Word-of-Mouth Gains Volume

As the recession continues to put pressure on ad spending across most media, word of mouth marketing is one notable sector that has bucked the trend and continued to grow.

And agencies are devoting more resources to meet client demand. Case in point: Omnicom’s OMD is preparing to launch a new WOM practice this fall called OMD Word, according to sources. The offering has been in the works for months, but agency executives said they weren’t prepared to discuss it in detail until Q4, when a formal launch is planned.

WOM is still a relatively small sector, but growing fast. PQ Media estimates that WOM spending this year will reach $1.7 billion, up 10 percent from 2008, at a time when outlays in most of the key media sectors are down.

By category, consumer package goods marketers spend the most on WOM campaigns, accounting for more than 17 percent of spending in 2008, according to PQ. Other leading product categories were food and drink, finance, business-to-business services, electronics, telecommunications and retail, per PQ. The researcher said that the automobile sector likely would have been a top-five WOM category last year but for the financial woes that beset the industry.

PQ projects that spending next year in the WOM sector will reach $1.9 billion, up 13 percent. For the five-year period leading up to 2013, PQ forecasts that annual spending will climb an average 14.5 percent, reaching $3 billion.
Why the surge in WOM? Ed Keller, CEO of the Keller Fay Group, a New Brunswick, N.J.-based market research firm that specializes in WOM, explains it this way: “The number-one way that consumers make decisions is through word of mouth. Brands realize that consumers are willing to engage with them in conversation, and they realize that they have no choice but to participate if they want to be a part of the consumer decision making process.”

According to research conducted by the firm, some 3.5 billion brand-related WOM conversations take place daily in the U.S.

And because clients are interested in knowing what’s being said about their brands, media shops are likewise intrigued, said Keller. “Increasingly, the goal of what media agencies do is to generate word of mouth,” he said.

Keller Fay and Interpublic’s Universal McCann issued a research paper in June at the Advertising Research Foundation conference in New York that contends there is a direct correlation between advertising expenditure and word of mouth. “Word of Mouth can be seen as an early measure of ad effectiveness,” Keller said.

OMD’s approach — a dedicated WOM offering — is just one of several ways that media shops are responding to client needs in the WOM sector. WPP’s GroupM, for example, has a specialty firm called M80 that creates WOM campaigns for clients of all GroupM agencies such as Mindshare, Mediaedge:cia, MediaCom and Maxus.

Publicis Groupe’s MediaVest doesn’t have a dedicated unit per se, but the holding company increasingly offers WOM components as part of broader campaigns. “It’s definitely growing in importance,” said Greg Warren, president of client services for MediaVest USA. “It’s receiving a lot of attention across the board from clients, driven by the availability and significance of online and social communities and the way people can publish their own words online.”

“Across the board, the area that is most highly associated with sales lift is word of mouth,” said Warren.

MediaVest and sibling Starcom have developed a global research tool called IntenTrack to assess advertising and WOM effectiveness by measuring consumer intent to purchase brands and products. IntenTrack surveys consumers about the ads they see, how and when they’re driven to Web sites, when they print coupons or talk to others about products and where they go for opinions about brands.