Word-of-Mouth Ad Spending Up 35.9%

Nov 28, 2007  •  Post A Comment

Psst, pass it on: Word-of-mouth advertising is growing fast.
Spending on word-of-mouth advertising jumped 35.9% to $981 million in 2006, according to a recent report by PQ Media, and is expected to top $1 billion this year.
Over the longer term, PQ Media sees word of mouth growing at a compounded annual rate of 30.4% through 2010, when it will hit $3.7 billion.
That growth is faster than for other facets of the marketing world, including branded entertainment, direct marketing and public relations.
“Major brand marketers are moving from just testing word-of-mouth marketing to including it as a growing component of fully integrated marketing campaigns,” said Patrick Quinn, PQ Media CEO. “The continued advancement of new word-of-mouth technologies is creating cross-currents among alternative media strategies.”
PQ Media defines word-of-mouth marketing as “an alternative marketing strategy supported by research and technology that encourages consumers to dialogue about products and services.”
Word-of-mouth marketing has two major segments. Content and services comprises strategy and consulting, word-of-mouth agencies, online communities and word-of-mouth media. The other segment, ancillary products, includes research, measurement and technology and tools.
In putting together its analysis, PQ Media limited itself to U.S. spending by marketers, not including brand spending on salaries or internal marketing initiatives. To avoid double-counting spending on other advertising and marketing services, PQ didn’t include in-store product sampling, event marketing and sponsorships, public relations not associated directly with word-of-mouth marketing and social network and consumer-generated media advertising.
While most conversations about brands take place offline, the Internet has made it much easier for consumers to exchange opinions about brands, especially through popular social-networking sites, such as MySpace and Facebook, and through blogs. And by going online, some marketers have found an easy way to start conversations about brands on a mass scale.
“The word-of-mouth marketing industry is capitalizing on this trend through its ability to provide ROI [return on investment] to brand marketers in a highly cost-effective platform,” Mr. Quinn said.
PQ said it is not yet able to break out spending by product categories, but it said data from various sources indicate that food and beverages, media and entertainment and sports and recreation marketers are among the biggest users of word-of-mouth strategies.
The area is so important that marketing bellwether Procter & Gamble owns one of the leading word-of-mouth companies, Tremors/VocalPoint, which targets youth and female audiences.
In its report, PQ Media pointed to a couple of interesting word-of-mouth campaigns during the past year. In one, GlaxoSmithKline worked with Communispace to build an online community before the release of Alli, its new weight-loss drug. The company gave online users a six-month supply of the drug and they discussed their experiences with the drug and other weight-loss issues with members of the community. The company used the feedback in its regular marketing campaign when the product was launched over the summer.
Del Monte had an online community formed around the issue of traveling with pets. The difficulties pet owners faced when traveling led to the creation of a new line of pet-travel products that the company will be introducing.


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