Celebrities have shilled products for years, accepting millions of dollars to represent brands in big-bang advertising programs. Think of George Clooney with Nescafe, Charlize Theron with Dior, and the Kardashians with almost everything. Internet celebrities have followed suit, leveraging large online audiences to win big marketing deals.
Ordinary citizens also have a chance to be influencers by helping companies market and sell goods. While marketing research has amply studied social sharing, face-to-face word-of-mouth (WOM) marketing is less understood. A new study in the Journal of Marketing explores the effectiveness of WOM with seeded marketing campaigns (SMC) in which companies hire customers to spread the word about everyday products, such as coffee, chocolate, and toothpaste. Customer advocates, or “seed agents,” can be particularly effective selling “mundane” products (categorized here as fast-moving consumer goods (FMCG)). In an analysis of brands in Europe, more than 80% of all commissioned SMCs are for FMCG brands.
FMCG brand managers work in a trillion-dollar industry characterized by relentless competition, constant innovation, changing customer tastes, and price sensitivity. In addition, they must target digitally savvy customers who are no longer easily reachable via TV and newspaper advertising.
To respond to these challenges, companies have started to experiment with SMCs. With the help of specialized agencies, they employ thousands of seed agents, who receive brand information and products or samples, to “buzz” about the products with their peers. These campaigns are often created after the brand’s marketing plan has been developed and with left-over budget because they are cheaper to run than traditional advertising programs.
However, how to manage SMCs is a source of confusion. One brand manager we interviewed ran three different SMCs of similar design, size, and cost for the same brand, but saw estimated sales effects that differed by more than 150%. She could not explain any apparent differences in those SMCs or the amplified WOM generated that could have explained those significant variations. Another manager suspected that as her marketing plan become more complex, advertising increasingly cannibalized firm-created WOM effects. Yet she didn’t have sufficient insights on the potential interactions between SMCs and traditional marketing communications to explicitly consider these effects in her decision making.
Our study presents the first empirical evidence on the effectiveness of FMCG seeding programs and how they interact with traditional marketing tools. Our team studied four brands from various European FMCG markets, combining advertising and sales promotion data with market research data and word-of-mouth variables from SMC agencies. Our data set comprises different market situations to represent the wide variety of both FMCG products and SMCs.
Key findings include:
- Firm-created WOM from SMCs incrementally increases sales in all cases. SMCs can increase total sales by approximately 3% to 18% over the course of campaigns.
- In the brands we studied, companies estimated that 90% of WOM took place offline and was universally positive. More than 90% of incidents were positive and only 3% were negative.
- Sales elasticities are comparable to or stronger than those previously represented for tools such as social sharing.
- Firm-created WOM consistently interacts negatively with all tested forms of advertising. The sales effects decrease by -.6% to -2.2% for every 1% increase in concurrent advertising activities.
- In contrast, firm-created WOM consistently interacts positively with promotional activities that convince buyers to take advantage of price deals. SMC sales effects increase by +.3% to 1.1% for every 1% increase in promotional activities.
For managers, our findings provide insight into what to expect when introducing SMCs into this environment. Our findings support the importance of SMCs to FMCG marketers and also provide guidance on how to conduct a rigorous analysis, including simulating specific marketing plan conditions.
On a theoretical level, we provide evidence of how new tools such as SMCs integrate with more established tools of the marketing mix, which can help shed light on the dynamics of interactions and indicate of how SMCs contribute. Specifically, while advertising ignites WOM for many industries, for supermarket sales it may be markedly different.
From: Florian Dost, Ulrike Phieler, Michael Haenlein, and Barak Libai “Seeding as Part of the Marketing Mix: Word-of-Mouth Program Interactions for Fast-Moving Consumer Goods,” Journal of Marketing, 83 (March).
Go to the Journal of Marketing