It may well become the mouse that roars on Madison Avenue. Consumers clicking away at their computers are increasingly swapping opinions about products through e-mail, discussion groups and a growing swell of Web sites. In this formidable shift in the balance of marketing power, no amount of advertising or public relations spin may rectify a bad situation once it begins its journey through cyberspace at warp speed. Skeptical? Ask the folks at Intel.
A few years ago, the company had difficulties with its Pentium chip. Intel tried to diffuse mounting e-mail complaints by posting its own online notice that the problem was rare and affected only a small number of users. IBM shot back with its own Web notice refuting that claim and later refused to ship computers with the defective chip. Intel was forced to issue a product recall and replaced the chip.
“Intel had to spend $500 million fixing a chip because of a discussion that started on the Net,” says cyberspace pioneer Esther Dyson, the chairman of EDventure Holdings, who sits on the board of WPP Group plc. “It’s dangerous for marketers to ignore the fact consumers are talking about products on the Web. They need to face this growing reality because it’s an issue that’s not going away.”
But even as companies devise new Net strategies to talk directly to their customers, they may be missing a key point: Consumers are using the medium to talk about the way products are marketed.
“I don’t think marketers understand this change. We’ve been carrying this message to them for the past year and a half. But when we tell them about it, it’s always news to them,” says J. Walker Smith, president of Norwalk, Conn.-based Yankelovich Partners. “It’s inevitable. There’s going to come a year when advertisers realize customers are acquiring a true empowerment technology. It’s already happened with music and the Web.”
There’s a burgeoning number of new Web sites soliciting consumer opinion about products, entertainment, media, vacation destinations–even presidential candidates. They include Deja.com, Productopia and Epinions. Another, BizRate, compiles consumer ratings on e-commerce merchants.
The Hollywood Stock Exchange, in which NBC just bought a stake, offers site visitors $2 million to invest in the “stocks and bonds” of current films, celebrities and music, thus establishing their fluctuating market worth. (The company, which generates revenue by selling research to the entertainment industry, created patented models that help predict studio box-office amounts.)
Amazon.com began tapping into consumer opinion four years ago when it invited site users to contribute book reviews. Other sites, such as Cnet, also solicit user opinions.
Epinions offers a breathtaking view of the speed at which this grassroots consumer revolution is taking hold. The Mountain View, Calif.-based company founded last April was created in 12 weeks and had raised $8 million before a line of software code was even written. Epinions has already gone through a second round of financing, picking up $25 million from investors, including Goldman Sachs and Dell Computer’s Michael Dell.
“We haven’t even had a chance to spend any of the original $8 million on advertising,” laughs 28-year-old Mike Speiser, a co-founder, who is director of marketing. “To get word out, we relied on a viral e-mail campaign.” Lack of a media profile hasn’t hurt traffic numbers on Epinions. The site launched in September and drew 331,000 visitors in October. By November, that number rose to 600,000, and Epinions expects to break 1 million in December.
For Net consumers, empowered by the new ability to quickly comparison shop, sharing impressions and brand experiences is a natural extension of online purchase behavior. More significant for marketers, however, is research that shows consumers are developing less of an emotional tie with brands and are adopting one based on performance and accountability.
In a recent Yankelovich Monitor, the company found that purchase decisions are most heavily based on word of mouth and trusted third parties. The top influences were: a current product owner, 34 percent; family members, 31 percent; and friends, 29 percent. A separate study from BizRate of 5,500 Web consumers shows that 44 percent said they consulted opinion sites before making a purchase, while recent findings from Forrester Research found that half of those using online communities consider consumer comments important or extremely important.
“Peer recommendation is increasingly vital today because everyone thinks ‘experts’ have an agenda or can’t be honest,” says Larry Light, president at marketing strategists Arcature. “The Web facilitates discussions among consumers. But that’s also part of a larger trend in marketing. We’re seeing more real people in advertising, more real-looking executions.”
A recent Yankelovich study found that a majority of consumers want companies to make safe products without government regulation and are disillusioned with their ability to get complaints heard.
“The Internet is great because now consumers have a voice with marketers, which they never really had before,” says Jack Trout, president of marketing strategists Trout & Partners. “The good news is you have a voice; the bad news is that people can cause a lot of mischief.”
In Next: A Vision of Our Lives in the Future, Ira Matathia and Marian Salzman, at the helm of Young & Rubicam’s Brand Futures Group, argue that protecting brand integrity in the face of unfounded attacks is becoming an important Web issue.
“Reputation management on the Internet is going to be one of the most important communication problems in the future,” says Salzman. She points to Tommy Hilfiger, who was accused in an Internet campaign of making racist comments on the Oprah Winfrey show two years ago. Calls for a boycott ensued, picking up speed on and off the Net. For a brand under assault in the borderless cyberspace marketplace, timing became urgent.
Hilfiger responded with its own online message circulated in popular Web news groups. The company offered evidence from Oprah’s producer that Hilfiger had never been a guest. In its rapid response, Hilfiger averted further problems.
Salzman says Internet disinformation is a two-way market stream. Consumers looking for legitimate information about products may be hearing a paid-for plug from someone thought to be objective.
“There are brands out there that are paying people to talk favorably on message boards, in discussion groups or in news groups. This is paid for, commercial and with specific brand objectives,” says Salzman.
How do visitors know they’re reading legitimate postings from a loyal consumer and not someone with an ulterior motive? That’s one of the criticisms about such Web sites: Competitors or former employees may flame the venues under assumed names. Sites also get slammed for using product advertising as a revenue stream. (BizRate carries no ads.) Aside from advertising, they also earn money from selling research, ringing up commissions as shoppers click on to merchant sites, and licensing their technologies and services to other companies.
Regardless of how valid some of the complaints may be, the popularity of such Net destinations is a clear indication of what marketers can expect in the new Web economy. In an Internet-driven information age, advertisers are losing their grip on controlling brand image in a mass marketplace.