Lies, Damn Lies, and Word of Mouth

The hottest marketers in the country face their biggest challenge yet: marketing themselves.

1 | 2 NEXT

When some 450 attendees gathered at the Word of Mouth Marketing Association's conference in Orlando recently, they had many reasons to celebrate and a few to be fearful. Word-of-mouth marketing--by which companies encourage consumers to recommend products to one another--is currently among the brightest stars in the advertising firmament. But some practitioners worry that too many of their peers run campaigns that dupe consumers. The fear is that such abuses could undermine the credibility of a field that many marketers consider invaluable.

People have always recommended stuff to friends, of course, but the notion that companies can manage such exchanges has gained currency in the past few years. Techniques are still evolving as different companies experiment with wildly different strategies. Typically, though, marketers try to get samples of new products into the hands of individual consumers--often the connectors and mavens Malcolm Gladwell wrote about in The Tipping Point. The marketer encourages those individuals to talk up its products to friends, acquaintances, and total strangers.

How common are word-of-mouth programs? Very. Most major brands have one in the works. Dell, Hershey, Intuit, and Kraft belong to WOMMA, the year-and-a-half-old trade group. Entrepreneurial companies are also embracing word of mouth because it can be done cheaply and has an outsider appeal. Numerous start-up marketing firms and ad agencies specialize in it. Some of those have already sold to major agencies; others have raised serious money. David Balter, founder of Boston-based BzzAgent, one of the best known firms, arrived at the WOMMA conference triumphant, having just secured $13.75 million in venture capital.

In short, buzz has buzz. Word of mouth is among the very few techniques to infiltrate the no-marketing zones people have built around their lives. Many marketers believe that informal, unmediated communication through blogs, social networking sites, or chats in the girls' bathroom is hands down more effective than even the most polished ads. Of course, that informal, unmediated communication is effective only so long as people trust it. Unfortunately, conventional wisdom these days is that everybody lies, from auditors to Oprah authors. Consumers are aware that advertisers buy words on search engines, and that even some bloggers are on the take. If word of mouth becomes suspect, what's left for marketers?

Evangelists or Shills?

Marketers engage people to join word-of-mouth campaigns in several different ways. BzzAgent, for example, distributes rewards points to consumers in its network for every interaction they have in which they mention a product. Those points can be redeemed for prizes supplied by BzzAgent's customers.

Compensation schemes are uncontroversial in the industry. Transparency is another story. Outsiders often assume people enlisted in these campaigns hide their involvement to appear more credible. It's sometimes true. Some companies have employees write slanted reviews of products online, while others hire actors to pretend to recommend products.

Industry insiders say they view these tactics with alarm. In their perfect world, all word-of-mouth marketers would tell people what they were up to, says David Binkowski, of Hass MS&L, an agency in Ann Arbor, Michigan, that runs campaigns for General Motors, Procter & Gamble, and others. When he sends a sample product to a blogger, for example, he always asks her to say in her post that she received the item as part of a marketing campaign. Most boutique firms know enough to disclose, Binkowski adds. He says it's the large ad agencies that are jumping into this hot field that make clumsy mistakes like posting fake reviews online. (Big agency folks dismiss the charge.)

Whatever the source of abuse, duping not only sows suspicion in consumers' minds, it also raises the specter of government scrutiny. In October, an industry watchdog group called Commercial Alert, based in Portland, Oregon, sent a letter to the Federal Trade Commission, arguing that anybody who promotes a product without mentioning that he or she has been compensated is basically committing fraud. "There is evidence that some of these companies are perpetrating large-scale deception upon consumers by deploying buzz marketers who fail to disclose that they have been enlisted to promote products," wrote Gary Ruskin, Commercial Alert's executive director. The FTC should investigate word-of-mouth marketers, Ruskin continued, and create rules governing their conduct.

Though Ruskin's group is tiny, marketers take it seriously. In 2001, Commercial Alert petitioned the FTC to require search engines to disclose whether advertiser payments influenced their rankings. "The FTC came back a year later and did exactly what we wanted," Ruskin says.

1 | 2 NEXT

Try a RISK-FREE Issue of Inc. Today!

Renew | Contact Us | Current Issue

Select Services