Secret gets out on marketing's new way in

The Denver Post
By Kristi Arellano

Paul Saunders of Brecksville, Ohio, often finds himself striking up conversations with strangers about the latest book he's reading, and he extols cat food and motor oil to friends and family.

There's a reason. Saunders, 48, a producer of Internet radio shows, is an "agent" in the nascent but growing industry of "word of mouth" or "buzz" marketing.

Buzz marketing has gained prominence as marketers target consumers who tune out traditional ads but value personal advice. The industry relies on ordinary people hyping products in exchange for goods such as hats, T-shirts, gift certificates and compact discs.

Their tactics include recommending products to close friends, posting online reviews or chatting up strangers on a bus. Some agents talk loudly so as to be overheard. Others urge store managers to stock products.

Some call it "deceptive"

Colorado's Rock Bottom Restaurants Inc., one of the first companies in the country to launch a far-reaching campaign, is among the practice's adherents. Saunders, formerly of Littleton, was among agents "buzzing" about the company's Rock Bottom Breweries, a national chain of microbrewery restaurants.

Buzzing also has detractors, who complain it encourages people to act as shills.

"It's deceptive," said Gary Ruskin of Portland, Ore.'s Commercial Alert, a nonprofit advocacy group he co-founded with consumer advocate Ralph Nader. "People think they're talking to an ordinary person when they're talking to a corporate shill. It's telemarketing right there in your face." Responding to those criticisms, BzzAgent, a Boston company that organizes buzz campaigns, last week changed its disclosure policy to require agents to identify themselves as such to consumers.

Besides BzzAgent, companies nationally that embrace buzz marketing include Tremor, part of Cincinnati-based consumer products giant Procter &Gamble, and Los Angeles-based M80, which relies on an online network of teens to create buzz on the Internet.

Locally, Gary Hatton of Innovative Consulting Group, a Lakewood marketing firm, says he experimented with buzz marketing in the past when he slipped into Internet chat rooms to talk up a bike wheel rack he was promoting. And Motive, the "experiential" marketing arm of Denver's Morey Evans Advertising, is running a buzz campaign for General Motors in which young people can get concert tickets and other perks in exchange for getting friends to sign up for GM's online network.

"The credibility factor"

Buzz marketing is successful because of "the credibility factor," said Walter Carl, assistant professor in the department of communication studies at Northeastern University. "With people we know, we know we can trust them because we are in a relationship with them."

Dave Balter, BzzAgent's founder and chief executive, said, "It's part of the social fabric to really pay attention to recommendations."

Estimates in Advertising Age magazine put the size of the industry at $40 million to $60 million. And it's growing. A survey of 481 marketing executives conducted by CMO Magazine showed that 43 percent would use or planned to use word-of-mouth advertising in the next six months.

Rock Bottom Restaurants became BzzAgent's first restaurant client in 2003. Its 12-week campaign with 1,073 volunteer agents was the subject of a study by professors from Harvard and Yale universities. It also sold Rock Bottom marketing director Marilyn Davenport on the concept's effectiveness.

BzzAgent's Balter, who then was trying to get his company off the ground, got Rock Bottom to pony up $80,000 for a campaign touting the "Mug Club," a Rock Bottom program promoting parties and keg tappings, and it rewards patrons for repeat visits.

The results were persuasive. During the campaign, Mug Club sales were $1.2 million higher than usual, and the average frequency of visits increased 37 percent. The amount spent by Mug Club members increased 12 percent.

Because of the popularity of the campaign and others like it, BzzAgent today charges $95,000 for a 12-week campaign with 1,000 agents.

Saunders, the Ohio buzz agent, participated in the Rock Bottom campaign. He invited friends to join him there, or told them that he knew of a great restaurant they should try.

His buzzing echoed those of other agents. The agents are required to file online reports that describe their activities. By filing the reports, they accrue points that can be redeemed for prizes.

"My parents came to town, and I immediately told them about this wonderful place with the best beers in the world. We were at the brewery within the first hour they were here," an agent identified only as "Titup" said in one report. Buzz agent "Victoria H" said she started a conversation about Rock Bottom with her doctor, whom she was visiting because she had a case of hives.

Other agents "mistakenly" handed their Mug Club cards to cashiers instead of credit cards, then used the "error" as an excuse to strike up a conversation, according to their online reports.

One brought a Rock Bottom menu to a different restaurant, then proceeded to order from it – purportedly to a waitress' dismay.

A sense of community

The company for which they worked, BzzAgent, ultimately enlisted two business professors, David Godes of Harvard and Dina Mayzlin of Yale, to study the new marketing method.

The two compared the buzzing activities of die-hard Rock Bottom fans with agents who had limited knowledge of the restaurant chain.

The professors concluded that the "impact of (word of mouth) created by customers that have no loyalty to the firm is significantly higher than the (word of mouth) created by loyal – and in some cases very loyal – customers."

Loyal customers had already told their friends about the restaurant and were less inclined to do so on an ongoing basis, Godes and Mayzlin suggested. Saunders participates in campaigns because they give him a sense of being part of a community.

"The key for me is that you're connecting with people who have a particular interest in the campaign," he said. "It's not going to the general market. The nice part is that you do see the feedback at the end. You feel good about the tiny piece that you did. You had some part in it."

Not just the cyber-wise

BzzAgent has more than 121,000 volunteer buzzers and adds 2,000 a week, all through its website, Balter said. The company has 2,400 agents in Colorado and 1,500 in metro Denver.

Agents aren't just cyber-wise teens and hip college kids. They range from 13 to 89 years old, Balter said. More than half are more than 25 years old, and a third are over 35.

"We've got students, housewives, news anchors, executives and chairpeople of major companies," Balter said.

Many are drawn to the practice because it gives them a first look at potentially hot products. Eighty percent of agents never redeem their rewards, Balter said.

"It's not the incentives. It's just interesting to know what is new," Saunders said.

The rewards, however, are at the heart of ethical questions surrounding the industry.

Commercial Alert's Ruskin said he asked the Federal Trade Commission to investigate the legality of non-disclosed buzz marketing.

An FTC spokeswoman did not return messages, but the agency told Advertising Age magazine that it is not investigating the practice.

Most companies are interested in generating natural word of mouth, said Andy Sernovitz, chief executive of the Word of Mouth Marketing Association. Companies such as BzzAgent and Tremor are simply well-developed free-sample campaigns, he said.

The association, which has 220 corporate members, is opposed to "secret-agent" campaigns in which people don't disclose their involvement in the organized efforts, Sernovitz said.

Identifying themselves

In its early days, BzzAgent encouraged its buzzers to be secretive. The company later altered its policy to allow volunteers to disclose their participation as they felt necessary.

The latest policy requires agents to check a box in their reports indicating they identified themselves as product representatives.

Agents who don't disclose can't participate in future campaigns.

In making the change, the company cited research by Northeastern University's Carl, who said disclosure does not diminish the effectiveness of buzz marketing and combats the industry's "stealth stigma."

Hatton is aware of the stigma – and that many Internet forums frown on product pitches. As a result, he said, he only pitched his client's bike rack a few times on the Internet, and he tried to be discreet. If people responded, he referred them to the company's website or suggested that they call a local bike shop.

"I just threw it out there," he said. "I planted the seed."

Staff writer Kristi Arellano can be reached at 303-820-1902 or karellano@denverpost.com.