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Accidental Referrals

March 1, 2014

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Bryan Lilly, PhD and Aliosha Alexandrov, PhD

For realtors and other providers of professional services, customer referrals are one of the most important sources of new business. As service providers, we want customers saying good things about our brand, and to intentionally recommend our brand to prospective customers. The last thing we want is for customers to say negative things about our brand. Unfortunately, our desire for positive word-of-mouth runs squarely against the anecdotal belief that customers are 10-times more likely to say negative things about a brand than to say positive things.

What are the implications of this 10-to-1 belief? In some companies, practices are implemented to standardize customer experiences. Senior leaders figure, "If word-of-mouth is much more likely to be negative than positive, then let's eliminate unique experiences, so people have fewer interesting things to talk about. We will lose some positive word-of-mouth, but we will lose ten times as much negative word-of-mouth." The drive to standardize resonates especially well among people who work in areas such as operations management and legal departments, where low variability equates to low risk (which is good).

To some extent we sympathize with a desire to create standardized experiences. After all, consumers should have clear expectations of a brand's core benefits, and consistent experiences solidify these expectations. Also, some brands are preferred largely because consumers want a very consistent experience, such as at Starbucks. However, we also recognize the existence of three counter issues:

  1. Inconsistency in experience is sometimes critical to generating delight. Research shows dissatisfaction is often evoked if inconsistency exists on basic-expectation features. But delight (very high satisfaction) is rarely caused by consistent performance on basic features; delight is caused by unexpected positive experiences (Ponnam, Sahoo, and Balaji 2011).
  2. Even when negative experiences occur, service recovery research shows customers are largely forgiving of negative experiences if they were caused unintentionally, and if the service provider apologizes and tries to perform better in the future.
  3. Some research in marketing shows the 10-to-1 ratio does not always hold. For example, consumers recall engaging in negative word-of-mouth more readily than they recall engaging in positive word-of-mouth, but actual word-of-mouth is more positive than negative (East, Hammond, and Wright 2007).

So, how can service providers better understand and leverage word-of-mouth? Of course, positive word-of-mouth is very useful for generating referrals. Service providers also want to avoid practices that lead to negative word-of-mouth. Yet, discouraging negative word-of-mouth by being overly consistent might hinder an agent's ability to delight her customers who help generate referrals.

These ideas about word-of-mouth led to our own research study, where we examined positive and negative word-of-mouth, without assuming they are opposites from each other. We posed the question, "Does positive word-of-mouth occur through a different process or motive than negative word-of-mouth?" If so, then perhaps service providers can work to increase positive word-of-mouth in ways that pose low risk of evoking negative word-of-mouth.

Conversing About a "Brand" Versus Conversing About "Myself"

We developed a list of conversation motives. Notably, much of the word-of-mouth research in marketing focuses on instances where consumers discuss brands in an effort to recommend for or against a brand. However, people naturally converse with each other for many reasons. People may share feelings without any intent to support or detract from a brand. For example, if a friend asks you how your day is going, you might mention things that occurred during your day (your experiences), and speak positively or negatively about them. These experiences may involve brands or interactions with service providers. The point of your conversation is simply to talk about your day; brands or service providers just happen to be part of your day's experience. On the basis of your comments, your friend may seek out a brand or service provider, and therein lies a referral. But the referral was not intentional, it was accidental.

Our list of conversation motives drew from prior research in areas such as communications, psychology and sociology. We then whittled these motives down to a manageable set, based on how frequently they motivate everyday conversations. Our final set of motives included factors such as a desire to affirm or enhance one's image, a desire to compare one's self to others, a desire to form and strengthen (or lessen) emotional bonds with others, a desire to help (or harm) others, and a desire to intentionally support or attack a brand or service provider. We then collected data in multiple waves, both from our university students, from the adult population around our university, and from an online panel. We asked people to think of the last time they mentioned a brand or service provider to someone else, and to then describe what they mentioned, and why they mentioned it (the conversation motive). We also asked people to disclose the brands they mentioned and we collected demographic data.

The results of our analyses reveal an interesting pattern. Yes, consumers engage in negative word-of-mouth. But more frequently, consumers engage in positive word-of-mouth, and by a ratio of almost 3-to-1. So why does prior research find people recall sharing negative word-of-mouth more than positive, while we found the reverse? When we look at specific motives, the pattern changes. Sure enough, when a motive is specifically to support or attack a brand, negative word-of-mouth wins. When people feel 'taken advantage of' by a brand or service provider, they use word-of-mouth as a form of revenge. Speaking negatively about the brand or service provider is how they pursue this revenge and feel better. But across all conversations, these instances of wanting revenge are few. Other motives are much more frequent, tend to be positive, and tend to lead people to converse positively about brands and service providers. For example the motive of comparing one's self to others occurred frequently, as when a person hears about someone's experience on a vacation and then tells about their own vacation. In these instances, people talk much more positively than negatively about their experiences.

Across all of the conversations we studied, close to 90% were not motivated by a desire to support or attack brands. Normal conversations are not about brands, they are simply about "myself." That is, people converse about themselves when talking to others, and mentions of brands or service providers are made simply because the brand happens to be part of the person's experience. Moreover, people talk about things that interest them, and mainly discuss experiences that are positive and interesting (e.g., 'worth talking about'). Culturally, many people in our society are counseled early in life about being positive, for example by grandparents who say, "Nobody likes a complainer" or "If you don't have anything positive to say, then don't say anything at all." It seems that people basically adhere to these recommendations except when they have a grudge to bear with a brand or service provider, and those cases are rare.

Implications for Real Estate Professionals

Aside from core benefits you provide in your service, think about how the customer progresses through your service as part of their day. For example, as a realtor, if an out-of-town customer is looking at houses, you can take them past an interesting attraction in your area and get a photo you can later send them (e.g., "This is a photo of me near the Denver Mint, and the realtor took it while showing me houses in the area.") Or if a customer comes with young children, find something interesting to occupy the children's time. The goal is not just to give the children something to do, but to give them something to do that your customer finds "worth talking about" with others. Every customer is different, and with each customer you must judge whether/how to infuse something interesting.

Gain expertise on a wide range of common interests, and then ask customers about their interests. For example many people have hobbies or other strong interests, and these interests often surface in daily conversations. To some extent, you may find creative opportunities to add value to a customer's area of interest. For example, your knowledge of area caves might be conversation worthy to someone with a spelunking hobby, your knowledge of the local garden club might be conversation worthy to an avid gardener, etc. Useful questions to ask customers include, "So what do you do when you're not at work?" and "So what do you like to talk about with your friends?" Listen to what people say, and progress from there.

Be consistent with delivering core brand benefits, but provide unique experiences. A little trial and error might be needed, and look for a wide variety of opportunities. For example, you might develop a "joke of the week" card and print copies of the card customers can take with them. The goal is to add some unique experiences that are worth talking about. When you find something that resonates with customers, encourage them to share with others and to mention you. This is an indirect request for a referral. You are not saying, "Please refer me." You are saying, "If you share this with a friend, please also mention me and invite your friend to stop by and meet me." You can still directly ask for referrals, but realize you can generate strong word-of-mouth through customers who have conversations where a referral is not the intent of the conversation, and is more accidental in nature.

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References

Alexandrov, Aliosha, Bryan Lilly, and Emin Babakus (2013), "The Effects of Social-and Self-Motives on the Intentions to Share Positive and Negative Word-of-Mouth," Journal of the Academy of Marketing Science, 41(5),531-46.

East, Robert, Kathy Hammond, and Malcolm Wright (2007), "The Relative Incidence of Positive and Negative Word-of-Mouth: A Multi-Category Study," International Journal of Research in Marketing, 24, 175-84.

Hsin-Hui, Lin, Wang Yi-Shun, and Chang Li-Kuan (2011), "Consumer Responses to Online Retailer's Service Recovery After a Service Failure," Managing Service Quality, 21(5), 511-34.

Ponnam, Abhilash, Debajani Sahoo, and Makam Balaji (2011), "Satisfaction-Based Segmentation: Application of Kano Model in Indian Fast Food Industry," Journal of Targeting, Measurement and Analysis for Marketing, 19 (Sep/Dec), 195-205.

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About the Authors

Bryan Lilly, PhD
Professor of Marketing, University of Wisconsin - Oshkosh

Bryan Lilly, PhD is a Professor of Marketing at the University of Wisconsin Oshkosh. Dr. Lilly teaches courses in sales, marketing strategy and statistics. He also consults with companies on using voice-of-customer information to drive growth.

Aliosha Alexandrov, PhD
Associate Professor of Marketing, University of Wisconsin - Oshkosh

Aliosha Alexandrov, PhD is an Associate Professor of Marketing at the University of Wisconsin Oshkosh. Dr. Alexandrov teaches marketing research and an introduction to marketing course.

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