The Irresistible Outbreak of Trust

A Viral Marketing eBrief

May, 2004

Viral Marketing eBrief

Viral marketing is replacing traditional marketing because it allows low-cost, rapid, highly targeted, personalized, and therefore extremely effective, communication and propagation of marketing messages to existing and potential customers, by leveraging relationships of trust

 

 

·          It can be recalled that of the three major marketing approaches, only viral marketing allows highly targeted and personalized communication to existing and potential customers, capitalizing on relationships of trust, but necessitates very satisfied customers

 

-            Mass marketing (also known as spam when the message is transmitted by e-mail) involves communicating in an impersonal fashion with all (or a large number of) potential customers

 

Mass marketing (sketch, thickness of lines reflects personalization,

and hence effectiveness of the marketing message)

 

-            Direct marketing entails communicating in a somewhat personalized fashion with a fairly targeted subset of potential customers, about whose preferences something is known

 

Direct marketing (sketch, thickness of lines reflects personalization,

and hence effectiveness of the marketing message)

 

-            Viral marketing harnesses highly targeted and personalized communication with existing customers (because it is much easier to query them about, and note their preferences), who are motivated to recommend the message to family, friends and acquaintances, again through highly targeted and personalized communication (the referrers tailor the message), thus leveraging relationships of trust

 

Viral marketing (sketch, thickness of lines reflects personalization,

and hence effectiveness of the marketing message)

 

-            It should also be recalled that for it to succeed, viral marketing pre-supposes that existing customers are very satisfied, otherwise they will not take the time or effort to pass on the message

 

Characteristics of marketing methods, by type

Type

Description

Situation where most useful/effective

Mass

Promote a product/service indiscriminately to all potential customers

No information about potential customer preferences

Direct

Promote a product/service only to potentially profitable customers

Some information about potential customer preferences

Viral

Motivate existing customers to persuade family/friends/acquaintances to undertake a desired action

Very satisfied customers

Source: Websites, as observed in April, 2004

 

·          Viral marketing is flourishing because it is low-cost, simple to implement, rapid, scalable, allows leveraging online communities, and has become a fad

 

-      Consumers bearing part of the cost of propagating a marketing message is generally attractive in a cost-conscious economy

-      Low barriers to entry

-      The Internet allows low-cost and accelerated transmission/propagation

-      Scalability

-      Tightness of online communities, among which a recommendation can be transmitted with greater confidence

-      Get-rich bandwagon effect, notably since such high-profile successes as Hotmail (acquired by Microsoft in January, 1998 for up to an estimated US$ 400 M) and ICQ (purchased by AOL in June, 1998 for nearly US$ 400 M)

-      Fashionable

 

·          Among the three types of viral marketing encountered, success depends on maximizing the pass-along rate from person to person

 

Characteristics of viral marketing campaigns, by type

Type

Objective

Incentive?

Customer motivation

Key Success Factors

Value

Brand-building

N

Share a quality experience

Seen by largest number, and hence quality of experience and ease of referral

Instrumental

Purchase product/ service

N

Share a quality experience, which requires certain products

Low cost of required product relative to quality experience

Incentive

Purchase product/ service

Y

Qualify for an incentive

Immediateness of incentive

Source: Websites, as observed in April, 2004

 

·          Best practices encountered revolved around an inherently infectious product/service/campaign, leveraging existing/creating demand, offering incentives, positioning the vendor and the process as trustworthy, granting a free trial period, motivating/making it easy for the customer to refer, and back office functions

 

Best practices in viral marketing campaigns, examples

Best practice

Examples (campaigns/products/firms)

Inherently infectious product/service, or viral marketing campaign

 

Products/services whose value to existing customers grows when the number of users increases

Hotmail, ICQ, PayPal, Love Monkey, plaxo.com

Use of the product/service incites others to become a user

ICQ, Napster, Kazaa, Gnutella, PayPal, Love Monkey (college dating), Tumbleweed (sensitive document transmission online)

Behaviors of the target community carry the message

Hotmail, ICQ, Motley Fool, Mobliss (wireless content), American Idol II (TV series), Club Photo (photo developer offering free online photo albums)

Products/services that invoke a passion (eg Harley Davidson motorcycles)

Harley Davidson motorcycles

Cool factor (right feel, or perceived as fashionable or trendy, seen from the customer’s perspective)

AmIHotOrNot.com (photo evaluation), Mountain Dew (10 proofs of purchase & $35 for a Motorola pager, target: kids), All Your Base Are Belong to Us (video game), Mahir (Turkish man’s homepage), ishaggedhere.com (sexual adventures blog), Deloitte Consulting (Bullfighter jargon buster)

Fun

BlueMountain.com (online greeting cards), Singapore Airlines (ecard campaign), Passthison.com (online greeting cards), Jockey (men’s underwear, “Make-a-Flake” campaign)

Materialize the product’s message

Scope (consumers can send a customized & animated email "kiss" to their friends, reinforcing the branding message that the mouthwash brings people "Kissably close")

Interactive games that motivate existing users to challenge their friends to play

IBM, Ford, GM, Nike, Burger King, Babel Media, Passthison.com

Stage events that demonstrate the product

Trivial Pursuit, Pictionary

Leverage existing demand, create new demand

 

Target population focus, especially opinion leaders

DOS, Windows, CNN

Build a large community, with common needs

Napster, Kazaa, Gnutella, Babycenter.com, Spiderman (film), The Matrix (film), Queer as Folk (TV series), Southwest Airlines, Krispy Kreme Doughnuts, Build-A-Bear Workshop, Dallas Mavericks, O'Reilly & Associates, SolutionPeople, IBM

Exploit the strength of weak ties (individuals with many casual social connections have a larger influence on communities)

Tupperware, Amway (para-pharmaceuticals), Avon, Mary Kay Cosmetics

Offer incentives

 

Chance of winning a prize

Sony Music (Taiwan), ePrize, Fujitsu PC

Offer incentives that existing customers actually want

AllAdvantage.com (pays to track online behavior & serve ads while people are online), Epinions (cash/100 hits), MyPoints.com, Etrade.com, Ebates.com, Mercata.com (“PowerBuy”, price of item goes down the more people buying it simultaneously), More.com (prices on products purchased during charter period will never increase), gazooba.com (users offered incentives to recommend websites to others)

Attractive value proposition in call-to-refer

Tripeze.com (contest giving away two free airline tickets/day), Danier.com (leather retailer, vouchers), ebrick.com (etailer, special deals & discounts), Computer.com (computer-related advice portal)

Vendor/process positioning as generating bona fide referrals

 

Honesty (recipient of the referral must believe the referrer is providing an honest endorsement)

Hotmail

Trust in the vendor by the customer, built up over time

Epinions, eComplaints, ciao.com

Free trial period

 

Structure pricing such that usage of the product/service is free in the beginning

Intuit’s Quicken

Incite potential customer to refer, facilitate actual referral

 

Personalize each message, based on known customer preferences

Amazon

Encourage to refer

Hotmail, ICQ

Compelling call to refer

BlueMountain.com

Ease of referral

Hotmail, ICQ, BlueMountain.com

Back office

 

Cap incentives to avoid spam-like distribution of your message

AllAdvantage.com

Track and analyze results (notably e-mail pass-along rates), using software that measures viral activity, in order to be able to capitalize/ control success/unwanted side-effects

 

Contingency plans in case a campaign develops in the wrong direction

AllAdvantage.com

Source: Websites, as observed in April, 2004

 

·          Where available, the most successful viral marketing campaigns exhibited an inherently infectious product/service/campaign, or offered an incentive, or several best practices combined

 

Results of viral marketing campaigns, main approaches used

Campaign

Results

Main approaches used

AmIHotOrNot

120 M/month page views

Cool factor

Hotmail

75 M users in first year

Products/services whose value to existing customers grows when the number of users increases; Behaviors of the target community carry the message; Honesty; Encourage to refer; Ease of referral

Jockey

17 M page views in first month

Fun

ICQ

12 M registered users in first 22 months

Products/services whose value to existing customers grows when the number of users increases; Use of the product/service incites others to become a user; Behaviors of the target community carry the message; Encourage to refer; Ease of referral

AllAdvantage

2 M active users in first year

Offer incentives that existing customers actually want

Ebrick.com

492 K unique visitors/month in first month, unknown how many before

Attractive value proposition in call-to-refer

Epinions

300 K reviews of 100 K products in first 6 months

Offer incentives that existing customers actually want; Trust in the vendor by the customer, built up over time

Babel Media

200 K unique visitors in first 10 days

Interactive games that motivate existing users to challenge their friends to play

Fujitsu PC

50 K registrations in first 6 weeks

Chance of winning a prize

Source: Websites, as observed in April, 2004

 

·          Potential challenges mostly focused on the lack of control inherent in allowing customers to decide what/to whom/how to pass on

 

Potential challenges in viral marketing campaigns, and examples

Potential challenge

Examples/counter-examples (campaigns/products/firms)

Heavy-handedness

MCI (mass marketing telephone calls during dinner hours), Hotmail (it was remarked that if Hotmail had appended its promotion as part of the body of the sender’s e-mail message, rather than as a separate note at the bottom, the campaign might very likely have expired before it got off the ground)

Association with unwanted, negative people

Online book reseller with affiliate program, neo-Nazi site signs up

Campaign thought offensive/poorly received can backfire, spreading negative image widely

Puma (images of couple wearing Puma sneakers in sexual position, although some suggest that Puma masterminded for buzz effect)

Brand control (message modified/transmitted to people outside target audience)

 

Cap incentives to avoid referrers turning the campaign into a business

 

Campaign morphs into a spam deluge, especially in incentive campaigns, which can damage the marketer’s reputation

Phonefree.com (viral campaign involved getting people to register for the service, then downloading their address books, and contacting everyone in them with the message, "Register for free long distance phone calls with us, and you can talk to so-and-so who just signed up!")

Lack of measurement

 

Uncharted growth (necessitating, for example, adequate infrastructure)

Hotmail

Source: Websites, as observed in April, 2004

 

·          Publicly-available research indicates that people are naturally extremely viral, because they try things recommended by friends and pass on the message to others, but few viral marketing campaigns actually succeed

 

-      (no source, mentioned January 7, 2000) 64% will try something if it is recommended by a friend

-      A Jupiter Media Metrix study (mentioned July 19, 2001), with regard to e-commerce sites, found that

 

.      45 % of consumers choose e-commerce sites based on word-of-mouth recommendations, yet only 7% of companies track e-mail pass-along rates

.      Viral marketing campaigns and efforts to improve customer satisfaction can reduce customer acquisition costs by 27% and increase average order sizes by up to 60%

.      Most companies define customer "loyalty" too narrowly, by focusing on how much visitors purchase, and as a result, they overlook a key measure of their customers' behavior, whether they are passing on information about the company, or not

.      Valuing loyalty based on purchase size alone could alienate customers whose spending is below the cut-off point, and that could hurt sales and limit the company's ability to use a valuable customer acquisition tool (ie viral influencers)

 

-      (no source, observed May 9, 2002) an estimated 80% of the recipients of a viral marketing message pass it on to at least one other individual

-      An Opinion Research Corporation International (ORCI) study (November 8, 2000) showed that when one person has a good online experience, he or she will turn around and tell 12 more people, but if that person has a bad experience, 12 others will also know about it, underscoring the importance of ensuring that users have a good online experience (according to other sources, this rate is significantly higher than offline experience transmission)

-      According to Jupiter Communications (no date), 69% of people who receive a website recommendation from a friend pass it along to at least 2-6 friends

-      ePrize (observed June 2, 2003) has seen on average a rate of 3.5 referrals per user when tied to the chance of winning a prize, of which about one-third of the referees come back to register

-      (no source, seen April 17, 2002) only 10% of all viral marketing campaigns succeed (remedied, according to this source, by e-mailing something humorous or a “fantastic offer”)

 

·          In the future, traditional advertising is expected to be replaced by viral marketing, although the quality of actual campaigns is expected to determine whether viral marketing becomes synonymous with spam, and viral marketing will be optimized by tracking Internet behavior to identify above-average influencers

 

Future orientations for viral marketing, further research needed

Future orientation

Further research needed

Traditional advertising will soon be replaced by marketing strategies that rely on consumers spreading recommendations by word of mouth

Market sizes, trajectory

Viral recommendation e-mails becoming so common that they become regarded as spam

Threshold (it was suggested that receiving one e-mail/day from a friend recommending something might be ok, but 30/day would be excessive)

(Corollary to the foregoing) quality of experience will become even more important

Qualitative experience measurement, with respect to content, approaches

Use the network effect value of individuals to focus campaigns on opinion leaders, who will influence others more than the average (one suggestion is to use quantitative collaborative filtering (used by amazon.com), which seeks to predict a user's rating of an item as a weighted average of the ratings given by similar users, and then recommend items with high predicted ratings)

Methodology to reliably quantify customers’ network effect value (it has been suggested that one source of information on network effect value is the Internet (chat rooms, discussion forums, and knowledge-sharing websites); it has also been suggested that calculating network effect value is similar to Google’s PageRank algorithm, in which a web page is ranked highly if many highly-ranked pages point to it; similarly, in viral marketing a customer is valued highly if he influences many highly-valued customers)

Source: Websites, as observed in April, 2004

 

Copyright © Wedgewise Ltd (www.wedgewise.com) 2004.

All rights reserved. Permission granted to reprint this eBrief

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