The Power of Consumer-to-Consumer Recommendations in the Retail Sector

Thursday, September 13, 2012

About RewardStream

RewardStream is an emerging leader in consumer-to-consumer (C2C) marketing solutions for brands targeting

the socially connected customer.

We help clients to energize consumers to recommend & refer to their trusted networks, and then to evolve them

into loyal, high value relationships.

Since 1999, we have delivered customer referral, loyalty and engagement solutions for some of the world’s most

esteemed brands.

Speakers

Alexandra Best VP

Richard Robins VP

Agenda

• Quick look: Marketing in the retail sector • Overview of research: Keller Fay & WoM for retailers • Examples: A look at how several retailers are fueling

growth through referral marketing • Q&A

Have a Question?

• Use the chat window in GoToMeeting to submit your questions throughout the session; we have left time for Q&A at the end of the webinar

• If we don’t get to your question during the session, please send questions directly to amberlie.denny@rewardstream.com

Dynamics Facing Retail Marketers

Search is Under Siege

“We do on the order of a billion queries a day, and we’re not even trying. Most of it is people trying to find people, but a bunch does link to commercial behavior like trying to find brand pages. You get these

search engines where you type in keywords and it runs some magic to tell you what it thinks you want. But I think search is evolving to

provide specific answers. Facebook is pretty uniquely positioned to answer most of the questions people want to ask. Like “What

restaurants do my friends like?”

- Mark Zuckerberg At Techcrunch Disrupt

September 11, 2012

“Search isn’t growing as it was for some of our business because consumers are looking

for us in other places”

- Jessica Koster, Senior Director eCommerce

The Jones Group

More marketers believe social and mobile will increase in effectiveness, as compared to affiliate marketing and email

Effectiveness of Social Networking Tactics

“Your brand isn’t what you say it is. It’s what other people say it is.”

1. Give people a reason to talk about your stuff

2. Make it easier for that conversation to take place.

“Hearing what other people have to say about a product gives shoppers the satisfaction of

knowing what they purchased is peer-reviewed and worth their money. Whether it is based on a conversation with a friend or a customer review on a website, people put a lot of weight in other

shoppers’ opinions. “

- Mike Gatti, Executive Director

Retail Advertising and Marketing Association

“Marketers spend millions of dollars on elaborately conceived advertising campaigns, yet often what

really makes up a consumer’s mind is not only simple but also free: a Word of Mouth

recommendation from a trusted source. A Word of Mouth recommendation is the primary factor behind 20 to 50% of all purchasing decisions.“

- McKinsey Quarterly, April 2010

Word of Mouth: The Keller Fay Report General Findings

Research Goals

• What is the influence of word-of-mouth recommendations in the retail category?

• Are word-of-mouth recommendations more or less influential at different points during the consideration and purchase lifecycle?

• Is there a difference in the impact of solicited vs. unsolicited recommendations?

Who is The Keller Fay Group?

• The first research-based marketing consultancy focused exclusively on word of mouth

• A few nuggets from The Face-to-Face Book: • It’s an invaluable tool for marketers who want to spread

the word about their products and brands faster than the speed of Facebook and with far greater impact.

• In-person social networking, not online marketing, is the secret to soaring revenues.

• 90% of recommendations that lead to consumer action happen offline.

Methodology

• RewardStream commissioned Keller Fay to study how recommendations affect purchases in banking, vacation travel, communications, subscription entertainment, and retail categories

• The survey was conducted among a total sample of 1,274 adults ages 18-59 who had purchased, applied to, or subscribed to a new product or service in the past 12 months.

The Overall Importance of Personal Recommendations

Recommendations are Frequent

Very Often 16%

Often 43%

Sometimes 33%

Rarely 7%

Never 1%

Recommended a product or service to someone

Very Often 11%

Often 40%

Sometimes 42%

Rarely 6%

Never 1%

Made a purchase based on a recommendation

Recommendations Impact More Purchases Than Any Other Source

40% 32%

19% 17% 17%

15% 14%

10% 9%

6% 5%

4% 3%

2% 22%

A personal recommendation

Past experience

Something I saw in a store/office

Online consumer review websites

An advertisement in a magazine, newspaper, or online

Price comparison websites

A commercial on TV or the radio

Something on a package, flyer, or brochure

An article in a magazine, newspaper, or online

A TV or radio program

Another type of website

Online blog

Another type of ad

Social media site

Something else

% of purchases influenced at any purchase stage, all categories

Over 20% of responses of “Something Else” include a reference

to price, cost, an offer, or sale.

Other items include convenience or need, or general references to family

and friends.

Face-to-Face Communication is the Most Predominant Way to Make a Recommendation

82%

15%

5%

1%

1%

1%

1%

6%

% of purchases influenced by recommendations by mode at any stage, all categories

Face-to-face

Over the phone

Via e-mail

Via SMS/text

Via IM/chat (e.g. AIM, GChat)

Via Facebook or Twitter

Via another social media site (e.g. Google+, Tumblr)

Some other way

Recommendations are Evenly Divided Between Solicited and Unsolicited

44% 46%

55%

47% 44%

37%

While becoming aware of aspecific brand

While researching various options While preparing to purchase

Solicited Recommendations Unsolicited Recommendations

% of solicited and unsolicited recommendations for specific purchases by purchase stage, all categories

Across All Stages, Recommendations are Most Influential in Purchases

26% 28%

26%

23%

17% 8%

14%

23% 19%

17% 18%

13%

0%

5%

10%

15%

20%

25%

30%

35%

40%

While becoming aware ofa specific brand

While researching variousoptions

While preparing topurchase

% of purchases influenced by purchase stage, all categories Recommendations Advertisements (Net) Online (Net) In a Store (Net) Nets defined as follows:

Online (Net)

• Online consumer review websites • Price comparison websites • Another type of website

• Online blog • Social media site

Advertisements (Net)

• A commercial on TV or the radio • An ad in a magazine, newspaper, or

online • Another type of ad

In a Store (Net)

• Something I saw in a store/office • Something on a package, flyer, or

brochure

Word of Mouth: Findings for the Retail Sector

Retail Sector Highlights

1. Consumers seek recommendations from family and friends more often for retail categories than for any other category.

2. Consumers increasingly seek advice from experts and other informed sources as the value or perceived importance of the product increases.

Respondents Overwhelmingly Identified Friends and Family as the Source of Recommendations for Retail Products

63% 38%

24% 1%

24% 6%

4% 20%

Family/Friends (NET)A friend

Other family memberSpouse/Partner

A sales person/clerkA co-worker

An acquaintanceSomeone else

Personal Care

% of purchases influenced by recommendations given by each

60% 29%

24% 11%

17% 8%

4% 29%

Family/Friends (NET)A friend

Other family memberSpouse/Partner

A sales person/clerkA co-worker

An acquaintanceSomeone else

Health Products

75% 42%

29% 10%

16% 11%

7% 5%

Family/Friends (NET)A friend

Other family memberSpouse/Partner

A sales person/clerkA co-worker

An acquaintanceSomeone else

Apparel 81%

39% 34%

13% 27%

13% 1% 2%

Family/Friends (NET)Other family member

A friendSpouse/Partner

A sales person/clerkA co-worker

An acquaintanceSomeone else

Consumer Electronics

Consumers Seek Recommendations from Family and Friends More Often for Retail Categories Than for Any Other Category.

78%

40%

13% 18%

9%

42%

A purchase related to fashion or personal appearance A technology purchase (e.g. a computer, TV, phone)

Somebody Close (Family/Friends) Distant Friend with Experience in Category An Expert/Professional in Category

% of people likely to look for advice from different types of people for specific types of purchases

Recommendations vs. Advertisements for Select Retail Categories

20%

23% 23% 28%

21% 11%

0%

20%

40%

While becomingaware of a

specific brand

Whileresearching

various options

While preparingto purchase

Personal Care

% of purchases influenced by recommendations or advertisements (net) by category

33% 31% 33%

17% 15% 10%

0%

20%

40%

While becomingaware of a

specific brand

Whileresearching

various options

While preparingto purchase

Health Products

20% 24% 18%

15% 14% 6%

0%

20%

40%

While becomingaware of a

specific brand

Whileresearching

various options

While preparingto purchase

Apparel

Recommendations Advertisements (NET)

21% 26% 23% 21% 13%

7%

0%

20%

40%

While becomingaware of a

specific brand

Whileresearching

various options

While preparingto purchase

Consumer Electronics

Sharing Stories

Getting Customers Talking: A Top 100 eTailer Turns to WoM

They wanted to know…. • How could they capitalize on the

good will of their happy customers?

• How could they get their existing happy customers sharing their brand?

• What customer insights would they be able to glean?

• What efficiencies could they achieve in their marketing?

• Launched Refer-A-Friend using their already loyal, enthusiastic customer-base as a springboard for new customer acquisitions through referrals

• Customers can share coupons with friends via Facebook, Gmail, Twitter, email and personal URL

• When their friend uses the coupon to make a qualifying first purchase, the referrer receives a coupon they can use against a future purchase

Happy Customers Share Offers with New Customers

"… new customers up 44% driven by strong results from the Company's marketing initiatives and the continued success of its

Refer-A-Friend program."

Nurturing New Members: A Beloved Family Of Brands Pilots WoM

• Family of brands created an exclusive program to be a resource on baby and toddler nutrition, while offering exclusive savings, samples, offers and resources to members

• They were looking to use customer and member recommendations to expand their online community, increase awareness for their program, and grow their member-base

Getting Members Sharing!

• For a limited time, members can share the program with friends/family and moms to be in their social circles using email, Facebook, Twitter, and personalized URL

• When the friend becomes a member of the program, they receive a $10 gift card to Amazon for the NEW amazon baby store, or anything else they’d like to purchase from Amazon

Early Impressions

“With each wall post made we have the ability to reach a wider audience through impressions, thus

increasing program awareness through word of mouth, all while helping to drive acquisition.”

Early Impressions

“Because everything is tracked at both aggregate and individual member levels, this really provides us with valuable insights on who some of our key

influencers might be. Think of the possibilities and targeting we can do moving forward, knowing who

these high value members are.”

Key Takeaways

Customer Takeaways

1. Customers are happy to share with friends and family - especially when your product, service, brand or program makes them happy!

2. Making it easy to share means more sharing will happen.

3. A referral program that capitalizes on social recommendations – both online AND offline – can boost acquisition, deliver actionable insights into who your most valuable customers are, and drive awareness … not mention ROI.

Research Takeaways

• Word-of-mouth recommendations are a strong driver of consumer purchase behavior at all stages of the purchase lifecycle, regardless of purchase category.

• Consumers seek recommendations from family and friends more often for retail categories than for any other category, but they increasingly seek advice from experts and other informed sources as the value or perceived importance of the product increases.

• In general, the importance of recommendations increases the nearer consumers are to making a purchase.

• The influence of advertisements decreases as consumers progress along the stages of the purchase lifecycle in all of the retail categories.

Have a Question?

• Use the chat window in GoToMeeting to submit your questions throughout the session; we have left time for Q&A at the end of the webinar

• If we don’t get to your question during the session, please send questions directly to amberlie.denny@rewardstream.com

Contact

Alexandra Best VP Marketing RewardStream alexandra.best@rewardstream.com 604.282.7549

Richard Robins VP Client Success RewardStream richard.robins@rewardstream.com 604.282.7544

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