Brad Fay COO Keller Fay Group

Matt Sato Manager Accenture

Director, Market Research & Analysis AT&T

Word of Mouth’s Role in Driving Sales

Greg Pharo

June 13, 2011

ARF AM 6.0, New York, NY

Spending on WOM Rising Fast

Source: PQ Media

$313 $487

$722

$981

$1,351 $1,543

$1,701 $1,918

$2,204

$2,572

$3,043

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

WOM Marketing Spending WOM Marketing Forecast

“Word of Mouth Marketing” and “Social Media” Are Among the Most Exciting New Tools in the Arsenal of Marketers Today

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Does Word of Mouth Drive Sales?

Does word of mouth directly influence sales volume, and to what extent?

Where does word of mouth fit into the “owned-earned-paid” media model?

Is it really a metric of interest to companies?

Questions Remain on Word of Mouth’s Role in Generating Sales

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Background - AT&T Marketing ROI

AT&T is one of the nation’s largest advertisers

Well-developed Marketing ROI program

Uses Market Mix Modeling to optimize DMA-deployment of media – Partnered with Accenture and Mediaedge to develop

advanced analytics capabilities for market mix optimization

AT&T also tracks weekly and monthly brand awareness, attitudes, and usage with a multitude of market research studies

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Problem - “Metrics Clutter”

AT&T’s tracking studies collect a constellation of market metrics: – Brand perceptions

– Usage

– Customer satisfaction

– Literally hundreds of data series

Management wanted to know which metrics – in addition to media - are most impactful on Mobility sales (i.e., “Gross Adds”) and on disconnects (i.e., “churn”)

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Methods - Create a Purchase Funnel Model

AT&T and Accenture created both a Purchase Funnel model which identifies which metrics are the most significant influencer Gross Adds

The model also shows what other upstream metrics drive these key metrics

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Methods - Using a Two-step Process to Identify Key Metrics

Analytical techniques are used to winnow the myriad of earned media metrics – Highly-related metrics were grouped together using a

cluster analysis

– A short-list of metrics that are most correlated with their group are selected

These representative metrics are then input into a separate model – Reduces the burden of incorporating potentially hundreds

of metrics

– Ensures the earned media impact is not “diluted” by having related metrics in the same model

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Methods - SEM Modeling

Traditional regressions assume no interactions among sales drivers

The SEM structure, used here, allows for interaction among sales drivers

Gross Adds

Paid Media

Brand Health

Word of Mouth

Gross Adds

Paid Media

Brand Health

Word of Mouth

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Methods - Measuring ALL Word of Mouth

Keller Fay Group’s TalkTrack®, a national syndicated program measuring WOM in all forms – Over 3 in 4 conversations occur face-to-face

The study involves 36,000 online consumers surveyed annually, – 100 every day

– Yielding about 1,000 weekly mentions of brands; 350,000 per year

Respondents are representative of the US population aged 13 to 69 – use a diary to keep track of their brand

conversations, then complete an online survey to gather detailed information about these conversations

– Quotas/weights by age, gender, education, race, etc.

Mode of Conversations

Across All Categories

Face-to-Face

77%

Phone 15%

Online 6%

Other 2%

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Finding - WOM Is a Major Driver of Sales

The number of positive WOM “mentions” in TalkTrack® proved to be one of the more powerful metrics directly influencing “Gross Adds” (sales)

Unaided Advertising Awareness, a top-of-funnel metric, was also a strong driver of Gross Adds

In turn, the Structural Equation Model identified which metrics influence Word of Mouth and Unaided Advertising Awareness

Paid media drivers are also included, as they directly impact Gross Adds, Word of Mouth and brand health metrics

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Unaided Ad Awareness and WOM Are Two Strong Direct Influencers of Gross Adds

Unaided Ad

Awareness

Word of Mouth-

Positive Mentions

Device perception #1

(non-customers)

Network perception #1

(non-customers)

Provider

Consideration

Gross Adds

Strong Moderate Weak

Strength of

Relationship

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The Model Also Identified Attitudinal Metrics Which Influenced Word of Mouth

Gross Adds

Word of Mouth- Positive Mentions

Willingness to

Recommend

Customer Service

Perception #1

Network

Perception #3

Network

perception #2

Strong Moderate Weak

Strength of

Relationship

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Word of Mouth Data Was “Clean” Enough to Model, in Contrast to Online “Buzz” Data

Word of Mouth variables were easily incorporated into the model

In contrast, online “buzz” data proved difficult to incorporate into models

– Computer-scored online buzz sentiment data did not prove to

be as accurate as hoped

– Online buzz may not always include all relevant online sites

– WOM captures a broader spectrum of discussions; fewer than

10% of conversations are online

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Next, Word of Mouth Was Trialed in Traditional Market Mix Models

AT&T next introduced Word of Mouth variables into traditional Market Mix Models – AT&T constructed market mix models for itself and

key competitors

– Each model uses Gross Adds as dependent variable

– Media, pricing, product innovation, messaging performance, competitive, other relevant marketing/environmental factors incorporated as independent variables

– Modeling Approach: Multiple regression analysis

Word of Mouth proved to be a powerful and statistically significant sales driver in Mix Models – Word of Mouth explained 10%+ of sales volume

– Paid Media remains #1 sales driver, driving ~30% of sales – but WOM is one of the top influencers of Gross Adds

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AT&T Conclusions

Word of Mouth is an impactful, relevant variable for influencing sales in the Wireless category

WOM metrics belong on a CMO dashboard as a key performance indicator

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AT&T Next Steps

Leverage Word of Mouth data in other analytics projects, including tactical campaign analysis

Deeper learning on paid media/WOM interaction

Making it actionable: influencing conversations

Work with research vendors to improve quality of online buzz data

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Keller Fay Observations

AT&T analysis provides strong evidence that “conversation” should be a marketing objective – Today, about half of WOM is influenced by marketing, including

20% by paid advertising

– These numbers ought to grow as marketers adopt word of mouth as an objective

Ways to Stimulate WOM – Messages should be “talkworthy” and easy to share

Think about providing “triggers”

– Targeting: Aim for consumers with larger social networks

Seek out “influencers”

– Channels: Favor those that facilitate conversations

Not just “social media”, but any media that reaches people in a social context

Pay-off: Conversation, advocacy, SALES