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WOM: Full Disclosure

Maybe it doesn't have the catchiness of "secret agent man," but there seems to be more controversy these days over "word-of-mouth agents" than the switch from Pierce Brosnan to that other bloke, what's-his-name.


Some suggested in late 2005 that certain word-of-mouth campaigns were actually illegal-- and the consumer watch group Commercial Alert has recently sent a letter to the FTC contending that any example of WOM's "failure to disclose is fundamentally fraudulent and misleading." And now MiamiHerald.com has opined that WOM marketing is a "corruption of core values to a depth that even the cynical genius of U.S. marketing had not previously dared to aspire to."


Ouch! But let's back up and outline the situation for a second. A business -- let's say a coffee producer -- decides that it wants to use WOM in order to promote its new line of espresso. It hires a WOM agency to create and implement a campaign. This second company then reaches out to its consumer agents who spread the word amongst their social networks. What was not always clear, however, was whether or not these "buzz agents" were telling other consumers about their relationship with the WOM agency and marketer.


I could see the temptation for WOM marketers to NOT want their agents to disclose a relationship. If someone told me, "Here's this new espresso, which I'm part of a campaign to promote," I think I'd be less interested than if they had simply said, "Here's this new espresso-- it's really good." The general view seemed to be that disclosure effectively limited the value of word-of-mouth marketing efforts.


Even so, many WOM marketers quickly realized that a lack of disclosure could cause a backlash. Thus, WOMMA's code of ethics requires disclosure, and many WOM agencies have started to require the same of their agents. As Thomas Pahl, assistant director of the FTC bureau of Consumer Protection's Division of Advertising Practices, told attendees of the Basic Training conference, insisting on this type of disclosure is likely to preempt some consumer group complaints. Commenting on Commercial Alert's letter, he said that WOMMA's emphasis on disclosure "would appear responsive." 


Will this limit the success of future word-of-mouth campaigns? In other words, no matter what any one of us thinks about WOM -- or the validity of Commercial Alert's allegations -- some of us might think that requiring disclosure is going to lower the returns on word-of-mouth marketing. And I have to admit, that was my initial thought. I'm not trying to say that WOM marketers SHOULDN'T disclose-- I just thought that such disclosure might negatively impact the effectiveness of a WOM campaign.


Trust me (and this business)


Apparently, my gut reaction was wrong. According to a study entitled "To Tell or Not to Tell?" just released by Walter Carl, assistant professor at Northeastern University, disclosure doesn't hurt word of mouth-- and it may actually be helpful. In his study, conducted with the WOM firm BzzAgent, Carl found that 75 percent of consumers who spoke to WOM agents thought the commercial relationship was a "non-issue." Moreover, messages were passed along by consumers at a 70 percent higher rate when there was disclosure compared to when there wasn't. 


This is all a bit surprising. To be totally honest, I have a hard time believing that consumers wouldn't cast doubts upon the validity of a recommendation coming from someone who had a commercial relationship with the business marketing the recommended product. This is partly a question of context: if I read a company produced blog touting the value of a particular coffee, I'm going to feel differently about the argument than if I read it on a consumer's blog. Then again, if it turns out that Professor Carl is correct, it would be quite a boon for word-of-mouth marketers. Maybe I'm just one of the skeptical 25 percent who take the relationship to be an "issue."


Trust those who disclose?


Professor Carl was gracious enough to answer some of these concerns. In an email, he explained why he didn't think the results of the survey were that surprising-- or cause for any real doubt. "In a clear majority of the cases in the survey," he said, "there was an existing personal relationship between the agent and their conversational partner." In other words, WOM agents talk to their friends, family and co-workers-- people whom they talk to, on a regular basis, about things completely unrelated to product recommendations. 


Because of this, when the "conversational partner" gets a pitch from a WOM agent -- even if they disclose their relationship with a marketing agency -- Carl suggests that they think, "I know I can trust them [the agent] because of our other interactions, and I know they are providing me with information that would be valuable and relevant to me." Moreover, Carl believes that disclosure only increases the agent's credibility and appearance of honesty. 


WOM in context


The basic premise here is that the source of a WOM message may be more important than its form. In other words, what consumers are concerned about when it comes to WOM is how much they trust the person telling them about a product. If they do, then it matters far less that this person (the WOM agent) also has a commercial relationship with an advertiser. Conversely, if they didn't trust the agent, they probably wouldn't listen to the recommendation-- whether or not it was associated with an official WOM campaign.


There are some interesting parallels here to other forms of marketing. The Ponemon Institute's 2005 Permissions Management Study found that consumers who trusted a business were more likely to be engaged, provide personal information and respond to marketing. Moreover, the study suggested that levels of trust were more indicative of consumer engagement than the form of messaging, officially declared privacy policies, or even whether a consumer had previously opted-out of future marketing. With this in mind, we can see how disclosure might not harm WOM-- as long as consumers trust their friends (who are WOM agents) to provide them with relevant and honest recommendations.


For the moment, consumers apparently do trust WOM agents to do just this. It's been suggested, though, that since word of mouth has recently taken off, consumers often feel excited to be involved in a campaign, which raises a couple of questions. If the excitement wears off, will consumers still accept that they should trust a WOM agent's recommendations? And would a certain number of recommendations -- any of which may or may not be relevant to consumers -- start to cause inundation and consumer tune-out?


Professor Carl isn't so sure. "WOMM programs," he says, "will only be effective when they incorporate the three bedrock principles of all WOM: trustworthiness, goodwill and relevance." As long as WOM messages really are relevant, Carl argues, then "repeated experiences will gain credibility," thereby avoiding ad saturation and inundation. These three principles are a good outline for promoting consumer engagement on many marketing platforms-- and Carl may be right that WOM is no different.

Alan Chapell, CIPP, is president of Chapell & Associates a consulting firm that helps companies understand privacy and incorporate consumer perception into product development. He has been in the interactive space for more than seven years with firms such as Jupiter Research, DoubleClick and Cheetahmail. Mr. Chapell is the New York chapter co-chair of the International Association of Privacy Professionals, publishes a daily blog on issues of consumer privacy and taught a class on privacy and marketing at NYU this past summer.

Chapell & Associates is headed by Alan Chapell. In 1997, Chapell founded the privacy program at Jupiter Research, an internet research firm focusing on the consumer internet economy. During his four and a half years at Jupiter, Chapell also...

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