word of mouth in marketing

According to Godes & Mayzlin (2004) for an effective “buzz management” the firm should measure word of mouth. To paraphrase Edward Deming, “You can’t manage what you can’t measure.” Word of mouth measurement would be important for market research. So the firm should identify the causal link between word of mouth and future sales and must also recognize that word of mouth is an outcome of past sales.  

Measuring word of mouth was a complex issue. How should the data be collected? Since the information is created and exchanged in private conversations, direct observation traditionally has been difficult. Word of mouth activity typically has been analyzed using two methodologies: inference or surveys, or both. However Godes & Mayzlin (2004) offer an alternative method to measure word of mouth. They find that online conversations can be an easy and cost-effective opportunity to measure word of mouth affecting the sales process occurring offline. So they assumed that (a) people make offline decisions based on online information, or that (b) online conversations may be a proxy for offline conversations. Online conversations offer the firm an attractive opportunity to learn about its environment by directly observing the flow of interpersonal communication. As compared with the survey method, direct observation is potentially lower cost and eliminates any reliance on recall.

Chen & Xie (2004) propose that “online consumer reviews can serve as a new element of marketing communications mix. They can provide relevant matching information to all kinds of consumers, including those who fail to benefit from the information provided by the seller. For many products, this function is impossible or very costly to achieve by the traditional elements of marketing communications mix such as advertising or personal selling (Kotler 2000)”.

Consumer reviews are becoming more important for consumer purchase decisions and thus product sales. A study conducted by “Forrester Research” finds that about 50% of people who visited the retailer sites with consumer postings thought that consumer reviews are important or extremely important in their buying decisions. Based on the data from Amazon.com and BN.com, Chevalier and Mayzlin (2003) find that online book reviews have significant impact on book sales (as cited in Chen & Xie, 2004).

Chen & Xie (2004) also showed that the seller that releases consumer reviews offer more complete product information to consumers through its traditional marketing communication channels.

Chevalier & Mayzlin (2006) examine the effect of consumer reviews on relative sales of books at Amazon.com and Barnesandnoble.com and show that customer word of mouth affects consumer purchasing behavior at two Internet retail sites. They find that an improvement in a book’s reviews leads to an increase in relative sales at that site and the impact of one-star reviews is greater than the impact of five-star reviews. That means that an incremental negative review is more powerful in decreasing book sales than an incremental positive review is in increasing sales. 

A recent Forrester study concluded that approximately 50% of young Net surfers rely on online recommendations to purchase CDs, movies, Videos/DVDs, and games (Awad et al. 2003).

A recent  confirms that new fact of life. The company surveyed 26,486 Internet users in 47 markets around the world and determined that word of mouth is the most powerful selling tool. The Nielsen survey found that consumers trust other consumers above all else. 78% of respondents said that they trusted - either completely or somewhat – the recommendation of other consumers. Nielsen's research confirms the urgent needs for companies to become more "social" online. (The Nielsen Research, 2007).

The Internet has degraded the impact of traditional product advertising by creating a new word of mouth content. With internet a consumer can reach thousands or even millions of potential consumers. Consumers who like or don’t like a product can now amplify their opinions on blogs, online discussion forums, and consumer product review websites -- or just blast their thoughts about a company or product to friends via e-mail, MySpace, Facebook, instant messaging, or cell phone text messages. The broad reach of online word of mouth gives consumers tremendous power to influence brand perceptions.

At a conference called "Word of Mouth Basic Training", more than 450 advertising and marketing professionals listened to speakers tell them how to reach customers using some alternatives to traditional advertising, like viral and buzz marketing, that are becoming increasingly popular within the industry. But replacing traditional advertising with word of mouth and viral marketing is an outlandish notion for most companies. Most of companies integrate word of mouth marketing with traditional advertising.

(www.nytimes.com/2006/01/23/business/media/23adco.html, 2006, para. 2, para. 16). Agencies are still fairly fragmented. They have an internet marketing group, or a web advertising group on one hand, and a TV advertising group on the other.

As both the ‘Economist Intelligence Unit’ and ‘’ showed in recent surveys, online marketing is also attracting increased marketing resources. But the key question is whether or not online marketing achieves a better return on these resources than traditional marketing does ( www.customerthink.com/blog/word_mouth_vs_traditional_marketing_ friend_or, 2007, para. 1).

Firms should understand the new relationship between online word of mouth and traditional communication mechanisms, such as offline word of mouth and advertising. A study conducted in 2003 shows that online word of mouth is a substitute for another traditional source of information. The traditional tool, advertising has no longer played a significant role for the populations that use online word of mouth as a source of information for consumption decisions. This result is very important showing the new reality become more and more obvious that the effectiveness of television advertisements will likely diminish as the online word of mouth increases. (Awad et al. 2003).

The stars in the social networking sector, MySpace (over 100 million users) and Facebook (59 million users as of December 2007) are changing the way people communicate with each other, find friends, evaluate products, and interact with the brands. Social networking and social media represent a promising new line of business. However many marketers haven’t kept up with this change in their business environment. They’re still largely operating in the old way, spending millions of dollars on TV and print advertising that are anything but interactive. The new way (social networking, grassroots media, consumer-generated content, online community building, etc.) has changed the core relationship between customer and brand.

III. THE CONCEPT of MARKETING MIX

A brand name is a legally registered label name which describes a product or differentiates the product from no-name and competitors products. Actually the value of a brand is much more than its own tangible existence. Importance of the value of a brand comes from its perception in the minds of customers. The value-adding perception called the brand equity is affected by all the elements of the marketing mix.  These elements are often influenced or controlled by a wide variety of people including those who work in production, distribution and sales. Therefore it is very crucial to ensure that all people who can influence the brand perception should act or talk in a consistent way with these marketing elements.

Managing the perception involves a carefully coordination of the marketing elements which are the four “P’s” of the marketing mix; 

• Price
• Product
• Place
• Promotion

They are also known as the four “P’s.” It is important for an organization to have a good understanding of the marketing mix. Each element is important when developing a marketing plan.

Price: What is the highest amount that the customer will pay for the product or service? Many times setting the incorrect price level is the beginning of the end for an organization. An organization must be sure that the price is not too high or too low. Mistakes either way will hurt the organization’s income. When an organization is starting out, it is important that they focus their price levels on breaking-even. A break-even analysis is necessary to determine the price to set to avoid a loss.

Product: What you are trying to sell to the customer. An organization needs to have an in depth understanding about what it is they are marketing. Development of the product’s size, quality, design, brand name, packaging are important when trying to match with customer’s needs and wants. An organization should explain how their product’s features benefit the customer.

Place: Where the customer meets the product. The question is how does the customer get to that place? An organization needs to make sure the product or service they are offering is in the appropriate location where its target markets can reach it. An obvious example of poor placement is developing a ski resort in Houston, TX. It is also important to look at the transportation that could be necessary to reach its customers and the geographical barriers that might exist. A B&B will not get many visitors if they have to travel on a poorly lit, gravel road.

Promotion: The method in which the customer will gain knowledge about the product and be persuaded to purchase it. There are many different types of promotional activities that can be used to help gain knowledge, exposure, and desire to purchase

• Personal Propaganda: creating and distributing your own brochures, newsletters, fliers, posters.
• Promotional Activities: coupons, give-aways, sponsorships of community events, trade shows.
• Professional Organizations: being involved with a professional organization or association in your field.
• Media Relations Campaign: a plan to develop contacts and relationships with the local media.
• Advertising: Print ads (newspapers, yellow pages), Outdoor ads (Billboards), Broadcast ads (TV and radio), Direct mailings.

The new concept “C’s” were developed by Robert Lauterborn and put forward by Philip Kotler reflecting a more client-oriented marketing philosophy. Instead of the four “P’s”, there is the four “C’s”;

•  Customer value: how much the customer values the product.
•  Cost to the customer: also includes customer’s time and energy, along with price of the product.
•  Convenience for the buyer: similar to place.
•  Communication: similar to promotion.

 

Through these elements of marketing mix companies try to control consumers’ brand perception. However there are some other influential factors like word of mouth that companies do not have significant control. Because people routinely discuss brands with each other as part of their normal life interactions and consumers most believe and trust information from like-minded consumers (Dunne, 2005).

IV. SURVEYS STUDYING THE EFFECTS OF WORD OF MOUTH

IV. 1. Surveys of Online Purchase Behavior

Today through internet people can reach thousands or even millions of other people compared to offline world in which a person can reach only a limited number of people. So internet is creating a new word of mouth content.

There are a lot of literatures and surveys studying the effects of word of mouth communication on consumers behavior. Results mostly show that word of mouth impacts consumers purchase decisions.

IV. 2. Nielsen Online Global Consumer Survey 2007

According to Nielsen Online Global Consumer Study April 2007 consumers mostly trust in other consumers. (The Nielsen Research, 2007).

Nielsen has conducted the survey twice-a-year among 26,486 internet users in 47 markets from Europe, Asia Pacific, the Americas and the Middle East to understand consumers’ attitudes toward thirteen types of advertising - from conventional newspaper and television ads to branded web sites and consumer-generated content.

The Nielsen survey found  that consumer recommendations that create word of mouth are the most credible form of advertising among 78% of the study's respondents. The recommendation of someone else remains the most trusted sources of information when consumers decide which products and services to buy. Consumer opinions posted online and branded web sites were trusted by more than half of all consumers. 

IV. 3. DoubleClick's Touchpoints Surveys of Online Consumers

There is another series of reports based on DoubleClick's Touchpoints surveys of online consumers. DoubleClick Inc. is a provider of marketing tools for advertising agencies, marketers and web publishers. They reported results of the surveys in their official website.

IV. 3.1. The DoubleClick Touchpoints III survey – 2005

DoubleClick study shows the influence of online media in purchase process.

Survey respondents were solicited from Greenfield Online's opt-in panel of research participants, weighted to reflect norms of the U.S. population. A total of 2,110 U.S. adult (18 years old and older) Internet users completed the survey.

DoubleClick asked consumers about their purchases (both online and offline) within the last six months in the following ten categories: Automotive, Consumer Electronics, Credit Cards and Banking, Home Improvement Products, Investments and Mortgages, Movies, Personal/Home Care, Prescription Drugs, Telecom Services and Travel.

One of the most crucial findings is that word of mouth is the most consistent factor in purchase influence. When looking at the top-four influences that respondents cited for both their initial awareness of the products they eventually bought and their ultimate purchase decision, only one factor shows up for nine out of 10 categories: “word of mouth.” The challenge for marketers, then, is to reach those hyper-influencers who influence the rest of us.

Internet shows significantly great strength in influencing purchases even relative to TV and print advertising. When asked which touchpoints most influenced their purchase decision, respondents cited websites as more important than TV advertisements in seven out of 10 product/service categories.

Some other key findings of the study include official company websites are the top stop for ‘further learning’ and the internet’s impact on purchase decisions is obvious.

Word of mouth reigns supreme over the purchase decision, so marketers should try to ‘influence the influencers’ and leverage the wide range of interactive marketing tools at their disposal.

IV. 3.2. The DoubleClick Touchpoints IV survey – 2006

Doubleclick survey finds online advertising to be an effective means to influence word of mouth in the study titled "Influencing the influencers: how online advertising and media impact word of mouth".

DoubleClick conducted the survey to find how companies can focus marketing investments to impact the role "word of mouth" plays in purchase decisions.

The research identified among the survey respondents a segment deemed to be "influencers" and examined how this key segment reaches purchase decisions. Reaching those influencers through advertising is very important for companies to impact word of mouth. In the academic literature Paul Lazarsfeld and Elihu Katz in their book “Personal Influence” in 1955 argued already that marketers do not simply broadcast messages to a passive mass audience, but rather that they target certain individuals, called “opinion leaders”. These individuals then spread, confirm or negate the messages of advertisers through their own “social relationships”, by word of mouth. (as cited in The Economist, 2007).

Survey respondents were solicited from eReward's opt-in panel of research participants, which is normalized to reflect the internet-using population in the USA total of 6,121 adult (18 years old and older) internet users completed the survey.  A subset of the overall sample, 1,041 respondents (17percent), was identified as influencers. Those respondents answered a set of questions specifically targeting the behaviors, activities, and attitudes of influencers.

The survey asked respondents about their purchases in the previous 12 months within the following 15 categories: automotive, banking, credit cards, investments, mortgages and loans, air travel, hotels, rental cars, telecommunications service plans, consumer packaged goods (personal care and household care products), apparel, consumer electronics, housewares and furniture, movie tickets, and prescription drugs.

The survey results revealed that influencers consider online advertising a key factor of their shopping process, second only to websites, as a source of further learning about purchase decisions. Nineteen percent of influencers cited web advertising as a source of information when they were researching a purchase, compared to 8 percent among the remainder of the sample. Both segments cited websites as their top source of research when they are shopping, but influencers clearly rely more on the web than non-influencers, with 40 percent of influencers citing websites for this purpose versus 31 percent of non-influencers.

Some other key findings of the study include the following:

• Influencers are active consumers of all media, especially the Internet: Asked about a range of different types of media, influencers spent more time reading newspapers and magazines, watching TV and especially using the Internet. Twenty-three percent of non-influencers said that they spent five or more hours a day online, compared to 39 percent of influencers.

• Influencers pay close attention to advertising, positively and negatively: Compared to non-influencers, influencers were more likely to take some actions to limit or control their exposure to advertising, such as the use of digital video recorders to fast-forward through TV ads or the use of a pop-up blocker to control their web experience. At the same time, they were more apt to agree with positive statements about advertising, such as 76 percent agreeing that they are likely to pay attention to advertising when they are shopping for relevant products, compared to 63 percent of non-influencers. Influencers were also much more likely do Internet research as a result of ads they saw in traditional media, to talk about ads of interest to their friends, and to acknowledge that ads often contain valuable product information, among other attitudes.

• Influencers embrace emerging media: Influencers are seeing the impact of emerging media such as video, blogs and messaging, among others;

• 57 percent of influencers say they watch video online today, compared to 40 percent of non-influencers
• 44 percent read blogs compared to 28 percent of non-influencers
• 36 percent access the web on handheld devices compared to 21 percent of non-influencers

Rick Bruner, DoubleClick's director of research and industry relations, said "…if the question is how can companies spend their marketing dollars to impact word of mouth, the answer is to reach those influencers though advertising. Influencers are media gurus and they pay attention to advertising, especially online and in emerging media platforms."

IV. 3.3.The DoubleClick Touchpoints survey – 2007

Doubleclick’s research demonstrates the benefits of online video advertising.

DoubleClick conducted the survey to make a research of online video ad placements, illustrating that video is a highly effective format for online advertising. Findings show that audiences have high interaction rates with video ads, users click the "Play" button more than they click on image ads, video ads are typically played two-thirds of the way through and video ad click rates are far higher than those of image format ads.

This analysis was based on aggregated and cleansed data from video placements of 301 ad campaigns by 131 advertisers, representing 2.7 billion video ad impressions. Those campaigns ran between June and September 2006. Almost all video units in this analysis were auto-play ads. Almost all of those ads played with the sound off until users interacted to trigger sound.

The objective was to identify major trends in the performance metrics of online video ad campaigns according to campaign features, such as vertical industry sector, ad format, ad size and ad length.

Some key findings of the study include the following:

• A healthy portion of exposed audiences interact with video ads

• Users click the "Play" button more than they click on image ads

• On average, video ads play two thirds of the way through

• Video click rates are far higher than image format ads

V. WORD of MOUTH MARKETING

V. 1.Concept of Word of Mouth Marketing

All these studies showed that most of the brands have been recommended by a friend or just-like me person. However a brand gets stronger when there is an advertising or a promotional offer to get the conversation going. So more companies are allocating advertising budgets to word of mouth marketing. Because all recent studies demonstrate that word of mouth is more important than any other traditional forms of advertising. Because word of mouth is often an important driver of consumer behavior and a product’s success.  

Word of mouth marketing may be the oldest form of advertising but, as a marketing discipline, is becoming the most credible form of marketing. So marketing managers are increasingly interested in word of mouth marketing. They try to implement the right marketing strategy in order to influence, directly or indirectly, word of mouth.

 is the promotion of a product, brand or services that encourages people to pass along a marketing message voluntarily. A word of mouth marketing strategy allow marketers learn how to effectively target consumer influencers. Word of mouth advertising creates an awareness campaign where the business information travels from person to person, creating a world of wind of awareness.

V. 2. Social Networks and Viral Marketing

Today the world is changing and so consumers are changing too. Consumers are being empowered by the internet, by the tools of digital media, with a chance to talk about brands to a wide audience where the cost of doing so is almost zero. They are no longer willing to just be the recipients of marketing messages from brands and media. Now everyone has a voice and they can talk back to brands and to big media. Thus today media is no longer in the hands of “elites” like professional media or marketing departments of companies. Consumers are free to ignore brand messaging that “elites” create, and get their purchasing recommendations from digitally networked friends. They can join blogs, produce and publish videos, share photos with a global audience. Consumers are eager to participate, interact and contribute not just consume. Information and opinions are instantly dispersed. This online world created social networking web sites like Myspace (over 100 million users) and Facebook (59 million users) which are taking their power from these eager consumers. These stars in the social networking sector are changing the way people communicate with each other, evaluate products, and interact with the brands.  

With the success of Myspace and Facebook social networking is the fastest growing segment of the internet with being the highest traffic category of website.

Social networking is about forming communities of shared interest. It gives to people an opportunity to come together and to communicate with each other. Online social networks allow people to expand their social networks, finding others with shared interests.

By using the advantage of social networks, popularity of viral marketing that is a new concept is increasing. Whatever called viral marketing, buzz marketing, blogging, community marketing, social marketing, new media marketing, customer evangelism or other consumer to consumer techniques all inspire people to recommend your product or service. Viral marketing includes the marketing techniques to increase the brand awareness in the online market. The aim of viral marketing is to create the impression of spontaneous word of mouth by taking full advantage of the power of online networks to which includes mechanisms such as blogs, podcasts, message boards, and product reviews.

Whether a company spends millions on a formal word of mouth campaign, or leaves it up to customers to spread the word, all businesses must pay attention to social networks, since  networks create exponential increase in the influence of the message by transmitting the message from a single reader to thousands or even millions of other readers. So viral marketing utilizes from social networks or every other possible communication network through internet. The value of marketing on social networks is rising with the existence of shining social networking sites like Facebook.

As the popularity of Facebook grows more and more, people are increasingly sharing opinions and information about themselves, their likes and dislikes as well as their activities on this social network. This popularity of Facebook proves that Mark Zuckerberg successfully map the social graph and create a powerful new model of communication like a giant word of mouth engine. So new concept of Facebook marketing that requires  communicating, not advertising, is becoming popular.

In a meeting Mark Zuckerberg standing in front of advertising executives said “Nothing influences a person more than a recommendation from a trusted friend. …In the future, ad messages would increasingly be conveyed from friend to friend through online Networks (Story, 2007). … For the last hundred years media has been pushed out to people,… but now marketers are going to be a part of the conversation(The Economist, 2007)”

VI. FACEBOOK

VI. 1.Presentation of Facebook

Facebook is a social networking website that helps people communicate with their friends, family and co-workers. It is different than other social networks. In the web sites like Myspace users are encouraged to meet with new people or people that they barely knew. However Facebook is not a way to make new friends.  Facebook founder Mark Zuckerberg said “People already have their friends, acquaintances, and business connections. So rather than building new connections, what we are doing is just mapping them out."

Facebook encourages users to add some descriptive information about themselves in addition to giving basic personal information. Users create profiles that often contain photos and lists of personal interests, exchange private or public messages, and join groups of friends. Users can add favorite music, books and movies. There are additional special features including events and messages. Users can interact in a number of different ways like forming or joining political and social groups. However, approximately 80% of groups are fun related such as “I love NY”.

Other than aiming to meet friends, people can use Facebook for some business purposes. Some employers look at Facebook profiles to find new employees or interns. For example Ernst & Young engages in a conversation to recruit college students. Because Facebook promises to become an online identity for recruiters, bosses, and colleagues looking to hire and promote; a souped-up business card for job hunters.

VI. 2. The Facebook Timeline

In February  Facebook was launched by Mark Zuckerberg and co-founders Dustin Moskovitz and Chris Hughes in their Harvard dorm room. Facebook membership was initially restricted to students of Harvard University.  Only a few weeks after its launch,  more than half of the undergraduate students at Harvard registered to this website. In order to register it required a valid “edu” extension email address. In March 2004 Facebook expanded from Harvard to Stanford, Columbia and Yale and this expansion continued to cover the rest of Ivy League schools (eight schools in the Northeastern United States) in April 2004. In June 2004 Facebook moved its base of operations to Palo Alto - California where is the headquarter at the present time.  As of December 2004 Facebook reached nearly 1 million active users.

In May 2005 Facebook raised $12.7 million in venture capital from Accel Partners. In August 2005 the company officially changes its name to Facebook from thefacebook.com. In September 2005 a high school version was launched. In October 2005 Facebook begins to add international school networks. As of December 2005, Facebook's expansion reached to small universities and colleges in the United States, Canada, Mexico, the United Kingdom, Australia, New Zealand, and Ireland. Thereby Facebook reached more than 5.5 million active users.  

In April 2006 Facebook raises $27.5 million from Greylock Partners, Meritech Capital Partners and others Facebook Mobile feature launches. In May 2006 Facebook's network extended into India and Facebook expanded to add work networks. In August 2006 Facebook added universities in Germany and high schools in Israel to its network. August 2006 Facebook and Microsoft formed strategic relationship for banner ad syndication. In September 2006 Facebook became open for registration to anyone with a valid e-mail address selecting to join one or more participating networks, such as a high school, place of employment, or geographic region.

Facebook reached more than 12 million active users in December 2006; 20 million active users in April 2007; over 50 million active users in October 2007 and more than 59 million active users in December 2007 (users who have returned to the site in the last 30 days).

Popularity of Facebook is growing exponentially so the Facebook company too. Now there are more than 350 employees working for Facebook.

VI. 3. Facebook Statistics

There are some statistics about Facebook as of December 2007 announced in the Press Releases of Facebook:

VI. 3.1.General Growth

• More than 59 million active users
• An average of 250,000 new registrations per day since January 2007
• An average of 3% weekly growth since January 2007
• Active users doubling every 6 months

VI. 3.2.User Demographics

• Over 55,000 regional, work-related, collegiate, and high school networks
• More than half of Facebook users are outside of college
• The fastest growing demographic is those 25 years old and older
• Maintain 85 percent market share of 4-year U.S. universities

VI. 3.3.User Engagement

• Sixth-most trafficked site in the United States
• Second most-trafficked PHP site in the world
• One of the largest MySQL installations anywhere, running thousands of databases
• More than 65 billion page views per month
• More than half of active users return daily
• People spend an average of 20 minutes on the site daily  

VI. 3.4.Applications

• Number 1 photo sharing application on the Web  
• Photo application draws more than twice as much traffic as the next three sites combined
• More than 14 million photos uploaded daily
• More than 6 million active user groups on the site

VI. 3.5.International Growth

• Canada has the most users outside of the United States, with more than 7 million active users
• The U.K. is the third largest country with more than 7 million active users
• Remaining top 10 countries in order of active users (outside of the U.S., Canada and UK): Australia, Turkey, Sweden, Norway, South Africa, France, Hong Kong

VI. 4.Facebook and New Business Concepts

VI. 4.1.Business Solutions

In May 2007, Facebook launched “Facebook Marketplace” allowing users to post free advertisements within such categories as : for sale, housing, jobs, and other.

Facebook launched “Facebook Social Ads” that is a marketing initiative which publishes relevant stories about friends engaging with the business. With a Facebook Social Ad the business can reach precisely to the target audience that it chooses instead of creating an advertisement and hoping that it reaches the right customers. The ads can also be shown to users whose friends have recently engaged with Facebook Page of business or engaged with website through Facebook Beacon. Social Ads are more likely to influence users when they appear next to a story about a friend's interaction with the business.

 Facebook Social Ads allow businesses to become part of people's daily conversations. Ads can be displayed in the left hand Ad Space — visible to users as they browse Facebook to connect with their friends — as well as in the context of News Feed — attached to relevant social stories. Social Ads are placed in highly visible parts of the site without interrupting the user experience on Facebook.

While creating a Social Ad the business receives performance metrics from  including demographic data of who's engaging with the ad and feedback on how to optimize the ad.

Facebook launched “Facebook Pages” that is a marketing initiative which create a business presence to engage with customers and fans on Facebook. Users can express their support by adding themselves as a fan, writing on Wall, uploading photos, and joining other fans in discussion groups. Updates can be sent to fans regularly — or just with special news or offers. Creating a Facebook Page is free for all types of businesses: Restaurants, Bars,

Cafes, Health and Beauty, Pets, Local Stores, Parks, Attractions, Sports Teams, Games, Artists, Musicians, Politicians, Non-profits and many others.

When fans interact with Facebook Page, the actions they take are automatically generated into social stories. These stories are published to News Feed, which friends may see the next time they log into Facebook. The stories link back to your Facebook Page, inviting more people to interact with it, which generates more social stories and drives even more traffic to the Page. Think of it as word-of-mouth marketing, only completely free and happening online.

The viral distribution of Facebook Page can be increased with Facebook Social Ads. Create an ad creative and attach it to stories in News Feed or in the left-hand Ad Space. Social Ads increase the number of friends who will see the story when they visit Facebook, and also specific demographics can be targeted.

In November  2007, Facebook launched “Facebook Beacon” that is a marketing initiative which publishes Facebook users' activities on partner websites such as eBay, Fandango, Travelocity, and Blockbuster to their friends. Facebook Beacon enables customers to share the actions they take on this website with their Facebook friends.

Facebook Beacon actions include purchasing a product, signing up for a service, adding an item to a wish list, and more. When a user performs the action, they will be alerted that this website is sending a story to their profile. No additional user action is needed for the story to be published on Facebook, and users remain in control of their information.

Facebook Beacon enables brands or businesses to gain access to viral distribution within Facebook. Stories of a user's engagement with a site may be displayed in his or her profile and in News Feed. These stories will act as a word-of-mouth promotion for the business and may be seen by friends who are also likely to be interested in the product.

Facebook launched “Facebook Insights” that is to gather insights on who's engaging with the presence of a business on Facebook by getting valuable metrics. With Facebook Insights, there is an access to data on activity, fan demographics, ad performance, and

trends. With this information, the business are better equipped to improve  custom content on Facebook and adjust the ad targeting. Facebook Insights is a free service for all  and .

Facebook provides a deep understanding of exactly who is engaging with business by its robust database of authentic demographic information. From the performance of social ads to the viral distribution rate of stories about business, Facebook Insights helps to learn more about the target audience.

Facebook Insights provides the necessary information to improve the content of  and the performance of .

Facebook launched “Facebook Platform” to create an integrated, customized, social experience for a business on Facebook.

With Facebook Platform, applications can be created. This applications harness the power of the social graph, and create new opportunites for the business. Facebook Platform provides the tools to quickly create custom experiences for users to interact with the business and their friends while maintaining the look and feel of the Facebook interface.

With Facebook Platform, you can create an authentic social experience for your users by integrating your current web site or web application directly with the Facebook Platform or sponsoring an existing application. You can also integrate mobile and desktop applications with the Facebook API.

Facebook Platform is a development platform that enables companies and engineers to deeply integrate with the Facebook website and gain access to millions of users through the social graph. More than 50 percent of Facebook users return to the site each day, providing unparalleled distribution potential for applications and the opportunity to build a business that is highly relevant to people’s lives.

Facebook launched “Facebook Polls” to get answers to important business questions from only the people that company want to reach. Because tens of millions of people express

themselves authentically on Facebook, the company can accurately target Polls by gender, age, location, interests, and other demographic data. The poll will only be shown to the people who meet the criteria that is defined before.

The polls will immediately start showing up in target audience's News Feeds where they can respond as soon as they log in to Facebook. Based on the level of activity at that time, the questions could be answered by hundreds of people in as little as 30 minutes. The detailed results are broken down by age group and gender. Poll insights provide an immediate understanding of targeted audience's attitudes and beliefs.

VI. 4.2.Revenue Sources of Facebook

Social networking sites generally is free to users. So to make revenue Facebook has three methods of producing revenue.

• Local text ads (from the college and local businesses), running at $15-20 per day
• Traditional banner ads, sold on a national basis
• Sponsored groups - examples included Apple, EA, etc.

Written in a article titled “MySpace, Facebook and Other Social Networking Sites: Hot Today, Gone Tomorrow?” at Knowledge@Wharton (2006): “…social networks have power beyond ad revenue to act as a customer relationship management (CRM) tool for companies selling products or services. There's a lot of focus on advertising and banner ads and the amount of traffic. But it's important to look beyond traditional forms of web adverting to see the real potential -- which is leveraging the connectivity of the sites and using them to form communities around products, media or services to really be in contact with your users. Still, he acknowledges, it will not be easy to convert those relationships to new revenue sources. The future is in finding ways to monetize the online community beyond just traditional web advertising, although it's going to be difficult for online communities, even those behemoths like MySpace. As a web-based business, social networks do have some advantages over traditional companies in tracking user behavior in order to detect problems early. …Wharton marketing professor David Bell also cautions

that sites will need to remain subtle in their approach to marketing if they are to build on their current success. While they provide banner and text ads, even more valuable word-of-mouth promotion lurks in the buzz within user profile pages.”

VI. 4.3. Success of Facebook

With the sale of social networking site MySpace in 2006, rumors surfaced about the possible sale of Facebook to a larger media company. However Marck Zuckerberg had already said that he did not want to sell the company. In March 2006 BusinessWeek  reported that Facebook had rejected a $750 million offer. In September 2006,  reported that Social-networking Web site Facebook.com is in serious talks to sell itself to Internet media company Yahoo Inc. for an amount that could approach $1 billion. In October 2007, after Google purchased video-sharing site YouTube, rumors circulated that Google had offered $2.3 billion to outbid Yahoo. On October 24, 2007, Microsoft announce that it had bought a 1.6% share of Facebook for $246 million.

There is an article at “valleywag.com” talking about the value of Facebook: “The Wall Street Journal is reporting that  to sell a stake in the hot social network at a valuation between $10 billion and $15 billion. That would net Mark Zuckerberg's company between $300 million and $500 million in cash, without Zuckerberg having to surrender any meaningful control over the company; the stake would represent 5 percent or less of Facebook.”

Several studies that has been analyzed showed that a recommendation from a consumer is the most trusted form of advertising. Moreover if the opinions posted online, they are a strong influencer to give a purchase decision. Facebook is using this idea that recommendations from friends are believed to be one of the most effective forms of advertising. Therefore Facebook encourages word of mouth marketing by allowing users to display their favourite books, movies, music, and TV shows in their profile pages. Facebook users can join a fan club for a brand, recommend a product or share information about their purchases from external web sites.

The success of Facebook application was amazing. For example Picnik, one of the 85 initial applications in Facebook Platform, was downloaded more than 100,000 users within three days since “News Feed” instantly and automatically notified friends whenever someone downloaded Picnik. That means word of the application spread exponentially via Facebook.  These kind of Facebook applications allow users to be more informed about each other as keeping track of other's favorite music and videos, sharing and comparing movie reviews.

Facebook started to sell a new advertisement that display user’s profile photos next to commercial messages that are shown to their friends about items they purchased. The addition of a Shopping application will evolve word of mouth in the online shopping arena. The application will allow users to add online purchases to their Facebook profile. Facebook creates a new word of mouth that users can be influenced by what their friends are buying instead of seeing what strangers are purchasing. For example, Facebook users who rent a movie on “Blockbuster.com” will be asked to display their movie choice to all their friends on Facebook. And those friends would receive that movie message with an advertisement from Blockbuster. The New York Times Company will also allow visitors to its Web sites to zap information about their visits back to friends on Facebook. Facebook already has ties to Amazon for book reviews. In addition Facebook allows advertisers set up their own profile pages at no charge and encourages companies like Blockbuster, Condé Nast and Coca-Cola to share information about the actions of Facebook users on their sites (Story, 2007).

In The Economist print edition on November 8th 2007 San Francisco, there was an article titled “Will Facebook, MySpace and other social-networking sites transform advertising?”. In the article Facebook profiles that can be used as brands' pages by adding reviews, photos or comments were analyzed; “The first step for brands to socialise with consumers is to start profile pages on social networks and then accept “friend requests” from individuals. On MySpace, brands have been doing this for a while. For instance, Warner Bros, a Hollywood studio, had a MySpace page for “300”, its film about Spartan warriors. It signed up some 200,000 friends, who watched trailers, talked the film up before its release, and counted down toward its DVD release.”

For both companies and publishers, social networking and social media represent a promising new line of business. Any organization with a tight customer or user base should be thinking about applying social networking and social media applications to its business. For companies not already in the media business, they can even think about getting into it via social networking.

However there are warnings that the information passed through Facebook on to advertisers may be of poor quality since information about users on their profiles is too many and out of date.

A research of Myspace shows that 98% of American Myspace users correctly report where they live. And they tend to immediately report important changes in their lives such as getting engaged. This presents great marketing opportunities (The Economist, 2007). Facebook young founder, Mark Zuckerberg,  said “On Facebook, we know exactly what gender someone is and exactly what age they are” (Story, 2007).

The future of social networks was analyzed in an article titled “MySpace, Facebook and Other Social Networking Sites: Hot Today, Gone Tomorrow?” at Knowledge@Wharton (2006). In this article newx target is called cell phones: “MySpace and Facebook are planning to extend their reach beyond the computer screen to cell phones. Cingular Wireless, Sprint Nextel and Verizon Wireless are starting a service that will allow users to post messages on Facebook's home pages or search for other users' phone numbers and email addresses from a cell phone. MySpace has a pact with Helio, a wireless joint venture between SK Telecom and Earthlink, that will allow users to send photos and update their blogs or profiles by cell phone.”

VII. SURVEY RESULTS

VII. 1. Aim of the Research

Studies of the Nielsen and the DoubleClick were analzyed above. The common result is that consumers are mostly influenced by other consumers. Then Facebook uses viral marketing was investigated as the success story. So I will try to show that Facebook can reach target market in Turkey by applying only word of mouth marketing.

So In this study, exploratory research design is used in order to have a qualitative understanding of the impact of word of mouth in marketing by examining “Facebook” case.

VII. 2. Methodology

I conducted a survey among university students. Samples are chosen randomly. The

questionnaire is made of  15 questions. The data set is analyzed at Excel. Pivot table format

is used for the analysis and cross checking of the answers.

Parts of the questionnaire include examining general criteria of advertising reliability, general profile of internet usage, and awareness of Facebook.

VII. 3. Survey Results

Respondents' demographic profile includes 37 female and 14 male. Most of these targets' age ranges between 21 and 26, and they are undergraduate students.

30 out of 51 respondents claim that the information they receive from their friends is the most reliable information, and accordingly the most reliable advertising source. Second most reliable information comes from the comments of the other users on internet.

Respondents spend an average of 2-3 hours at internet in a day. They access internet in order to first communicate to their friends, chat, second to search information and check e-mails. They find the addresses of the interested websites from search engines and they also visit websites that they hear from their friends.

In case of Facebook awareness level, facebook is at the first rank for 9 respondents, and for 27 respondents it is among the top five sites that they visit everyday. 15 of the respondents do not emphasize facebook in their top five sites but 14 of these do know facebook even though they do not visit it frequently.

49 out of 51 respondents know the facebook. 46 of 49 respondents know the website through their friends and the invitations that they received from their friends as well. 39 of this 49 respondent is member and they visit the website mostly everyday. These members have 100-200 members in their profile. 30 out of 39 respondents recommended the website to their friends and an average of %57 responded back positively, meaning they became a member of facebook.

In terms of Facebook context and usage, for the half of the respondents, Facebook is an important network in finding old friends, spending their free time, communicating with friends.

VII. 4. Charts

VIII. CONCLUSION

The study seeks to identify the importance of word of mouth especially in today’s digital world. There are a lot of literatures and surveys saying that traditional advertising methods have just lost power compared to online word of mouth. Facebook, star of this social networking sector, proved that online word of mouth is enough to reach 59 million people and created a powerful new model of communication like a giant word of mouth engine.

In this study, exploratory research design is used in order to have a qualitative understanding of the impact of word of mouth in marketing by examining “Facebook” case. The results are paralel with literatures and surveys conducted to understand the effect of word of mouth. The results indicate that Facebook could reach 49 out of  51 undergraduate students by using social networking which a promising new line of business.

It can be said that Facebook create a new world of social network so that not only it used the advantages of this viral marketing when presenting itself to the world but also new application techniques on Facebook will show us that new marketing era just starting. We have to be ready to hear amazingly high profit figures of Facebook or higher company valuation. Because now all big brands started to use Facebook ad platforms, but in a short-period of usage of these ads will be spreaded to reach every aspect of consumers.

REFERENCES

Awad, N. F. & Dellarocas, C. &  Zhang, X. (2004) Is Online Word of Mouth a Complement or Substitute to Traditional Means of Consumer Conversion?

   

Chae, D. & Bateman, A. (2002) Branding @ the Digital Age. Gordonsville, Chapter 5: Strategic role of E-Branding, VA, USA: Palgrave Macmillan.

Chen, Y. & Xie, J. (2004, June) Online Concumer Review: A new element of marketing communications mix. 

   

Chernatony, L. (2000, September) Succeeding with brands on the internet. Birmingham Business School Working Paper Series.

   

Chernatony, L. (2001, September) Characteristics associated with successful e-brands. Birmingham Business School Working Paper Series.

   

Chernatony, L. (2003, June) Brand building on the internet. Birmingham Business School Working Paper Series.

   

Chevaliler, J. A. & Mayzlin, D. (2006, August) The Effect of Word of Mouth on Sales: Online Book Reviews. Journal of Marketing Research, Vol.XLIII, 345-354.

Clifton, R. (2004) The Economist; Brands and Branding. Part 3: The Future for Brands: Future of Brands. Princeton, NJ : Bloomberg Press.

Crawford, W. (1997) The Mix Makes the Difference. Industry Week, Vol. 247.

Dunne, D. (2005, 12 December) Help! Online consumers are taking over my brand!. 15302369, Vol. 90, Issue 16.

Facebook | Press Releases (2007, 17 December)

   

Gobé, M. (2001) Emotional branding : the new paradigm for connecting brands to people. New York : Allworth Press.

Godes, D. & Mayzlin, D. (2004, Fall) Using online conversations to study word-of-mouth communication. Marketing Science, Vol.23 (4), 545-560.

Godes, D. & Mayzlin, D. (2007, August) Firm-Created Word-of-Mouth Communication: Evidence from a Field Test.

 

Goncalves, K. (1998) Services Marketing: A Strategic Approach. New Jersey: Prentice Hall.

Knowledge@Wharton (2006, 3 May) MySpace, Facebook and Other Social Networking Sites: Hot Today, Gone Tomorrow?.

   

Kotler, P. (1991) Marketing Management.  New Jersey: Prentice Hall.

Kotler, P. (2002) Marketing Management, 11 Edition. New Jersey: Prentice Hall.

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Navarro, N. (2006, January) Asymmetric information, word-of-mouth and social Networks: from the market for lemons to efficiency. CORE Discussion Paper Series, 2006/02. Université Catholique de Louvain.

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Story, L. (2006, 24 November), What We Talk About When We Talk About Brands. The New York Times.   

   

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APPENDİX

                   

FACEBOOK ARASTIRMASI

BÖLÜM 1 : KATILIMCI PROFİLİ

D.1. Cinsiyet:

D.2. Yaş:

D.3.  Öğrenim durumunuz:

BÖLÜM 2 : GENEL REKLAM GÜVENİRLİLİK DEĞERLENDİRMESİ

S.1. Aşağıdaki reklam kaynaklarından hangisi sizin için en güvenilirdir.

BÖLÜM 3 : INTERNET KULLANIMI GENEL DEĞERLENDİRME

S.2. Bir günde ortalama kaç saat Internete giriyorsunuz? (TAM SAYI OLARAK KAYDEDİN)

S.3. Interneti en çok kullanma sebebiniz: 

S.4. Internette ziyaret etmek istediğiniz siteyi nerelerden buluyorsunuz (Birden çok cevap işaretleyebilirsiniz):

S.5. Internette en çok ziyaret ettiğiniz ilk 5 site hangileridir:

        

BÖLÜM 4 : BİLİNİRLİK VE KULLANIM

S.6.  FACEBOOK sitesini biliyor musunuz?

S.7. FACEBOOK sitesini nereden biliyorsunuz?

 S.8. FACEBOOK’a üye misiniz?

S.9. FACEBOOK sitesini ziyaret sıklığınızı belirtir misiniz?

S.10. FACEBOOK profilinizde kaç tane arkadaşınız var?

S.11. FACEBOOK sitesini hiç başka arkadaşınıza tavsiye ettiniz mi?

S.12.  Siteye davet ettiğiniz arkadaşlarınızdan tahmini % kaçı FACEBOOK’u kullanmaya başladı? (lütfen yüzde rakamı verin)

  %     _                kullanmaya başladı.

S.13. FACEBOOK sitesini kullanma nedenlerinizin önem derecesi nedir?

 S.14. Arkadaş ortamlarında FACEBOOK ile ilgili diyaloglara şahit oldunuz mu?

S.15. FACEBOOK dışında başka sosyal iletişim networklerine üye misiniz?

Vaktinizi Ayırdığınız İçin Teşekkür Ederim!