How Consumer Talk Supercharges Advertising

Opinion: Conversation helps drive $7 trillion to $10 trillion in annual spending

The best advertising executives are unconsciously competent at creating 'talkable' ads
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“Advertising is really a conversation-starter,” Audi of America president Scott Keogh told me in 2011 when I was co-writing a book on social influence, The Face-to-Face Book. Keogh’s insight as chief marketing officer has propelled great advertising and dramatic sales growth for the Audi brand. It hasn’t hurt Keogh’s career, either.

Many marketers acknowledge advertising’s power to start conversations, but few make it a key objective for campaigns, and even fewer evaluate advertising’s success in driving conversations.

A key obstacle has been the lack of authoritative evidence to support this kind of social strategy for advertising, leaving it to marketers confident enough to rely on instinct and intuition, like Keogh.

Today, finally, hard evidence is available. The potency of peer-to-peer influence in amplifying the impact of advertising is a matter of science.

A study conducted by Engagement Labs working in collaboration with marketing professor Koen Pauwels of Northeastern University—a renowned authority on the interface of marketing productivity, metrics and social media—scientifically linked consumer conversation and sales.

The study used sophisticated market mix modeling based on weekly brand-level data for consumer conversation, ad spending and sales. It included 170 brands in the first stage of the project and ultimately built full mix models for 21 brands as diverse as Toshiba, Pepsi, Dove and Bud Light.

Key findings of the study include:

19 percent of all consumer purchases are driven by conversation, which translates into between $7 trillion and $10 trillion in annual spending in the U.S.

Online conversations in social media account for nearly one-half of that influence, and face-to-face conversations drive slightly more than one-half. However, online and offline conversations are totally different from each other and, thus, must be measured and managed as two separate channels of influence.

What may be most interesting for the advertising industry is that 25 percent of the entire impact of advertising works by stimulating conversations that ultimately lead to sales. U.S. advertisers spend $200 billion annually, expecting to get back at least $200 billion in economic value. If one-quarter of the sales impact is attributable to conversation, that means $50 billion in value is due to advertising starting conversations, both online and offline. That’s more than enough value for advertisers to invest in efforts to improve how they plan for and amplify conversations both in their media planning and creative development.

The study also broke down the amplifying impact of face-to-face and social media conversations by media type. Television remains the biggest driver that leads to offline conversations and sales, while online video has the greatest impact on the social media conversations that lead to sales. Radio was a surprisingly strong factor, as well, for both offline and online conversations leading to sales.

There is a critical but under-recognized synergy between advertising and consumer conversations. Paid advertising is great for creating awareness and consideration and sparking conversations, but it isn’t particularly effective at persuading people. That’s where conversations come in. Advertising starts a conversation that can lead to persuasion.

Audi, which enjoyed nearly 8 percent sales growth in 2017, is the automotive poster child for the power of conversations in driving brand success. When we score the brand’s performance regarding both online and offline conversations, it scores the highest of any auto brand. It achieves this by performing well in both online and offline conversations.

In the accompanying chart, notice that Toyota is slightly better than Audi at generating offline conversations, but no brand comes close to Audi in driving online conversations in social media. When we looked “under the hood,” we found that Audi’s success is in fact mainly a result of driving conversations with advertising and connecting with key “influencers.”