Word of Mouth Part 3: The C-Rate
(If you haven’t read Parts 1 and 2, read them now. In fact, you really need to start with the post “What is the Single Most Powerful Force in Marketing?”)
So far we’ve learned that Word of Mouth is in fact the most powerful force in marketing.
We’ve also learned that true Word of Mouth doesn’t come from viral gimmicks, but from “something else.”
We’ll be learning what that “something else” is shortly. First, let’s talk about what I call the C-Rate (short for “Copulation Rate”).
This might get a bit heady, so read it 2 or 3 times until it sinks in. It’s worth it.
Here we go …
The C-Rate is the rate at which a Word of Mouth “virus” generates new “infectees.”
A C-Rate of 1 would mean that 100 people “in” would generate 100 out.
Or 100 customers generate 100 new customers.
A C-Rate of 0.5 would generate half as much.
That is, 100 customers would generate 50 new customers.
Now, it’s important to note that this figure is meaningless unless it is measured over time.
So, what we really need to talk about are 10 day C-Rates, 20 day C-Rates, and so on …
Let’s imagine a 10 day C-Rate of 1.1.
100 customers in, and 10 days later, they render 110 new customers.
Not bad at all.
In fact, any C-Rate over 1 is phenomenal and is something rarely achieved.
1.1 is astounding.
But when you get into rates like 1.3 and above, that’s when you get into serious “Tipping Point” territory.
Here are two screen shots from my #1 best-selling book The Irresistible Offer (Wiley 2005) that illustrate this point.
Now, see how crazy it gets around 1.31?
But actually, 1.1 is pretty crazy, too.
See, at Day 10 – those are 10,100 new customers that came in passively.
None of the gimmicky viral marketing tools can generate anything close to these types of results.
Most companies have a C-Rate of 0.001 or maybe slightly better.
But here’s the reality no one talks about: anything above zero is actually “good.”
When you get into the 1+ range your company is growing and growing at a steady rate. The higher over 1 you are, the more rapidly you grow.
But what if you’re at say … 0.5?
Is that a failure?
Not by a long shot.
If you have a C-Rate of 0.5 it means that your advertising goes that much further. (Further than you think – do the math and you’ll see that 10 days later it’s 50 more customers, then at 20 days another 25, and at 30 days another 12.5, and so on ….)
Imagine you start an advertising campaign and you get a negative ROI.
You spend $100 on an ad, and you generate $95 in sales.
That’s a negative ROI of $5.
But what if those new customers, through Word of Mouth, generate just a few more customers?
Well, even a modest C-Rate of 0.25 or less might be enough to tip you over the edge and give you a profitable campaign.
But, very few companies can ever make it over 0.25.
Those that do have a decided advantage – no matter what business they are in.
The sad thing is, attaining 0.25 and sustaining it is not that hard. You should be able to do much better than that if you know just a few simple things. (more on that later)
So, as you can see, companies don’t just wave a magic wand of “buzzworthiness” over their business and watch the magical numbers start flying in.
Word of Mouth is something that must be built, cultivated, and improved over time.
The company I’m building right now, Simpleology, is at around 0.8 right now. This is a fete few companies ever achieve, but we will crank it up even higher. It’s almost a mathematical certainty. (More about that coming up …)
About 80% of our business comes purely through the Word of Mouth of the people who love our products. Without advertising, without affiliates (we have some great ones, but they only account for 15% of our sales), and certainly without viral marketing gimmicks.
So, how does one cultivate genuine Word of Mouth?
There are a lot of buzzwords out there that address this, and they sound good when a speaker says them from the stage, but they won’t do much for your bottom line at the end of the day.
I mean, really. Of all you’ve read about viral marketing, word of mouth, buzz, etc … How much of it have you actually been able to apply to your business?
What if there was an actual plan you could follow that would actually improve your Word of Mouth consistently and steadily – cranking your C-rate up and up?
Keep watching this space …
So… the most powerful force in marketing is Word of Mouth. No arguments there, but is it the most important thing? There is something more central that makes WOM so powerful.
The most important thing in marketing is having a positive influence on the things people in your marketplace learn. Specifically, are you helping them know, think and do things that are good for your business?
If they like what they learn about you, your product, way of doing things and what they need to do to benefit from doing business with you, they’re likely to buy. If they don’t, they won’t.
However, not all people in the marketplace are current buyers. Many just learn from things they are exposed to and pass it on through their influence on others. That’s how “buzz” starts – and keeps rolling.
Influence on marketplace learning is not limited to the promotional functions of marketing. It’s in product, it’s in systems, it’s in the way people are treated.
It’s the essence of all business activities that act together to communicate the value of your irresistible offer.
Everything else is tactical – the way you go about it. But it sure helps to have a great tactician on your side.
Interesting stuff! But, how in the heck do you measure the C Rate? – how would I measure to find my .8?!
For a short period I’d start with something simple like:
No of extra customers at end of measurement period divided by No of existing customers/clients ‘on the books’ at beginning of period.
C-rate = (N2-N1)/N1
Marketing statistians might want to use more complex ‘compounding’ equations to factor in the big benefit of great WOM – exponential growth over time.
Hi Mark,
Also, go to the link at the bottom of the link here to see my other ‘bad’ art. (bad as is cool!) Thanks, Mark.
When you asked ‘Are you the world’s worst artist’ I just had to send you this link that I sent to my team last month with my ‘baaaad art’. I had a drawing of this stupid sheep and sent a page that I just sort of threw together because my team WOULD open the link. My confrontation worked a little bit, but the point is you will see my ‘Baaaad’ drawing.
Note from MJ: Ow. Sorry Marilyn, no extra points for baaaad puns!
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I’d love to crank up my word of mouth. Yes. Waiting for what you have to say about doing that.