X amount for a CPM, but if virality is 30 times that, I'm paying so much less. If you have a 27 times virality rate, you really paid a 27th of that."
According to the Brandweek article, BzzAgent had the simplest formula for measuring the success of a WOM campaign: dividing sales by total conversations.
Procter & Gamble's Tremor unit measures success of a WOM effort by comparing areas where a campaign has run with places it hasn't.
More complicated was ChatThreads, which took into account reach, purchase behavior and other factors including marketing program costs. Under its six-week campaign, 1,867 participants talked to an average of 16.4 conversational partners regarding a "lower-involvement CPG product." Eighty-three percent of those partners then spoke with an average of 1.94 others. In sum, of the 747,537 people that the campaign reached, 146,545 units were estimated to have been purchased. Even then, Walter Carl, an assistant professor at Northeastern University and chief researcher of ChatThreads, said the company's 50 cents outcome clearly wasn't definitive.
"Almost all the inputs are variable," says Mr. Carl. "We've seen different values per conversation, but we haven't done enough campaigns to say what the average is."
Net Promoter, a system created by Satmetrix, gauges a WOM program's success by looking at how many consumers would recommend the brand or product to a friend. The company believes this system is more a measurement of "pure word-of-mouth" than the effects of a campaign. Says Deborah Eastman, CMO at Satmetrix, "Word-of-mouth is something that's earned," Eastman said. "We believe that paying people to deliver word-of-mouth is not the right model."
Discussion questions: Do you think word-of-mouth can be measured? What do you think are the challenges of doing so? What needs to be taken into account?