A 2004 Intelliseek study¹ found that consumer–to-consumer recommendations—even online consumer postings to forums—carry a higher trust factor than virtually all other forms of advertising, including TV, radio and print. That did not come as a surprise to many long-established businesses.

In fact, one of them always understood the value of consumer recommendations; its entire sales strategy relies on turning customers into brand ambassadors and capitalizing on their social networks to influence others to purchase. That company is Tupperware, and it made a fortune by understanding word-of-mouth's power 50 years ago.

Since then, word-of-mouth (or WOM) has been reengineered as "Consumer Generated Marketing." And, thanks to blogging, its persuasion power is making business media headlines again through a series of high-profile customer relations disasters.

Let's review the forces behind WOM and look at how marketers could reclaim it to engage into productive conversations with consumers.

The beginning: empowerment, frustration and a long memory

First, consumers talk to each other more because they can. Self-publishing tools and enhanced/user-friendly communication technologies have made consumer generated-content increasingly popular. AOL's Jonathan Miller² estimates that 60-70% of the time people spend on AOL is devoted to "audience generated content." The blogosphere is intricately linked to a network of newsgroups, discussion forums and consumer rating sites such as Epinions. Millions are exchanging comments and complaints about products and services on a global scale. Search engines act as a gateway to access this nebula of brand conversations and expose information-hungry shoppers to mixed brand messages and customer service ordeals. This is a far cry from the unilateral positiveness of traditional communication, but makes for good conversation starters, especially if you are looking to buy one of the products decried yourself.

Second, the trust bond between businesses and consumers is fading, and consumer-to-consumer relations have become a viable alternative. There is a growing disconnect between marketing hype and customer experience, and the conversations made possible by technology make it more apparent. Consumers try to engage with corporations on this issue, but the latter have been deafened by decades of shouting advertising slogans in the guise of dialogue. As a result, consumers rely on each other more for product education and information.

In fact, word-of-mouth is valued 1.5 times more by consumers³ today than it was in the 1970s. This finding is further compounded by the results of a survey⁴ that examined the sequence of how consumers learn about products and what influence their purchasing decision: Word-of-mouth came out as the most mentioned determining factor across 9 out of 10 product categories.

Third, the Internet has a long memory. Roughly 81% of consumers age 30-64 use the Web to research products or services⁵. That creates a lot of conversations. What makes the Internet so unique compared with other media is that it leaves a "digital trail" of word-of-mouth behavior. Consumers' voices of discontent are on the wall, for all to see. This makes it harder to conceal past or current contentious customer issues and erodes companies' reputations. On the plus side, this traceability solves the issue of measuring the impact of word-of-mouth, beyond anecdotal evidence. Several companies such as BlogPulse or Buzzmetrics are working hard to track and model conversation trails, and these efforts resonate with ROI-focused marketers. P&G⁶ even claimed to have cracked the code of WOM's effectiveness.

Taking these three factors into consideration, it is obvious that a fundamental change in our relationship with brands and the way we are marketed to is underway. As the authors of the Cluetrain Manifesto⁷ put it: "People in networked markets have figured out that they get far better information and support from one another than from vendors....There are no secrets. The networked market knows more than companies do about their own products. And whether the news is good or bad, they tell everyone."

This new balance of power, where consumers own marketing is aptly named "Consumer Generated Marketing"—a term derived from Pete Blackshaw's "Consumer Generated Media." It spurns consumers desire tap into collective experience balance perceived biased information received from entities with vested interest in purchase. Consumers now have tools the will promote companies that fulfil promises, to destroy those who break them. This has an impact both consumers' on companies' behaviors and sets high expectations for their relationships.

The automotive industry is a good example of a category rocked by CGM. Nowadays, very few consumers would purchase a car without first checking online opinions or comments by other car owners. Nearly 150 million searches are conducted every year on the term "new car" alone⁸. Honda Hybrid's line of cars came under scrutiny⁹ by skeptical owners who gathered in online forums to discuss actual mileage calculations when the advertising claim of 50-60 miles per gallon didn't match their experience. Prospective Honda buyers are using these sites to connect with current owners for feedback. To assess damages to Honda's reputation, it is worth noting that 74% of car buyers¹⁰ named "consumer reports" as most influential in their purchase decision.

Several high-profile marketing or PR setbacks, such as the recent Dell or Land Rover cases, also involved consumers upset by the performance of a product and the companies' response (or lack of) to their grief. These consumer-originated campaigns led to product replacement or compensation and widespread public vindication. More importantly, it forced the affected companies—and those who watched the saga unfolding—to pay more attention to how they fulfil their promise to their existing clients instead of focussing solely on acquiring new ones. Fred Reichheld¹¹, founder of Bain & Company's Loyalty Practice, argues that a customer's propensity to recommend a brand is the most important measurement in business today, before "customer satisfaction." Marketers, as a result, are taking notice.

Companies do not always need to be at the receiving end of a consumer-generated mayhem campaign. Provided that their willingness to listen transpires throughout the entire organization, marketers can leverage consumers' goodwill and networks to their advantage.

Seven Steps to Consumer Generated Marketing

Trying to forcefully implant marketing messages into conversations is disruptive and useless¹². Forget about sending your standard press release to bloggers. On the other end of the spectrum, not every "print your own T-shirt" competition can be hailed as a "Consumer Generated Marketing" breakthrough. The key issue for corporations interested in tapping into consumer-to-consumer communication is how much control they are prepared to let go, and how much they trust consumers to promote their brands. It is not easy.

Here are seven tips to ease the pain, by order of brand control and consumer involvement:

1. Reclaim the call center

Monitoring the blogosphere, newsgroups and consumer rating sites for consumer feedback is a prerequisite. But I would argue that marketers are missing another trick: to reclaim call centers. There is a vast amount of customer interaction there, but too little information is fed back to the organization. Gathering better knowledge on consumer issues and training/empowering staff to deal with them would certainly help deliver a better consumer experience. Most disaster stories include an element of customer representative failure, whether on the phone or online. This is often the first channel that a dissatisfied consumer will turn to, before venting his/her anger online.

2. Fix what's broken

Jim Heskett¹³, a professor at Harvard Business School, wonders whether companies pay too much attention to the most vocal minority of consumers. This is a very valid question, but if you are a marketer and the second highest link on a search query about your brand is a catalog of disasters you hoped to keep secret, you know that the damage is done. Bloggers won't let you cover up your shortcomings any more. You need to fix what is broken quickly as consumers are bound to find out what works and what doesn't. If a consumer complains, check if this is an isolated case (see "reclaim the call center") and address the issue promptly. Publicize what you are doing to fix it.

3. Be prepared to join the conversation

Marketers should familiarize themselves with blogging dynamics and newsgroups etiquette. Several companies have successfully established company blogging policies and have equipped their staff with expertise in dealing with bloggers. The decision to blog or not needs careful consideration and planning, but you need to gather some experience about it sooner than later if you want to remain in touch with your increasingly tech-savvy and networked consumer base.

4. Treat influencers like VIPs