Monday, December 19, 2005

Dave Balter on Buzz Marketing (Tom Peters interview)

Dave Balter is the founder and president of BzzAgent, the groundbreaking word-of-mouth marketing firm that has been profiled in Forbes, Fast Company, and a New York Times MagazineGrapevine: The New Art of Word-of-Mouth Marketing, coauthored with John Butman, was published in November 2005. cover story. His first book,

Dave has over 10 years of experience in marketing, including founding two promotional marketing agencies. He holds a provisional patent in the process and systems of Word-of-Mouth marketing and research. He is also a founding member of the Word-of-Mouth Marketing Association (WOMMA), co-chair of WOMMA's Ethics Council, and a frequent speaker to corporations and universities on the subject of Word-of-Mouth and non-traditional media. asks ...

So Dave, did someone invent word-of-mouth marketing?

DB: Good question. Word-of-mouth as a medium has been around forever, right? I mean, it's about people communicating their opinions and ideas with each other.

Wasn't Eve the very first effective word-of-mouth marketer?

DB: You could say that.

She had a good apple.

DB: She had a great apple and she said great things about it, and the next thing you know we're where we are today.

I don't think anyone really invented word-of-mouth as a medium. It's part of our communication pattern. But certainly organizing, managing, and measuring it has been invented. I think it really started with people beginning to understand it. You can go back to Pattie Maes' word-of-mouth algorithms with Firefly, and then look at The Tipping Point, Anatomy of Buzz, and Diffusion of Innovations by Everett Rogers to trace how innovations are being communicated among people.

You asked if someone invented word-of-mouth. I think it started with learning about it and witnessing it and understanding it, and then it moved to people asking, "How do we build approaches to harness this?"

How did you get turned on to word-of-mouth marketing?

DB: I had run a few promotions agencies and some loyalty programs for corporations. I realized all along that while we keep pushing stuff at customers, what we're actually waiting for is to see what one customer is going to say to another or what recommendation they're going to seek with regard to our promotion.

So I had become somewhat disenchanted—this was about 2001—with the idea of current marketing. I read The Tipping Point and was just blown away by the ideas—


DB: Actually, the Sneezers came from Unleashing the Ideavirus, which I read next. In Tipping Point, it was Connectors and Mavens and Salesmen. Then I read Anatomy of Buzz and got into Diffusion of Innovations.

I was lucky enough to spend some time with Pattie Maes, and I asked her, "Why has no one organized this?" I ran some ideas by her about organizing it, and she thought the ideas would work.

So I decided to try to build a concept of a loyalty program organized around word-of-mouth. Instead of spending on your credit card and getting airline miles, what if you could share your opinion about a product or service and be embraced by the brand in return? That was really the start of it.

So that was the beginning of BzzAgent?

DB: Yes—in December 2001. I pulled together the core concepts almost immediately, and we started building the first template of the site and the system and the approach. By May of 2002 we were live.

So how does a campaign work, in brief?

DB: In brief, anyone can sign up with us to become a volunteer "BzzAgent." This is something that we talk a lot about in Grapevine. When we started the company we were convinced that we wanted to build a system that would find only those Influentials, Sneezers, and Connectors that I had read about. The problem was that we couldn't get any money, because no one believed we could build a company out of this. So we didn't have the money to filter who could sign up to become a BzzAgent.

You mean literally anybody could be a BzzAgent?

DB: Yes. Anyone could sign up. Initially, we thought that when we got enough money we would get rid of the people who weren't cool or influential or whatever. But the irony is that we discovered that everybody really has the capability to communicate and share their opinions and have influence.

So we never changed the system. Today there are about 120,000 agents across the U.S. We add about 1000 to 2000 a week, organically—we don't market for them. When they sign up they get profiled: their likes and dislikes, age, where they live, etc. Based on that information, we begin offering them campaigns. An agent might get a campaign for a book or a fragrance or a beer. We just launched a campaign for a toothbrush. The campaigns are for all sorts of things. A mobile phone. Volkswagen. All sorts of stuff that people are passionate about.

Once you get into the campaign, you're able to experience the product and you receive something we call "The BzzGuide," which helps people become conscious of how to communicate about the product more effectively.

So for instance, if it's a book, the BzzAgents actually get a copy of the book?

DB: Yes.

But if it's a VW they probably don't get a copy of that.

DB: Yeah, didn't you know we gave out 5000 free cars? No. People got a very special private test drive where VW dropped the car off at their house for a weekend.


DB: Yeah, pretty cool.

For a thousand BzzAgents?

DB: I think it was actually more than a thousand. It was what we call a BzzNetwork—or a private label version of the BzzAgent approach and system.

So a lot of people got to spend a weekend with the car?

DB: Yes. There are actually 11,000 people in the Volkswagen campaign but not all of them got to test drive.

So once they get the product, they get this guide that helps them understand how to communicate better. No scripts. This isn't about telling them what to say. It's about providing ideas for effective communication, what types of people you should communicate with, some interesting stories about the brand that others may not know, and so forth. We communicate by telling each other stories. I don't come up to you and say, "Drivers Wanted." I say to you, "My Volkswagen kicks ass. I just drove cross-country. Totally smooth, wonderful car."

Once all this has occurred, once someone has formed their opinion, they go out and communicate with others as they normally would, honestly and naturally. They tell people they're a BzzAgent. There's no stealth. Then they come back into the system and fill out a buzz report form that documents a communication they've had. They'll note time and location.

So they just send an email back to the hive, as you call it?

DB: Well it's through the BzzAgent platform. That information about the word-of-mouth dialogue comes into our system, and people we call Communications Developers read the narrative, this word-of-mouth dialogue. Then they write an individualized reply to every single one. That's really become the heart of the system. The Communications Developers provide appreciation and support, enthusiasm, training—all these things that we don't usually get when we share our opinion about a product or service.

So if you're part of the Volkswagen campaign, you go out and say to someone, "You've got to try the Passat. Here's why I love it. I'm part of this campaign ... ." You report that to us, and we might write back, "That's really cool. Did you make sure you mentioned the thing about the glove box being chilled? People love that idea. By the way, I just got one. I love it. I'm going to drive it to Austin tonight to go to a show. Talk to you soon." Really conversational. And that's really the core of the system.

Based on reporting activity, we also grant people points. Those points can be accumulated and redeemed for brand-associated rewards. But as we mention in the book, almost 80 percent of agents never receive a single point for any reward. Their motivation isn't about getting stuff.

What does motivate them?

DB: This is the interesting thing. In building the business, I thought that getting stuff would be the motivation. We actually built the Communications Development department just to have fun. But what we found was that interaction became really key to making the person feel involved and listened to. So when we ask people why they do this, they say things like, "Well, I like to be the first to know about things." "I love to have stuff to talk to others about." "I feel involved with the brand." "I'm being heard." "I finally get to be treated as part of the process and not being a target or being captured." It's about being involved as opposed to, "I get stuff."

Very surprising, and yet really natural, when you think about it.

It certainly says something about our consumer culture. I probably mentioned this to you before, but I'm still enthralled with my Gillette M3Power razor. But I feel frustrated, because I want to go out and talk about this, but who's going to appreciate it? Nobody in Gillette is ever going to know that I'm out buzzing their product for them. We're all inundated with so many advertising and marketing messages each day that we feel like we're part of that marketing system. So I think we all inherently understand that we can become marketers for anything we own. Clearly, you got a lot wrong—the kind of people that would make good agents, the motivation for doing it—and yet this still works. The idea is so powerful that it overcame those mistakes.

DB: Yes, completely. But that's the beauty of this. We kept letting the individuals tell us what was right. And we did have a lot of it right. We understood that word-of-mouth is powerful and that honesty was key.

I was talking with Eric Jackson, who wrote the PayPal book. One of the keys to PayPal's success was that whenever anything went wrong, they communicated honestly with their whole community. That seems to be what you're saying here, that one of the reasons for your success is that you were always communicating with your whole community. If anything went wrong, you would know about it right away. There was like no lag time.

DB: Exactly. They report to us, and in real time they might say, "I didn't like this about the system," or "How come in this campaign you sent me this kit and in that one you sent that." It gives us continuous real-world feedback, and we're able to really learn from them.

That was actually one of the reasons we launched our "Inside BzzAgent" blog. About a year into the business, we decided to launch a blog that tells everybody exactly what happens inside the company. Things like our org chart and letters to investors that nobody would ever expect you to publish. What we were trying to build on was that idea of really letting our customers and our agents be involved, letting them be a part of the process. That's what people really enjoy. They want to be heard, have a voice.

What about the name BzzAgent? In the book, you discuss how people confuse word-of-mouth with buzz marketing, viral marketing, and, apparently worst of all, shill marketing. But your company name certainly has the sound of buzz marketing.

DB: Almost immediately when I had the idea for the company, the theme BzzAgent came to mind. At the time, I didn't realize there was a difference between buzz and word-of-mouth and viral. I just thought they were all the same thing. I didn't even know that shill marketing was different. I just figured it was all under the same umbrella. In Grapevine we really try to articulate the differences among these media and the different impacts they can have.

So our name is just "bzz" with no "u."

Which is really confusing.

DB: Yeah. But the brand quickly became pretty well known and we didn't want to change it.

How about explaining what shill marketing is?

DB: Shill marketing is where companies pay people to pretend they're having a real conversation with you when you have no idea they're being paid. Companies hire people called "leaners" to lean into a bar over your shoulder and talk to you about the drink they're ordering, for instance.

In the book we talk about a Vespa campaign where they had these good-looking people—both men and women—riding around on their Vespas. They would show up at a café, start a conversation with some unsuspecting person, then give them their phone number, like a connection had been made. But when someone called the phone number, they got the Vespa dealership. Just breaking some poor guy or gal's heart.

But that deception tags the brand. You're interfering, trying to deceive, and people ask themselves, "How could they do that to me?"

Fifteen percent of every conversation has something to do with a product or service. So why be deceptive? Why not just find people who want to talk about that product and engage them to communicate with others?

I think you say the ideal campaign lasts for 12 weeks. If you go too long, people get tired of talking about it. If you don't go long enough, they haven't gotten all of their energy revved up yet. But the surprising thing is that you say that the BzzAgents might only buzz five to nine times?

DB: That might be all they report. People typically have about 40 to 50 products in their word-of-mouth repertory, so to speak. There are only so many things we're thinking about, and maybe four or five that we just talk to everyone about. The iPod was like that. Cabbage Patch Kids back in the day. There's the occasional one that's at the top of our list, but most products live in that group of 40 to 50. We don't go out and just look for someone we can talk to about those products. The way you interact with most people is, for example, when someone mentions a restaurant, you say, "Oh yeah, yeah. I'm in a campaign for that restaurant. Let me talk to you about that." Or if someone mentions another car, you bring up Volkswagen and say, "Speaking of cars, I was involved in this campaign." Right?

So how many campaigns is a BzzAgent in at one time?

DB: Up to three.

So they might have three things in mind, and if something related comes up in a conversation, they'll mention their campaign. They're not going out to actively promote this. They're not going to lean into the bar and order a Zima or whatever.

DB: No, no, no. And if someone reports any activity like that to us, we let them know that's not really what we're about here. This shouldn't be so aggressive. They try the product and read the guide, and as they go about their daily business, they'll comment if the subject comes up. For instance, if we were doing a campaign for Tom Peters and somebody was talking about design, the BzzAgent might say, "Hey, wait a second. Have you read Re-imagine?" It's that concept, not a pre-planned interaction.

How do you measure results?

DB: There are various methods, but there are two key ways. First, from the reports, we accumulate statistical data about how much word-of-mouth is occurring, and get a quantitative view. We also accumulate qualitative data: Do people like the product? Do they say mostly positive things, mostly negative? How often do they communicate? What about other media? Here's a really interesting statistic: 40 percent of every word-of-mouth interaction has something to do with another media channel—TV, print, radio, whatever. So some of our data helps articulate how other media are being used.

So somebody is talking to somebody about a coffeemaker and they mention the ad on TV.

DB: Yes. One of the brands we did a campaign for was Home Café by Folgers, which was on Survivor. Folgers wanted to know if people saw the Survivor thing and did they pay attention to it? So we got a lot of reports from people who would say, "I tried this Home Café thing." "Hey, was that the thing on Survivor?" "Yeah, yeah, yeah. That's where I saw it." And it's that sort of integration of the communication with the advertisement. That's the future. That's it right there.

So do you coordinate these word-of-mouth campaigns with actual print or TV ad campaigns?

DB: Absolutely. It's clear we do not think we're a replacement for all other media. Traditional media is not going anywhere. It's just that its effectiveness has changed. In the 1950s, you could run a Tide commercial and people would see it and think, "Oh, I gotta buy Tide." Today people still see the commercials and they like some of them, but they don't act until they check for themselves if the product is something they're really interested in. And by checking, I mean they'll ask a friend or read a review online. They'll go to the store and read the point-of-sale stuff. All that leads to a purchase decision. So it's really the integration of all these things.

Right. Somewhere along the line I developed a rule that if I heard about a product from two different unrelated people, then I would consider it. Or I would go to a movie if these two different unrelated people suggested it, or if they recommended a book.

DB: We probably all have our own rules we've had to make up. They say we see 3000 ads a day and we filter out 95 percent of them. So what you're talking about is the filtering process you created for yourself. If two people mention it to you, it's worth looking at. Right?

Well, it also has to be two unrelated folks I think are sane.

DB: Right. But a very important key is that they don't have to be some sort of "Influential." They could be your neighbor that you just happen to like or trust or whatever.


DB: It's not about whether or not they fit into some special portion of the population. That's not how we make our decisions.

Right. Somewhat related here, I loved your story about the Rock Bottom Restaurants. What you learned there seemed to be quite a twist on everything. Can you talk about that?

DB: Sure. Rock Bottom is a restaurant chain with 30 locations in 15 states. We did a campaign for them about two years ago aligned with Harvard Business School and studied how many people in our system were "Influentials," who's a "Trendsetter," what's the impact.

We had a thousand agents join us for the campaign. Rock Bottom had a loyalty program called the Mug Club. A lot of these people already had the Mug Club card, so we just invited them into the campaign. Rock Bottom was generous enough to allow us to track sales data across these cards, so we could tie actual reports of word-of-mouth to spending on a card. So we could say, "This person reported; how did they spend?" Things like that.

We looked at four groups of people. The first group included Influentials and Trendsetters. We expected them to be driving results, but we found they didn't really do much. When we asked them why, they said, "I'm pretty careful about what I talk about. I've already talked about Rock Bottom; I've sort of moved on. They're not as cool as they used to be." So Influentials didn't create much change.

Then we went to the second group, which was the Heavy Loyals. One Heavy Loyal we talked about is Dwight, who I think had 1812 pints and 400 or so visits to Rock Bottom. This guy loved Rock Bottom.

Was he the best customer in the world for Rock Bottom?

DB: Yeah, he's a guy who's there all the time. We figured he'd talk a lot, but what we found was he didn't really want to talk that much. When we asked him why he wasn't talking more, his first answer was, "I've already told everyone around me about Rock Bottom." He had already influenced his network. Secondly, he had started to feel a bit of ownership toward Rock Bottom, like it's his place. Heavy Loyals can like a brand or product so much that they start to internalize it almost.

Maybe you don't want to talk about it because you don't want more people coming in. It's so internal to you that you need to keep it inside you in some metaphysical kind of way?

DB: It's really interesting. A lot of people have this feeling for bands, for instance. A band that they like so much they eventually don't want to turn anyone else on to it. They don't want everybody to know about it or everybody will go and then it won't be what it is now. There's probably some really deep psychological theory here. But we see it over and over, where the heaviest of evangelists don't get as active in certain ways about the brand. They're more than willing to help, and they love the company or the brand or the product, but there's a moment they'll stop because they just treat it differently to themselves.

So we went to a third group, which were the Mavens. We thought maybe the experts, the people who write reviews, would have more to say. So we went to the Mavens and looked at how they were reporting activities to us and compared it to their cards.

What we found was they had a very short word-of-mouth window. These people talked about Rock Bottom but moved on very quickly, mainly because their job was to continuously talk about the next thing. So they would say, "Well, I'd already talked about Rock Bottom and my reputation is about new things and the next thing and so I've sort of moved on. But it's a great restaurant, I'd be glad to recommend it if someone asked."

When you say it's their job, you mean it's their social job to be out in front of everyone else.

DB: Yes. That's their identity. Now, the last group was the most fascinating piece. This group was called the Light Loyals. They were people who had been to Rock Bottom a few times. For instance, one woman had been to Rock Bottom three times and had seven beers—the person that drops to the bottom of everybody's customer segmentation list.

Did she drink every last drop in those seven beers?

DB: She boozed like crazy. No, I'm kidding. When we looked at the data for this woman and the people in this group, it was incredible. They were the ones who actually reported activities that were really impressive and then started spending more on their card. They got people to sign up for other cards, and they frequented the restaurant more. They weren't Influentials; they weren't restaurant experts; they were just regular everyday people.

And when we asked them why their behavior changed, they said, "You know, I hadn't really thought that much about Rock Bottom, but you made me realize I love the place. And by the way, we have this thing at work every Friday where we go to lunch and I figured, why not? I'll take people to Rock Bottom. I love that place."

So it was making people conscious. They didn't have a network that was influenced. They didn't base their reputation on whether they were some type of expert. All this together makes them very willing and very able to create word-of-mouth that has impact.

So when the campaign ended, over the course of three months we had generated 1.2 million above-trend sales. We increased spending-per-card, frequency of visits, and new card sign-ups—wonderful stats all from this Light Loyals group. So we call this "The Myth of the Influentials."

When I read that, I was reminded of my own experience when I was learning to be a glassblower.

DB: Ooh, cool.

I couldn't tell enough people about glassblowing. I was excited. I was learning this thing. I mean, you're holding 1500 degrees of molten glass nearly in your hand. It was exciting, and it was so new. I think there's just something innate that makes us want to share new knowledge with other people.

DB: That goes back to some of the motivations of the volunteers. You want to talk about things; you want to be the first to know. You want to be in that group that's sharing knowledge. That's pretty important to us.

Yes, you want to share something. When I was talking to people about glassblowing, I could be pretty certain that no one else there knew anything about it.

DB: Right. You were the cool guy.

There's very interesting stuff about negativity in the book.

DB: Right. We call this "The Weird Value of Negativity." Negative word-of-mouth has a bad rap. I think there was a statistic that came out in the '70s that said negative word-of-mouth traveled 11 times faster than positive or some such stat, which has been disproved over and over and over.

I heard someone say basically that same thing just the other day.

DB: It's so sexy, it must be true. Don't get anything bad said about your product. Eleven times faster. But it's been disproved over and over. That doesn't mean that you want negative word-of-mouth; it's certainly not something people strive for. But I find three interesting things.

The first is that negative word-of-mouth is the way a company listens in this day and age. People are going to say good and bad things about your products and services. It's going to happen. And companies that are paying attention to those things are getting all the information they need to decide how to continue to distribute their product or sell it or change it. When there's an issue in the real world, you've got to listen to where the problem is and figure out how you can solve it. All that comes from negative word-of-mouth.

The second thing is that 50 percent of negative word-of-mouth comes from a feeling of injustice on behalf of the brand. What that means is not so much the product itself but your experience with everything else around it. Like if you have a problem with your Dell computer and Dell customer service treats you like garbage. Even though you love that computer you're going to say bad things. So one way a company can combat negative word-of-mouth is to listen and pay attention to the negative word-of-mouth and respond to it. Very simple.

Acknowledge it.

DB: Yes. Don't hide from it. People just want to know that you're paying attention to them. The Home Café machine, for instance, had some issues. We sent 3000 out to agents, and about 60 of them caught on fire. They actually sparked and smoked. This was a brand new product that clearly had some kinks and they wanted to work on it. So they sent every agent a new machine right away, no questions asked, and immediately that negative word-of-mouth stopped. These people said, "Hey, you know what? They treated me so well. I know products have issues. Fine, okay. Well this one works, it's really great. Thanks."

Now my third point about negative word-of-mouth is really the most important. It's about something we call Quiet Advocates. Quiet Advocates are people who don't really communicate much about a product unless there's a lot of negative word-of-mouth they consider unfair. If they think the company is being given a bad rap or isn't being treated fairly, they'll come out to defend the product.

These people, these Quiet Advocates, can be really powerful. In this Home Café campaign, the noise from people saying negative things became pretty loud, meaning a lot of people were doing it. So the Quiet Advocates came out and defended the brand and said, "Look, these guys are making a great product. They had a couple of kinks. They talked to you. They said they're going to fix it. Give them a break and move on." These people can be really powerful for your brand. We see this over and over, where Quiet Advocates come out of the woodwork and become long-term real evangelists for the product.

Right. And the other underlying lesson there is that we consumers aren't dummies; we don't expect anything to be perfect.

DB: Right. This isn't the end of the world. In the book, we talk about iPod's dirty secret. They had a bad battery. People asked questions; Apple responded very well. In the end people didn't stop buying iPods. They said,"Okay, they had a problem. They fixed it. That's what we want."

Then there was the whole Tylenol scare, whenever that was. Maybe before you were born.

DB: No, no, I remember that.

They took a huge multi-billion dollar hit taking everything off the shelves, but certainly the good will they bought paid for that many times over.

DB: Without a doubt. By doing that, they earned people's trust and support of the brand over time.

In the long run, is that a stronger message for the company than just to have been perfect all along? Should somebody think about screwing up just so they can fix it and make an even better impression on the consumer?

DB: Screw up a product on purpose so people will say good things when they fix it? That's quite a marketing strategy.

Well, I'm just wondering if you can measure the difference between somebody's good will about a company that's just always been good as opposed to a company that's had a flaw and then fixed it really well? Do they come out smelling better after having fixed a negative, or are they better off just being positive all the way through?

DB: Every company takes a different path, but my suggestion is not to create a bad product so that you can impress people by fixing it. Your job is not to go out and try to generate negative word-of-mouth. The point is that negative word-of-mouth isn't the end of a brand. And more importantly, every brand is going to have some at some point. It's how you deal with it, how you fix it, how you pay attention to it, that's really going to solve the issue.

Right. And where do blogs work into this?

DB: That's an interesting question. Online is not where most word-of-mouth occurs. In fact, one study shows that 80 percent of word-of-mouth happens offline. You might post something to a blog or a review on Amazon, but most of your talking is still face-to-face.

Blogs are a fascinating tool, but in most cases they don't make or break a product or service. Companies should pay attention to them and respond to them. They can be sources of customer feedback. But they're not going to replace face-to-face interaction where we're sharing opinions. They're another tool in the kit, another form of communication.

Do you think every company or every product should have its own blog?

DB: No. There are some products that no one wants to spend their time talking about. P&G doesn't need a blog about every product, but maybe they should have a blog about product development. People would be really interested in that.

Or something more behind the scenes, like you've done with your blog at BzzAgent.

DB: Oh yes, people love that stuff. I just think that companies should carefully consider what they put in them. I think they're an interesting, potentially very effective tool if used right, but I don't think they are the outlet for word-of-mouth communications.

So what's your favorite campaign of the moment?

DB: Well, we just launched a campaign for Sonicare, the automatic toothbrush. I love it. The dentist said, "Hey, you must be flossing." And I said, "No. Sonicare. Good stuff."

We're about to launch a Trolls campaign. Remember those little dolls?

The guys with the purple hair sticking up?

DB: Yeah. We love those guys.

So they're coming back?

DB: They're coming back. So we're about to launch that. We're very excited.

How are they different from before?

DB: They have more varieties. They sent us a bunch of trolls wearing BzzAgent t-shirts, which we thought were really funny. So you can dress them up.

So you'll be able to go online and buy clothes for your Troll?

DB: I hope so. That's an idea they should listen to. That would be great.

There you go. I'm going to submit my buzz report.

DB: Perfect. We're also launching a campaign early next year for Nutella, the chocolate hazelnut spread. We're excited about that one. There's a guy here who seems to enjoy a Nutella, fluff, and peanut butter sandwich. That's sort of the next level.

That's like a super-deluxe Reese's cup. Well, Dave, thank you. It's been great fun talking with you.

Blog: Inside BzzAgent,

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