Spread the Word

April 15, 2008

BY MICHAEL KRAUSS

Paul Rand, CEO of Zócalo Group, a new division of Ketchum and Omnicom, has a message for H. Lee Scott, Jr., CEO of Wal-Mart and leading C-level executives like Jeffrey Immelt, CEO of GE, and Richard Wagoner Jr., CEO of General Motors—start thinking about word-of-mouth marketing campaigns.

“When a company gets as big at Wal-Mart,” Rand says, “their story doesn’t get told at a human level. There are people who are incredible fans of Wal-Mart. What you always hear is the negativity. Wal-Mart does many wonderful things, but that story rarely gets told.”

If he could say one thing to a C-level executive like Scott, he’d say this: “You can positively begin shaping how people are talking about you and recommending you in ways you currently are not doing.”

Rand is not blaming the media or pressure groups for piling on Wal-Mart. He simply believes that companies need to start applying word-of-mouth marketing techniques for their own advantage.

“When 92% of Americans say that the number one place they go for information on new products and services that drives purchase is friends, families and people they trust, that’s overwhelming evidence that word of mouth can’t be ignored,” Rand adds.

Rand worries that C-level executives are more comfortable with traditional marketing mechanisms like advertising and promotional programs, but these may be ineffective. “You can reach buyers through paid means, but does that drive recommendation, or does it simply drive one-way communication?” he asks.

Rand is a seasoned agency executive and entrepreneur who founded Zócalo Group in Chicago in 2007 because he believes C-level executives need guidance and support applying word-of-mouth marketing techniques. He structured Zócalo from the ground up to make the case for word of mouth and to help C-level professionals put the techniques to work.

When it comes to word-of-mouth marketing, many C-level executives are skeptical. Word-of-mouth marketing feels amorphous, soft and fluffy. CEOs want fact-based, measurable outcomes from their marketing investments. CFOs like to watch the click count go up when you start your online advertising programs. COOs feel good when cash register results spike right after you drop a direct-to-consumer purchase incentive.

Yet every marketer learns in Marketing 101 that the best advertising is word of mouth. Rand wants to drive that point home and convince executives that word-of-mouth marketing is methodical and measurable.

In creating Zócalo Group, Rand has put in place a series of proprietary templates and frameworks that he uses with clients to establish a strategic and tactical approach to word-of-mouth marketing.

The key principles common to his word-of-mouth programs are:

• Own a position: Articulate an ownable position for your company.
• Map the story: Create a sharable story that puts your case forward.
• Identify influencers: Define and connect with the advocates, including customer evangelists, industry thought leaders, recommenders and determined detractors.
• Engage: Engage with the influencers online and offline.
• Measure: Evaluate the program impacts.
• Sustain: Invest only in sustainable word-of-mouth programs.

Rand is a fervent believer in measureable results. He links his agency’s word-of-mouth programs to recognized metrics and business outcomes. Many companies rely on Net Promoter Scores (NPS), a concept made popular by Bain & Company’s Fred Reichheld.

The technique captures a key metric for customer loyalty—a measure of customer advocates less detractors. The NPS statistic is hailed as the most important single marketing performance metric. Rand has staked out a high-minded position for Zócalo Group. He wants his clients to evaluate their word-of-mouth marketing programs based on word of mouth’s ability to move the dial ahead on the NPS score.

“Decide what it is you are going to measure,” Rand says. “In most cases it is sales, referrals or the Net Promoter Score. Benchmark on the things that are most relevant to your company or brand before you start your word-of-mouth program,” he adds.

Stressing accountability for marketing investments is a refreshing position for an agency executive to take, and Rand is in the vanguard.

“There has always been great consternation about measurability of many marketing mechanisms,” Rand says. “Lately there’s recognition that traditional ways of interrupting customers are less effective. Consumers kept getting more control.”

Rand talks about ROI and return on marketing objectives (ROMO) as two additional ways to measure word-of-mouth marketing investments.

For ROI, Rand encourages clients to launch split market promotional efforts. He tells them to pump word-of-mouth efforts into 10 metro markets and keep 10 control markets clear of word-of-mouth investment. Measure the difference in sales results. Analyze the outcomes and adapt and refine your word-of-mouth marketing investments.

Rand urges clients to identify lead customers who build word of mouth and get them involved with coupon sharing promotions. “It becomes very traceable back to what we are doing.”

Rand also uses ROMO.

“Our clients spend millions on a positioning. Their marketing objective is to get customers using key words and phrases to describe the brand. We check online and examine the conversations their customers are having. For one client, less than 5% of conversations reflected anything near the language the client sought. The ROMO was low.”

If you call Paul Rand to talk about making word of mouth measurable and methodical, be sure to ask him about the name of his agency. Zócalo means town square in Spanish and has obvious allusions as a place where word-of-mouth conversations occur.

When Rand presented the business case to Ketchum CEO Ray Kotcher and Omnicom Diversified Agency Services division CEO Thomas Harrison, he was set to name his new word-of-mouth marketing agency Revere Partners.

Rand liked the Revere name because of the fabled way Paul Revere spread the word of the British invasion. Kotcher and Harrison asked Rand how the word of mouth might play out when he opened Revere in London. Rand slept on it a night and came up with Zócalo Group.

Good to know Rand is nimble as well as methodical and analytical.

Michael Krauss is president of Market Strategy Group, based in Chicago, and can be reached at Michael.Krauss@Mkt-strat.com or news@ama.org.