In the world of marketing, what could be older than the concept of generating sales via word of mouth? Indeed, word of mouth is how your friend the Fool grew most robustly, and it has served many other products, services, and businesses very well.
Word of mouth is receiving a lot of attention lately in the marketing world, as marketers buzz about "buzz marketing." Buzz marketing involves getting people talking about your product -- generating a buzz. While traditional word of mouth involves little getting-the-word-out effort on the part of the company in question, buzz marketing often involves the company paying people to try a product, and then expecting them to rave about it to friends and others.
Malcolm Gladwell, in his extremely well received book, The Tipping Point, described how all kinds of things can pass the "tipping point" into widespread acceptance via certain kinds of highly influential people. He gave as one example the trendiness of old-fashioned Hush Puppies that happened when fashion plates began buying the shoes at thrift shops and wearing them all over town.
At Knowledge@Wharton, an article on buzz marketing pointed out that "Procter & Gamble (NYSE: PG) pioneered this approach on a large scale by recruiting hundreds of thousands of 'maven' teenagers to create buzz about new products -- some as mundane as toothpaste....They recruited a quarter million teens to talk about their products. Now they are in the process of recruiting mothers to do the same thing because they have suddenly realized that word-of-mouth is a powerful thing."
The article also pointed to "connectors," such as Oprah Winfrey, who has clearly wielded a lot of influence in the publishing world with her book club. Though it's interesting to note that not everything she touches turns to gold. Last year on her show, she gave away some 276 Pontiac G6 cars, made by General Motors (NYSE: GM). The result? According to the Detroit Free Press, the G6 "has been a flop, with nothing special to set it apart except, perhaps, the panoramic sunroof. And that's optional." (Learn more about GM's troubles.)
Why the renewed interest in buzz? Wharton professor Jerry Wind noted a CNW Marketing Research survey of the 15 largest U.S. television markets, which found that TV viewers ignored more than half the commercials for cars, credit cards, and pet-related products. Many other advertising subjects didn't fare much better. Blamed in part for this state of affairs are personal video recorders such as TiVo (Nasdaq: TIVO).
We as investors might be cheered by the prospect of our companies engaging in buzz marketing if they can generate more profit that way. But there are concerns. With some firms paying people to generate buzz, there are ethical lines being crossed. Consumers will likely begin to wax cynical, perhaps doubting genuine gushing reviews they receive.
Professor Wind offered an upside, though: "Research shows that negative word-of-mouth is seven times more powerful than positive word-of-mouth. This really forces people to have good products. Otherwise, when you turn people loose to say whatever they want, you could be in real trouble."
For now, I'll be on the lookout for companies buzzing up their offerings, and you may want to do the same. Have you already noticed some instances of it? Share your thoughts and experiences on our discussion board.
Longtime
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Selena Maranjian
does not own shares of any companies mentioned in this article.
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