How negative word-of-mouth marketing can help your brand

By Bryan Pearson, president and CEO of LoyaltyOne Inc.

The old phrase goes, "there is no such thing as bad publicity." Now research shows there may be no such thing as bad word of mouth.

A July report by our company, LoyaltyOne, and researchers at Northwestern University shows that negative word of mouth may actually indicate brand passion and lead to increased sales — if acted upon appropriately and quickly. Further, potentially negative experiences and comments can be translated into enhanced brand engagement and, in the case of loyalty programs, increased redemptions.

As the report, "The Positive Power of Negative Word-of-Mouth," puts it, "The very instance of negative engagement is both a warning and, when best practices are employed, an opportunity."

The study relies on a 2011 event when the AIR MILES Reward Program, operated by LoyaltyOne, made a couple program changes. One of these changes affected guidelines for reward miles redemption, a sensitive area for loyalty customers.

Realizing this, and knowing that engaged members tend to express their opinions when program rules change, LoyaltyOne paid close attention to shared member commentary on its community website. We worked with researchers and linguistic analysts from Northwestern University’s Medill IMC Spiegel Research Initiative to examine posts related to the program’s changes.

We did expect some verbal pushback, but were surprised by actual member activity afterward.

First, LoyaltyOne determined that those members who posted comments were generally more valuable customers — they were 70 percent more actively engaged with the AIR MILES program than those who did not post. So their negative comments stemmed from their emotional connection with the brand or, as the report puts it, they were "more passionate in expressing their opinions."

Passion can lead to activity, and it did. About one third of those who posted comments made redemptions afterward. They also increased their collection activity by 36 percent. That compares with a 21-percent lift among redeemers in the control group.

How do we account for such positive results? During the commentary period, LoyaltyOne responded to specific questions and clarified any inaccuracies when they were posted. This is a critical point of the research: LoyaltyOne’s strategy at the time was to offset the negative perceptions and comments with simultaneous positive experiences, basically exposing our most engaged members to the core values that initially attracted them to the brand.

Through the research, we learned that we could test the loyalty of even emotionally engaged consumers. It is up to us to monitor the relationship regularly and reinforce the elements that make it positive. This goes double when implementing change.

If we have the data, and the resources to launch a timely response plan that is genuinely worded, we can turn negative word of mouth into good publicity and improved business. That’s not an old phrase — that’s just smart marketing.

Bryan Pearson is President and CEO of LoyaltyOne Inc. and the author of the best-selling book The Loyalty Leap: Turning Customer Information into Customer Intimacy.

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