Thursday, February 21, 2008

The ROI Of WOM

I spend a lot of time on this blog talking about how non-profits can use social networking to their advantage. What's important to remember is that social networking is just a new way of generating word-of-mouth (or WOM) marketing.

photo credit: Dano

WOM is the one thing that money can't buy. It must be earned, cultivated, and maintained. the good news is that spreading the word is something that non-profits are good at anyway. In fact, non-profits are - for the most part - doing a better job of using Web 2.0 tools than their for profit counterparts, precisely because it's a natural thing for people that are engaged with a cause to talk about it amongst their peers.

It's not enough, though, to assume that your organization's word-of-mouth will take care of itself. The stakes are simply too high. Consider this post detailing the economic impact of Social Marketing from Esther Lim at the Crimson Consulting Group:
  • Companies enjoying higher levels of word of mouth advocacy such as HSBC, Asda, Honda and O2 - grew faster than their competitors
  • Companies suffering from low levels of word of mouth advocacy and high levels of negative word of mouth grew slower than their competitors
  • 7% increase in word of mouth advocacy unlocks 1% additional company growth
  • 2% reduction in negative word of mouth boosts sales growth by 1%
  • For the average company, a 1% increase in word of mouth advocacy equated to $16M extra sales

Source: London School of Economics, Harvard Business Review

I think it's fair to assume that these metrics translate from the for-profit, to the non-profit sector. What would your organization be willing to invest in terms of time and resources to achieve a 1% growth rate? For a $3 million dollar agency, that translates into $30,000 - the size of a respectable grant.

3 comments:

Casey said...

Thanks for the stats on WOM marketing - sometimes it can be hard to convince clients that WOM is something they should encourage, never mind invest in! They haven't quite grasped the fact that it's going on [online] no matter what, and they're better off participating and having their POV heard than not participating.

Leyla Farah said...

Thanks for stopping by Casey!

I agree, WOM initiatives are often a tough sell to agency execs - but having some good stats in hand should help. Good luck!

brook said...

economy is little bit stumble in all over the world.

==========
shanker

Social Bookmarking

ShareThis