Category: Consumer Behavior

Word of Mouth at Work

The power of word of mouth communication is undeniable. The credibility of messages spread person-to-person usually trumps the most creatively crafted paid marketing communications. We know that word of mouth is prevalent in our personal networks, but in what contexts do we engage in word of mouth? According to a survey released recently by BIGresearch, the workplace is a hot bed for spreading information. 95% of those persons surveyed said they give information about products and services to co-workers, and 93% seek advice from their workplace peers about products. Another interesting finding for marketers (but disturbing for employers) is that a substantial percentage of people are searching for product information online during the workday. I’m sure it is always done during lunch or other personal time!

It is easy to understand why marketers want to stimulate word of mouth communication given the frequency with which it occurs in the workplace. Also, the survey’s findings have implications for search advertisers. Workday hours should be viewed as an opportunity to reach consumers online even though they are at work. Our multitasking tendencies mean we can work and search. The connections that can be made with working consumers can impact beyond those searching because they can spread the word about new products, promotions, or other brand related information for you.

Link: Online Media Daily – “Study: Workplace Peers Influence Shopping Habits”

The Value of Positive Word-of-Mouth

Word-of-mouth communication has long been acknowledged as an influence on consumer behavior. The power of word-of-mouth is evident as marketers are increasingly seeking ways to engage in viral marketing and social networking. We know that negative word-of-mouth has potentially undesirable effects, but can the benefits of positive word-of-mouth be assessed? Absolutely, according to comScore, a marketing intelligence firm.

In a survey of the impact of onlione consumer-generated reviews on consumer behavior for certain services, comScore found that word-of-mouth in the form of user reviews are often accessed, have an influence on buying decisions, and can even lead to a willingness to pay a price premium. Restaurants, hotels, and travel were the three services for which highest percentages of consumers reported reading online reviews and acknowledging that reviews influenced their buying decisions. These findings are not surprising as the intangible nature of services leads us to seek information pre-purchase to help us make an informed buying decision.

The effect of user reviews on price willing to pay for services is particularly noteworthy. When a service provider is rated “Excellent” in user reviews, consumers sampled said they were willing to pay price premiums ranging from 22% for travel services to 99% for legal services compared to service providers rated as “Good.” It is a given that it makes sense for a business to monitor word-of-mouth about its performance on online user review websites to understand customers’ likes and dislikes. Now, we know it makes dollars, too!

Gift Cards not Consumer Reports Choice for Perfect Gift

I love gift cards- love to get them, love to give them. I like getting them because a gift card gives me a “kid in the candy store” feeling. I get to go to a store and pick out something for me! I like to give them for the same reason- I want the recipient to enjoying picking out something and not get stuck with a gift they may not want. Gift cards have become BIG business for U.S. retailers as we spent an estimated $80 billion on them in 2006.

So why is Consumer Reports going after retailers and the gift card business? They have released a report critical of gift cards. Among the negative points raised by Consumer Reports is that more than 25% of gift cards given are not completely redeemed. This behavior (or lack of behavior) by consumers results in retailers enjoying an estimated $8 billion windfall… all revenues, no expenses!

The argument that gift cards mainly benefit the retail industry is off base. The responsibility for consumers not redeeming gift cards rests solely with the people holding the cards, not the stores that sold them. Prime reasons that people don’t redeem gift cards are 1)they lose them and 2) they simply forget they have the gift card.

I would rather have a gift card than an ugly sweater any day. That reminds me, I have some gift cards from last Christmas floating around my sock drawer. I’d better use them so I won’t become part of the argument Consumer Reports uses against the gift card industry! CR does a lot of good for consumers; its efforts could better serve consumers in areas other than the giving and receiving of gift cards.

Online Ticketing: Break the Power of Brokers

The Internet has proven to be a great innovation for shoppers. The assortments of merchandise available to us have grown dramatically, not to mention the convenience of shopping in the comfort of your home and having your purchase delivered to your door. But, making purchases online can become a source of great frustration when you are denied the opportunity to make a desired purchase.

That’s the feeling thousands of people have experienced in recent weeks. First, it was parents of children desperately wanting tickets to Hannah Montana concerts. Then, it was excited fans of the Colorado Rockies seeking World Series tickets. In both cases, intense demand for tickets left thousands empty-handed and crying foul about the online buying process. The culprit appears to be ticket brokers and sophisticated technology some employ to scoop up tickets ahead of individuals.

The result is that many tickets are made available for sale on the aftermarket for event tickets. Brokers profit handsomely as they command prices that are substantially higher than face value. A check of prices on the web site of ticket reseller Stub Hub found tickets for Game 3 of the World Series in Denver are going for between $325-$4900. Some people who are angry about the unfair advantage held by ticket brokers suggest that ticket sales for high demand events should not be conducted online. Such a move might punish brokers, but it probably has more of an impact on the average consumer who values the convenience of shopping online. It beats having to camp out for tickets!

It seems a better way to punish brokers would be for consumers to pass on buying tickets at inflated prices. But, as long as people are willing to pay above market prices for event tickets, brokers will be angling to beat consumers to get highly coveted tickets. While I am bashing ticket brokers, I give kudos to ticket reseller sites like Stub Hub. They provide a valuable service to people wanting to unload event tickets. Ticket reseller sites are a great marketplace for bringing buyers and sellers together.

Changing Trends at the Dinner Table

American consumers love eating at restaurants. Advertising Age magazine reports on research that says we consumed 207 restaurant meals per person in the U.S. in 2006. The restaurant industry has enjoyed many years of growth as Americans patronize their restaurants as part of their busy lifestyles. More women were in the workforce, making it more difficult to find time to prepare meals at home. Besides, many Americans enjoyed the economic prosperity of the late 1990s and the last few years. More disposable income (or more credit cards) had people eating more meals out of the home.

The dining out trend is changing; the percentage of women in the workforce has dropped after topping out in 2001. Also, many Americans who are feeling the pinch of rising interest rates and higher mortgage payments may have less financial freedom to eat out. These changing trends are hurting the casual dining segment of the restaurant industry. Chains like Applebee’s are struggling as their rapid growth over the past decade followed consumer trends at that time, but the business is not as strong now. The beneficiary of the trend has been supermarkets, a category that suffered when casual dining restaurants enjoyed their growth. It’s not just that more people are buying meals to prepare at home from supermarkets. To the credit of many supermarkets, they responded to consumers’ desires for easy to prepare meals by offering items that are of comparable quality to casual dining menu offerings.

Customer trends change. It’s one thing to react to them after they happen, as supermarkets did as their business eroded in the 1990s. It’s another thing to look ahead and try to detect trends before they become a threat to their business, as casual dining restaurants now are experiencing. What is the plan to lure patrons in to their establishments more frequently? That plan should have been devised when times were good so that companies do not find themselves in panic mode attempting to overcome changing trends. Link

Sales Tax Holiday: Who Wins?

The state of Tennessee held a “Sales Tax Holiday” this past weekend. It is a 3-day period in which certain merchandise items are exempt from sales taxes. The holiday, held in conjunction with back-to-school, exempts school supplies, most clothing items, and computers. For a state in which the state sales tax rate is 7% and local sales tax rates as high as 2.75% on top of the state tax, it is a welcome relief to consumers!

Tennessee is one of 14 states (and DC) that offer such tax-free periods. Who wins with such a break? Of course, consumers win… as long as they do not take on too much credit card debt to pay for their “holiday” (not much of a holiday if you’re still paying for last year’s purchases!). We bought our kids’ school supplies and updated their wardrobes during the sales tax holiday, but they are purchases we would have made, anyway. Don’t get me wrong, I appreciated the 9.75% discount I knew that was being offered before I even walked into a store.

The bigger winners? One would be retailers, who can thank state governments for fueling a consumption frenzy that even the best devised promotions often fail to create. It’s a mini-version of “Black Friday,” the day-after-Thanksgiving sales event that is the highlight of the year for most retailers. Another winner would be lawmakers responsible for creating sales tax holidays. It is hard to think of a safer position for a politician to take with voters than “I’m against taxes, and I want to help you pay less taxes.” I will gladly indulge legislators as they do me a favor and suspend sales tax collections for a few days each year!

Potter Passion

My wife and I took our three sons to a Harry Potter book release party at a local bookstore last Friday evening. It was the second Potter book release party we had attended, so I knew to expect a fairly large crowd and a lot of young people. Friday night’s event was as expected on those points, but I was surprised by the number of adults actively participating in events at the party, especially the costume contest. I have been familiar with Harry Potter books since the beginning of the series, but I always equated it with children and teens. However, the more I thought about it I realized that seeing a large contingent of young adults shouldn’t surprise me as twenty-somethings were reading earlier J.K. Rowling books in their teen years. Some parents got hooked into the Potter series by reading books with their children or reading them before allowing their children to insure the content was age-appropriate. It was surprising initially to see so many adults dressed like the many children gathered, but I realized quickly it should not be surprising at all.

The excitement and passion displayed for Harry Potter at the book release party was very enjoyable to observe. I couldn’t help but think how marketers would do almost anything to create a fraction of the passion and affinity among their customers that was exhibited by Potter fans. Brands like Apple, Harley Davidson, and Ikea can claim success in the ability to elict passion from the marketplace, but for most companies that idea is as much fiction as the adventures of young Mr. Potter!

P.S. – An interesting book about the passions held by people is Who Are You People?, by Shari Caughron. People with passions ranging from ice fishing to Barbie collecting are profiled. You’ll never see “fanatics” the same way again after reading the book!