Word-of-mouth marketing requires that your company stay close to the pulse of its customers. But for businesses that harness it successfully, these elusive word-of-mouth marketing strategies can yield big benefits.
A recent Yale School of Management study found that customer reviews at Amazon.com and Barnes & Noble's BN.com actually do influence book sales. The study,
The Effect of Word of Mouth on Sales: Online Book Reviews by professors Judith Chevalier and Dina Mayzlin, chose random samples of titles from Global Books in Print and Publishers Weekly bestseller lists. Book and review data were collected from the Amazon and BN.com Web sites. For each book they looked at price, shipping time, sales rank, the number of reviews, and the average number of stars assigned by reviewers.
The study shows that the addition of favorable reviews at one site increases book sales at that site relative to the other retailer. It also finds that negative "1-star" reviews carry more weight with consumers than do positive "5-star" reviews. "The impact of a negative review is more powerful in decreasing book sales than a positive review is in increasing sales," the authors state. They attribute this to the credibility consumers place on "peer" reviews. Multiple glowing reviews for a book may be perceived as hype generated by an author or publisher.
The business impact Bazaarvoice has launched a service designed to help companies capitalize on the benefits of word of mouth. Started in February 2006 by senior executives from Coremetrics and Dell Computers, Bazaarvoice quickly signed several major online retailers to its solution, which provides the infrastructure for customer reviews and the capability to operationalize that feedback. Customized dashboards allow the retailer to show entire trends that become apparent from customer feedback.
For example: CompUSA shoppers who posted or read customer reviews had a 50 percent higher conversion rate online and spent 20 percent more per order than the average customer. The retailer also found that customers rated color printers based on the printers' ability to render color photos. Now it encourages customers to bring photo discs or USB keys into its offline locations so they can best evaluate printers in the stores.
"Obviously increasing conversion rates is the number one priority and benefit from [customer recommendations]," says Bazaarvoice marketing vice president Sam Decker. "But I'm very excited about this at a higher level, which is the customer-centric level. [Online comments] can be about change management. It's about making something that has been taken for granted much more operational... There's nothing more authentic to a business, in my opinion, than customers talking to each other. Listening to that is a big step in making any company more customer-centric."
At
Petco.com the Bazaarvoice solution has had the expected lift in conversions, average customer spend, and an increase in average spend among readers and writers of reviews. According to John Lazarchic, vice president of e-commerce, it has also helped Petco get closer to its customers.
"It has become an extra touchpoint," he says. "We now take our top rated products and feature them more prominently on the site. If a customer has positively reviewed a product, we know how to follow up via email with more recommendations. Basically, pet owners have an emotional connection to their pets and the products surrounding them and we're more in touch with that. Our customers are more engaged and therefore we know more about them."