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COMMUNITIES, WORD OF
MOUTH & MARKETING
KAI HUOTARI
Helsinki Institute for Information Technology HIIT
Seminar on New Business in Digital Economy
28.2.2008
Agenda
• From HIT era to Niche Era
• WOM as a Marketing Tool
• WOM in the niche era
• Communities - a double edge sward
• 19th Century was dominatedby Mass Media
• Broadcast Media fabricatedunprecedented hits andsuccess stories
• But in the 1990’s thingsstarted to change. Whathappened?
From HIT era to NICHE era
From HIT era to NICHE era
• HITs weren’t as big anymore
• The number of media channels exploded
• Audience sizes decreased
• Digital revolutionForce Business Example
1Democratize
Production
Long Tail
Toolmakers,
Producers
Digital Videocameras,
desktop music and video
editing software, blogging
tools
2Democratize
Distribution
Long Tail
Aggregators
Amazon, eBay, iTunes,
Netflix
3
Connect
Supply and
Demand
Long Tail
Filters
Google, blogs, Rhapsody
recommendations, and best
seller lists,
Source: Chris Anderson, The Long Tail, 2006
From HIT era to NICHE era
• Problems of the HIT system– products have to be targeted to the largest
possible audience compromises in contentand audience size.
• La Bamba
– Only a portion of the production can enter themarket considerable potential sales loss
• every year around 13 000 films are presented infestivals in US
• Only 500 get distributed in theaters
• Only 100 will make profit
– Pareto’s 80/20 seems to apply
From HIT era to NICHE era
• 98% rule
– Netflix, online film rental service, out of the25 000 films available at least 98% sold atleast once per quarter.
– Same thing with iTunes (98% of 1 million),Ecast (98% of 10 000) & Amazon books(98% of 100 000)
• Enormous potential in the NICHEmarkets
From HIT era to NICHE eraP
op
ula
rity
Products
From HIT era to NICHE era
sales range titles Units
1 000 000 or more 10 17 396 510
500 000 to 999 999 22 13 798 299
250 000 to 499 999 64 22 252 491
100 000 to 249 999 324 46 932 031
50 000 to 99 999 767 51 858 835
5 000 to 49 999 23 047 280 000 591
1 000 to 4 999 67 008 149 093 614
100 to 999 202 938 69 548 499
sold 99 or less 948 005 14 346 417
Total 1,2 Million 665 Million+
Book Sales in US, 2004
Source: Book Industry Study Group, Long Tail
From HIT era to NICHE era
Force Business Example
1Democratize
Production
Long Tail
Toolmakers,
Producers
Digital Videocameras,
desktop music and video
editing software, blogging
tools
2Democratize
Distribution
Long Tail
Aggregators
Amazon, eBay, iTunes,
Netflix
3
Connect
Supply and
Demand
Long Tail
Filters
Google, blogs, Rhapsody
recommendations, and best
seller lists,
Source: Chris Anderson, The Long Tail, 2006
WOMWord of mouth (WOM) is
oral, person-to-person communication between
a perceived non-commercial communicator and
a receiver concerning a brand, a product, or a
service offered for sale
(Lau & Ng, 2001, p. 164).
definition
WOM- Spreads easily
- Persuasive
- Easily accessible from the memory
- Offers information that is not accessible
elsewhere
- Easily available
strengths
G
I
H
M
J
L
N
K
D
F
E
weak tiesWOM
Strength of weak ties:
Information spreads rapidly from one consumer
cluster to others
strong tiesWOM
M
J
L
N
K
D
F
E
strong tiesWOM
M
J
L
N
K
D
F
E
Strength of strong ties:
Information coming through strong-tie
relationships is persuasive.
& MindWOM
Vividly presented information, such as WOM, has more
influence on product judgment than pallidly presented
information, such as printed information.
Although the manner in which information is presented
does not affect its probative value, vividly presented
information has a disproportionate effect on judgment.
Furthermore, consumers are likely to overestimate the
diagnosticity of accessible information because
alternative inputs are likely to be overlooked.
marketingWOM
• Seven times more effective than newspaperadvertising
• Four times more effective than personal selling
• Twice as effective as radio advertising ininfluencing consumers to switch brands
• Some studies suggest that WOM is the ultimateproduct success factor
• And it does not cost a lot!
• Can it be harnessed?
marketingWOM
• You cannot probably harness it but you caninfluence it.
• Traditional WOM marketing strategies arebased on attaining opinion leaders
marketingWOM
Some general rules in WOM marketing• Ask your customers to endorse you• Ethics and good service are paramount• Make satisfied customers meet potential
new customers• Facilitate the conversation of customers• Ask for feedback (good and especially bad)• Make your product interesting• Make your campaign interesting
marketingWOM
The two step flow model and the “expert” and “social” opinion leaders.
Mass media
Opinion leaders
Mega hubs
Expert Hubs
Regular Hubs
Mass audiences
Traditional WOM marketing strategies are based
on attaining opinion leaders
New communication technology has enabled new ways
for customers to converse and exchange views.
Online WOM marketing or viral marketing is word-of-
mouth communication taking place in the digital space.
niche eraWOM
Online tools and viral techniques have made many of
the traditional WOM marketing techniques more
efficient and easier to benchmark and reproduce.
But has WOM techniques really reacted to the Long Tail
phenomena?
niche eraWOM
niche eraWOM
Diffusion of innovations theory and influentials theory
are inherently dominated by the HIT philosophy.
Mass media
Opinion leaders
Mega hubs
Expert Hubs
Regular Hubs
Mass audiences
niche eraWOM
People are facing an ever growing flood of information,
not only from marketing companies but also from their
“friends” (ex. Facebook). Filtering becomes more and
more important.
informationfriends
consumer
WOM PROCESS
Long Tail would imply shifting the focus from the
company to the consumer and from dissemination to
filtering.
New opportunities for content producers, marketers and
technology providers.
niche eraWOM
• Henry Jenkins: ConvergenceCulture
• Empowered consumers actindependently of producers’will - even fan communities
Communities - a double edge sward
Communities - a double edge sward
• Reality TV Series Survivor
– group of people let on a deserted islandand eliminated from the game one byone.
– Recorded in advance. Secrecy is vital.
– An international Spoiler communityorganized itself with the help of Internetand started to systematically diginformation about the show before it wasaired.
Communities - a double edge sward
• Fan Fiction and Star Wars
– Star Wars is one of the most valuablebrands in the entertainment business
– Very tightly controlled
– Fan communities start to write their ownstories and making their own moviesusing the characters from Star Wars.
– What should Lucas Films do?
Communities - a double edge sward
• YouTube
– User commentaries under the videoframe.
– After making a deal with one of the USTV Networks YouTube hid thecommentaries behind a link, in order tohide unfavorable comments.
– User Community protested heavily andthe initial design was restated.
