June 2009

Making Sense of IWOM

Topic 1: The role of Internet Word of Mouth

(IWOM) in purchase decisions

© 2009 CIC

2

Overview

Do consumers pay attention to IWOM?

Why do consumers pay attention to IWOM?

Can IWOM influence consumers' attitude

towards brands?

How does IWOM affect the purchase decision

process?

About CIC

3

5

7

8

10

12

Contents

© 2009 CIC

© 2009 CIC

3

For the past 5 years, CIC has been studying the Chinese consumer through

systematic observation and analysis of social internet platforms such as blogs, BBS

and social networks using a unique methodology that combines quantitative and

qualitative approaches, including online ethnography, as well as cutting edge text

mining technology. Through systematic observation and analysis of online platforms,

their users and other essential elements, we have come to understand consumers’

online behavior and culture. Our white papers focused on IWOM around automobile,

mobile phones, notebook computers, sports as well as our various trend watches are

all testament to this effort.

In CIC’s most recent whitepaper series, “The Internet is THE Community,” we

stressed the importance of IWOM and its influence on reshaping the relationship

between brands and consumers. Brands which leverage IWOM can have not only

more effective communications, but also gain strategic insights for product

development and overall strategy.

For our latest white paper series, Making Sense of IWOM, we look at

consumer behavior, motivation and influence of IWOM. We use a more traditional

approach with comprehensive offline research in Beijing, Shanghai, Guangzhou and

Chengdu from late 2008 to early 2009. The research included a telephone survey of

640 BBS and blog users to study the influence of IWOM on the purchase decision

process. We also conducted 8 focus groups and 32 in-depth interviews with BBS/blog

users (including online opinion leaders) to further explore consumers’ online behavior

and motivation for engaging IWOM. Utilizing CIC’s combined expertise on IWOM

research and deep strategic understanding of IWOM, our team analyzed the data and

identified interesting and valuable findings which we will be sharing in 3 separate parts

for the series: “The role of IWOM in purchase decisions,” “How IWOM is generated

and disseminated” and “How brands can participate in online communities.”

To understand the depth and nature of IWOM’s influence, this first paper in the series

seeks to answer this primary question: “What is the role of IWOM in purchase

decisions.” We answer this question from these angles: “Do consumers pay attention

to IWOM,” “Why do consumers pay attention to IWOM,” “Can IWOM influence

consumers’ attitude towards brands” and “How does IWOM affect the purchase

decision process.”

Overview

© 2009 CIC

4

“Do consumers pay attention to IWOM”: Our research shows that over 81% of

BBS/blog users search IWOM when making purchase decisions, suggesting that

reviewing IWOM before purchasing is becoming a regular habit for consumers. Based

on a further study of 520 BBS and blog users who sought out IWOM for purchasing

products in the past year, we found that IWOM was most influential in the mobile phone,

consumer electronics, cosmetics and baby care categories with at least 50% of

respondents seeking out IWOM when looking to purchase. Even when not looking to

make a purchase, 89.8% respondents still pay attention to IWOM. Respondents

mentioned check the IWOM around their favorite brands, specific industries or products

of interest, as well as brands with attractive promotion activities or major negative

incidents.

“Why do consumers pay attention to IWOM”: We found that the primary motivation

is to reduce the purchase decision risk (71.5% of all respondents). In addition, for very

active online consumers, building community around shared interest of particular

brands and categories such as mobile phone or automobile is a major driver.

“Can IWOM influence consumers’ attitude towards brands”: IWOM can affect,

even change consumer’s attitude towards brands. Nearly 50% of respondents agree

that positive IWOM can influence them to decrease or totally change their negative

perception of a brand, while 43.6% said that negative IWOM can reduce or change their

originally positive perception. Clearly, paying attention to and taking care of IWOM is a

“must have” for brands.

“How does IWOM affect the purchase decision process”: We discovered that

IWOM also plays a particular role in the overall purchase decision making process.

While the majority of consumers place friends’ recommendation as the most important

source of purchase information, IWOM is the second most important source. Ads.&

mass media campaigns and sales persons’ introduction is of minor importance. During

the whole process, IWOM has remarkable affect on “brand awareness” and “purchase

decision,” with 56.3% of respondents getting to know the brand through IWOM and

58.7% of respondents making the purchase decision based on IWOM. What is more

interesting, after purchase, consumers are still interested in IWOM, with 47.5% of

respondents seeking out IWOM to share their user experiences and express their

opinions. If brands can interact with the consumers during this critical time, it has the

potential to bring substantial benefits to the brands’ new product development as well

as marketing communication.

Overview

© 2009 CIC

5

Do consumers pay attention to IWOM?

In order to better understand Chinese consumers’ awareness and level of attention

on IWOM, we conducted a survey of 640 BBS/blog users between the ages of 15-

60 from Beijing, Shanghai, Guangzhou and Chengdu. The result shows that 81.2%

of BBS/blog users search IWOM before making a purchase.

To explore how IWOM influences consumers’ purchase decisions, we further

studied 520 BBS/blog users who sought out IWOM before purchasing certain

products in the past year. We found that checking IWOM before purchasing is

becoming a habit for consumers that frequent BBS and blogs. Figure 1 shows

IWOM is most influential within the mobile phone, consumer electronics, cosmetics

and baby care categories with at least 50% of respondents seeking out IWOM when

looking to purchase a product.

数据来源: CIC， 520位最近一年内购买产品时查询过网络口碑的BBS/博客用户

Figure 1 Percentage checking IWOM when purchasing particular

product categories

Data Base: 520 BBS/blog users who sought out IWOM for purchasing certain product in

the past year

© 2009 CIC

It is clear that consumers pay attention to IWOM when looking to make a purchase.

However, is IWOM influential even when not looking to make a purchase? From

Figure 2, we see that even when not looking to make a purchase, 89.8%

respondents still pay attention to IWOM. Figure 3 shows different kinds of IWOM

consumers will pay attention to even with no purchase intent: 48.7% respondents

check IWOM for their favorite brands, 44.4% are attracted by various promotion

activities, and 40.8% look for information about specific industries or products of

interest. In addition, the IWOM around brands with major negative incidents, well-

known brands and the brands they have used before also drives more than 30% of

respondents’ attention.

Do consumers pay attention to IWOM?

6

Figure 2 Do you pay attention to IWOM

when not looking to purchase?

Data Base: 520 BBS/blog users who sought out IWOM for purchasing

certain product in the past year

Figure 3 What IWOM do you pay attention to when not

looking to purchase?

Data Base: 520 BBS/blog users who sought out

IWOM for purchasing certain product in the past year

© 2009 CIC

7

Why do consumers pay attention to

IWOM?

71.5% (Figure 4) of respondents cited “reducing the purchase decision making risk” as

the primary reason for paying attention to the IWOM of brands. In our qualitative

research we found checking IWOM has become built into the purchase process:

• “It’s a sort of reference, especially when my friends and I don’t know much about the product.”

• “Before purchasing, checking others' user experience and appraisal can help to reduce purchasing

risk. After the purchase, we look to solve problems.”

While it is not surprising to find that there are some very active BBS/blog users with

strong opinions, in China what is particularly important to understand is the strength of

the community of these active users and the extension and influence of these bonds

offline through elements, including offline meet ups and even online group purchase. In

the following whitepaper, we will give more detailed analysis on why active BBS/blog

users are more passionate in expressing and building community around shared

interests.

One interesting phenomenon: for general BBS/blog participants, (i.e. BBS/Blog users

who read but don’t create’ content), the main purpose of seeking out IWOM is to reduce

purchase decision making risk; but for active BBS/blog users (i.e. more active content

creators), finding friends with shared interests and sharing personal opinions is also a

major driver.

• “I love Apple’s products, if there is anything about Apple online, I will take a look at it.”

• “What he writes really feeds my appetite, so I add him into my favorite list and read his articles

regularly.”

• “I will always look for and like to read the cool IDs who always write good content.”

Data Base: 520 BBS/blog users who sought out IWOM for purchasing

certain product in the past year

Figure 4 Why do you pay attention to IWOM

© 2009 CIC

8

From our qualitative research, we found that if a consumer already has a good

impression of a brand, then positive IWOM will strengthen his or her affinity and trust

for this brand. What if the original impression is a negative one? Will positive IWOM

alter the consumer’s opinion?

According to the survey results (Figure 5), 25.8% of the respondents said their

negative impression would be minimized, 15 .6% said their perception would actually

shift to slightly positive and 5% said it would even shift to extremely positive. All told,

positive IWOM shifts a previously negative impression to a positive one for 46.4% of

all respondents. For 39.9%, however, positive IWOM would not cause a change in

opinion, 4.5% said it would worsen their negative image and 9.2% said they wouldn’t

believe positive IWOM due to the possibility of fake messages placed by brands or

agencies as we discovered in the qualitative research. In all, we can see that positive

IWOM has a 50% chance of influencing consumers to change a negative impression

of a brand.

Can IWOM influence consumers' attitude

towards brands?

Figure 5 How positive IWOM affects your negative

perception towards brands

Data Base: 520 BBS/blog users who sought out IWOM for purchasing certain

product in the past year

© 2009 CIC

9

Can IWOM influence consumers' attitude

towards brands?

When we look at how negative IWOM influences consumers who originally had a

positive impression towards brands, we see a similar result. According to Figure 6,

negative IWOM shifts the positive impression to a negative one. 43.6% said that

negative IWOM can reduce or change their original positive perception suggesting

that negative IWOM of a brand has a very strong potential to change consumers’mind on selection of products. Clearly, paying attention to and taking care of IWOM

is a “must” for brands.

Data Base: 520 BBS/blog users who sought out IWOM for purchasing certain

product in the past year

Figure 6 How negative IWOM affects your positive

perception towards brands

© 2009 CIC

10

Through our qualitative research, we found that consumers look to four sources when

researching during the purchase process: friends’ recommendation, IWOM, Ads &

mass media campaigns (TV, magazine etc.) and salesperson’s introduction. Figure 7

shows the four typical scenarios. When we presented these four scenarios via

decision tree analysis on our survey, we found that the majority of consumers choose

the first scenario. While the majority of consumers place friends’ recommendation as

the most important source of purchase information, IWOM is the second most

important source.

How does IWOM affect the purchase

decision process?

With the increasing power of IWOM, we see that this model can be modified to fit the

modern purchase process. Based on our qualitative research findings, we have

updated the model and divided the consumer purchase decision making process into 6

steps (Figure 8).

Philip Kotler, considered by many to be the father of modern marketing, proposed that

the general consumers purchasing decision making process includes 5 steps: problemrecognition, information search, evaluation of alternatives, purchase decision and final

post-purchase behavior.

Figure 7 Four typical scenarios for consumers’ research

during purchase decision process

Figure 8 Consumer purchasing decision making process

© 2009 CIC

11

In addition, we also evaluated how IWOM affects each step of the purchasing

decision making process. Figure 9 shows that during the whole process, IWOM has

the strongest affect on “brand awareness” and “purchase decision” with 56.3% of

consumers first learning about the brand through IWOM and 58.7% of consumers

making the purchase decision based on IWOM. After purchasing, consumers are still

interested in IWOM, with 47.5% of consumers still seeking IWOM online. During the

post-purchase stage, consumers mainly shared their user experience and expressed

their new requirements.

Figure 9 IWOM’s influence on each step of the purchasing

decision making process

Data Base: 520 BBS/blog users who sought

out IWOM for purchasing certain product in the

past year

How does IWOM affect the purchase

decision process?

Figure 9 IWOM’s influence on each step of the purchasing

decision making process

12

About CIC

CIC is the thought leader in Internet Word of Mouth (IWOM) with over 4 years

experience in China working with cutting edge clients across multiple industries

on a retainer basis. With a proven approach and case studies, CIC is the first

and best option in China to help clients make sense of the buzz. CIC coined the

term IWOM and has pioneered the concept of IWOM, redefining the relationship

between brands and consumers. CIC is committed to both providing objective

third party strategic advice to clients and promoting the healthy development of

the Internet Community in China. CIC's research and discussion of IWOM's

impact and best practices can be found on its company blogs, in its IWOM white

papers and IWOM watch reports and through its IWOM roundtable events such

as IWOM summit and IWOM classroom.

CIC offers customized and syndicated reports as well as an industry leading

IWOM analytics dashboard which is supported by proprietary Chinese language

based text mining technology (patent pending), data processing technology and

data visualization technology. CIC's retainer relationships stretch over multiple

years with multinational clients from Fortune 500 companies.

CIC's continual development and evolution is driven by an unique, powerful and

open mindset and learning culture which at its foundation continually seeks to

understand how the Internet, and IWOM, is redefining the relationships between

brands and consumers.

For more information, please visit

• www.iwommaster.com (CIC IWOM master intelligence service platform)

• www.ciccorporate.com (CIC website),

• www.seeisee.com (CIC Company blog in Chinese)

• www.seeisee.com/sam (CEO's company blog in English).

Address:

Room 108, Building A, UDC Innovative Plaza

No.125, North Jiangsu Road

Shanghai, 200042, China

Phone: 021-52373860 / 61 / 62 / 63

Fax: 021-52373632

Email: info@cicdata.com

© 2009 CIC

This report is copyrighted material owned by CIC. Any improper use of this

document or its content will be considered a violation of CIC IP copyright

and CIC has the right to take legal action.