One important question you might ask yourself is, why word of mouth? Why do we care about word of mouth? Why does word of mouth matter? Well think for a moment about the last product you bought. The last movie you watched, the last book you bought, or maybe the last restaurant you tried. How you found a babysitter for your kids, how you picked a dog food to give your dog. In most cases word of mouth drove our decision making. Think about a friend or a colleague who told us about a restaurant and we tried it and in fact data shows that word of mouth generates more than twice the sales of traditional advertising. More than twice the sales of a television ad, a radio spot, or even a print ad. Any company-generated communication. Word-of-mouth generates more than twice the sales of any company-generated communication. And in fact, research shows that a dollar spent on word-of-mouth goes ten times as far as a dollar spent on traditional advertising. And you might wonder why. Well, there are two key reasons. One you probably guessed already. And that very simply is trust. We see an ad on TV, we don't trust it. We don't believe what they're telling us because we're not necessarily sure that they're honest. There was a great ad on television a few years ago, with the famous football quarterback named Joe Montana. Famous US football quarterback, in the hall of fame, big famous sports star, and he was in this ad for these Sketcher shoes called Shape Ups. These are these shoes that you wear that theoretically at least are suppose to tone your rear-end. You walk around in these shoes, you get a firm rear-end. Okay, now imagine you saw this ad, famous sports figure, Joe Montana saying he loves these shoes. What would you think? And I remember thinking, wow. He must owe somebody a lot of money, right? There's no way he actually uses these shoes. And that's the thing we think every time we see an ad. We know someones trying to convince us, trying to change our mind so we push back, we react against the message. We turn off the TV, we flip to something else, we don't listen to what they're saying. Ads always say we have the best service, we have the best products. You've never seen an ad say you know, what we have the 17th best service. In fact, here are our 16 competitors who have better service. Check them out first, and if they're busy come work with us. But because of that we don't know whether they're telling the truth. But we can trust our friends and colleagues, cuz our friends and colleagues will tell it to us straight. They'll say, hey I worked with this distributor and they were fantastic, or hey I worked with these guys and they weren't so good. So the first benefit of word of mouth is we can trust it, we can believe what they have to say. And no wonder then the referred customers, people that come in from existing business have about a 20% higher customer lifetime value. They're better customers because someone went through their social network to find the person that would be most interested in what you have to offer. And that brings me to the second benefit of word of mouth, which is targeting. Often it's hard to know who might be most interested in what you're selling or what you're offering. How do we find the right customer base? How do we find folks that might be interested in what we have to offer but haven't purchased from us already. And often that's very difficult. It's hard to know when we use a particular outlet, whether they bought our products or not, or whether they're working with a competitor. But word of mouth does that targeting much more effectively. It takes someone else who knows people much better than we do and gets them to figure out who might like our products or service. A great example of this happened to me a couple of years ago. A company sent me a book in the mail for free. I was quite surprised. And this often happens with professors though, we got books in the mail. Companies think if they send us their books, we'll assign them to our students and they'll sell more copies in the process. But this time I didn't just get one book, I got two books in the mail for free. The exact same book. And I sat there looking at the books going, well, why the same book? Why two copies of the exact same book, and then I flipped to one of them and there was a note inside that said hey, Professor Berger, we think you'll like this book, but we think you'll also know someone else who will like this book. Pass the second copy on to them. And that's the first simple hack I'm gonna share in this session. How by turning customers into advocates can we get them to do the work for us. How can we get them to do the targeting for us? How can we take all of the people that like us already and get them to share our message and use them as a communication channel for our ideas? Now at this point, you might say okay, great. Word of mouth is effective. How do we get it? Usually when we think about getting word of mouth, we think online. We think about Facebook, we think about LinkedIn, we think about Twitter. But if you actually look at the data, if you had to guess, what percent of all word of mouth would you guess is online, on blogs and online reviews and social media. Pick a number between a hundred all the way down to zero. What number would you guess? I've played this game a couple times and most people say around 50%. Some say 60, some say 40, some say 20, some say 80, but on average people say around 50%. And that's a great guess. But unfortunately it's no where close to the real answer. The actual answer is 7%, only 7% of word of mouth is online. And lots of companies I work with are surprised by that number. They say, well hold on. Why are we investing so much money in social media if only 7% of word of mouth is online? I would say that's a good question. It's not that digital and social aren't useful channels, but they're not the only way that people talk about and share information. We spend most of our day talking face to face with others. By some estimates we spend six to even seven hours a day talking to others face to face. Much more time than we spend online. And more importantly, by focusing so much on the technology, we forgot about something much more important. The psychology. Why do people talk and share in the first place? What makes them share one message rather than another? And if you used to look up this question online, if you typed in well, what makes something viral, you used to get back one simple answer. And that word was cats. People said well there's lots of cat content. People make cat videos that go viral, there are LOL cats. It must be cats that make online content viral. That's a great theory, except that it's completely and utterly wrong. It doesn't tell us anything why some cat videos do better than others, or about all the things that get shared that have nothing to do with cats. So unfortunately, it's more science there than cats. I'm gonna share the science behind why people talk and share. We've done lots of research in this space and we found that there's six key factors, or steps, that drive people to talk about and share all sorts of information. And I put these in a framework called, in fact, STEPPS. And STEPPS actually has two Ps and it stands for Social Currency, Triggers, Emotion, Public, Practical Value, and Stories. Each of these dimensions is a psychological driver of what people talk and share, and it helps explain why all sorts of products and ideas catch on. Helps us explain why things go viral but also how one person talks to just one other person and that leads products and ideas to catch on.
