The Ripple Effect | 3 Keys to Success for Selling in Social Media [Speed Summary]

We’ve just finished re-reading Martin Oetting’s most excellent book on word-of-mouth and brand advocacy “The Ripple Effect”, interpreting it in the context of social commerce.

The Ripple Effect argues – with supporting new evidence – that if you want to optimize the spread of word-of-mouth through social networks, use “empowered involvement: – give customers an active say and role in what you sell and how you sell it – this will stimulate word of mouth (see our take on this back in 2006, a joint article we produced with Martin, and the Syzygy White Paper on participatory marketing).

The Ripple Effect is relevant to social commerce insofar as the no-nonsense definition of social commerce is word of mouth in the context of e-commerce (IBM’s definition). Thus, anyone involved with social commerce will find it useful to have a basic grounding in word of mouth. 

So here’s our speed summary, interpreted from a social commerce perspective.

[Note, if there’s one book on word of mouth worth reading, it’s the Ripple Effect, it stands head and shoulders above anything else published on the subject – covering pretty much everything anyone has had to contribute – and it has a brilliant bibliography for further research.  The only downsides are due to the fact that the book is actually a PhD dissertation so it has a) a dry academic tone (not one for the beach…) and b) an expensive academic book price tag].

Top, top line – 6 decades of research into word of mouth show that there are three key word of mouth levers that social commerce professionals can exploit to profit from selling in social media

• Experience: Social commerce will work when you’re selling something worth talking about – something that delivers an experience that is new, original, exclusive, surprising (expectation-beating), exciting, symbolic and satisfying.
• Involvement: Social commerce will work when you’re selling something people care about, something they find personally important and relevant, that is, products and categories with which they have high involvement
• Incentives: Social commerce will work when you incentivize happy customers to advocate

What seems clear to us from the Ripple Effect is that we’ve only just begun to scratch the surface of how to sell smarter with social media.

The Value of Word of Mouth: Word of mouth advocacy is valuable to businesses because it has a clear commercial effect; it can drive sales (Reichheld,2003), it can contribute up to 40% of the life-time value of a customer (Wangenheim & Bayón 2007), it can increase advertising effectiveness (by activating word of mouth, ads can more than double the life-time value of a customer (Hogan, Lemon, Libai 2004), it can change brand attitudes and is 9 times more powerful at doing so than advertising (Day 1971, Reynolds & Darden, 1971), it can improve purchase intention (Charlett & Garland, 1995) and it can stimulate brand loyalty by reducing post-purchase cognitive dissonance (Festinger 1957, Nowinski 2008).

There are three key drivers of brand advocacy that social commerce can harness to benefit from selling in social media

1. Experience: Social commerce will work when you’re selling something worth talking about – something that delivers an experience that is new, original, exclusive, surprising (expectation-beating), exciting, symbolic and satisfying.  These are key variables that drive advocacy.  More generally, advocacy happens when people experience first-hand – new products that beat expectations (Kuokkanen 1997; Westbrook 1987; Oliver 1980; Swan and Oliver 1989), particularly expectations around product performance and perceived value (Sundaram, Mitra & Webster 1998).  So getting the right product into people’s hands is key – product experience triggers the emotional responses of surprise and delight – and this results in advocacy (Dichter 1966, Derbaix & Vanhamme 2003, Schlossberg 1990, Oliver et al 1997 Westbrook 1987).

Whilst it’s not possible to manufacture brand advocacy – it’s a product of experience delivered – it is possible to amplify it, by making the experience exclusive – i.e. offering a new and newsworthy product when it is not generally available.  For example, offering an exclusive pre-launch trial of a new coffee resulted in active advocacy among 38% of participants (Holmes & Lett 1977).  This advocacy effect can be further amplified by additionally offering exclusive information– not advertised elsewhere – with the exclusive trial (Thomas, 2004).

A second proven technique for amplifying advocacy is to offer supporting expectation-beating experiences around the product – such as surprisingly good customer service, and more generally remarkable customer interaction, including efforts by the brand to support special interest and user communities (Sundaram, Mitra & Webster 1998, McConnell & Huba, 2003, Cova & Pace, 2006).  This can generate trust, which is an important prerequisite for advocacy (Gremler et al., 2001, Gummesson, 2006, Sifry, 2006; Scoble & Israel, 2006).

Finally, it’s possible to amplify advocacy by creating a sense of anticipation prior to experience, such as through teaser campaigns and sneak previews (Liu 2006).

2. Involvement:  Social commerce will work when you’re selling something people care about, something they find personally important and relevant, that is, products and categories with which they have high involvement.  (Zaichkowsky, 1985; Feick & Price, 1987; Richins & Root-Shaffer, 1988; Chung & Darke 2006).  We advocate things we care about and that are important to us.

Involvement-driven advocacy is largely dependent on the importance of product and category for the advocate:  We advocate products, which for us have 1) high functional value, 2) high symbolic value (we use them to signal our tastes), 3) high hedonic value (emotional appeal) and 4) high risk associated with their purchase (size and probability of risk (Kapferer & Laurent 1985)).  However, it’s important to note that involvement-driven advocacy can vary with context, articulated in situations where products are seen as important and relevant (enduring vs situational involvement (Venkatraman 1990, Richins & Root-Shaffer 1988, Houston & Rothschild, 1980)).

As with experience-driven advocacy, involvement-driven advocacy is an emotional response – in this case to interest and excitement (Dichter 1966, Sundaram, Mitra & Webster 1998).  This emotionally-charged impetus can be stimulated by marketing: For example, students recruited to join a select panel to evaluate new music bands, generated involvement among the student for these bands.  This triggered advocacy, which sent the bands in question to the top ten charts in the cities (and only in the cities) where the sub-$5K campaign took place (Mancuso 1969).  This involvement lies behind the success of the Idol talent contest franchise. In addition to stimulating involvement with a particular product, marketers can also stimulate involvement with the brand or company itself by involving them as advisors (Marsden 2005).

3. Incentives:  Social commerce will work when you incentivize happy customers to advocate. This can be done either through referral rewards programs – a highly cost-effective ‘pay-for-performance’ customer acquisition strategy, or by offering customers free or discounted samples in return for, if they like them, positive reviews and recommendations (Wirtz & Chew (2002), Ryu & Feick (2007)).  Incenting happy customers to advocate with samples, rewards and discounts is an effective alternative to margin-eroding price promotions (Biyalogorsky, Gerstner & Libai 2001). One further incentive, often overlooked, is a simple and polite please; a simple request to spread the word increased advocacy 12 fold  (File, Judd, & Prince 1992).

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