On Innovation

Irfan Kamal June 26th, 2008

Word of mouth campaigns have occasionally played an important role in the marketing of new entertainment and media (movies, music, books and games), but research to establish the major drivers of success has produced mixed results.  As a result, social media spend and monitoring is still a relatively small portion of the overall entertainment media spend.

However, a new research paper by Dellarocas, Zhang and Awad, has used different analytical techniques to demonstrate that – among other factors like box office revenue, marketing budget and star power – a movie’s early word of mouth (quantified as volume of online movie reviews, tone of review and the gender mix of online reviewers over the first few days of a movie’s release) has a significant impact on forecast movie revenues.

As you might expect, more positive reviews are associated with higher revenues.  In addition, however, a greater total volume of reviews (regardless of tone) and a greater diversity of reviewer genders are also associated with higher predicted revenues.  Without this online metric data, the accuracy of projections declines by over 1/3.

Another interesting finding is that online review volume, tone and gender are especially good at predicting the expected performance of so-called “sleeper” movies, i.e. movies with initial release on only a limited number of theater screens.  Since the majority of movies aren’t blockbusters like Spiderman and fall into this category, the value of online metric tracking is high.

So what’s this all mean?

For movie exhibitors, movie marketing companies and rental companies like Netflix and Blockbuster, this research supports the use of online word of mouth tracking to significantly improve inventory, marketing and merchandising decisions.

What’s most exciting, in my opinion, I’d guess that (1) this model should apply not only to movies, but to many products and services that have similar launch patterns – including new books, music and games; (2) creatively dialing up the volume of word of mouth should produce better gains than dialing up other types of marketing spend; (3) starting online conversations across a variety of demographic groups may be a better strategy than targeting just one group.

If that’s the case, tracking (and, potentially, influencing) word of mouth has tremendous potential financial impact to the many players (publishers, producers, distributors and marketers) in the $40+ billion movie, music, book and game industries.

Source:

Chrysanthos Dellarocas, Xiaoquan (Michael) Zhang, Neveen F. Awad, “Exploring the value of online product reviews in forecasting sales: The case of motion pictures”, Journal of Interactive Marketing, 21:4, pp 23-45, 2007 © 2007 Wiley Periodicals, Inc. and Direct Marketing Educational Foundation, Inc

Tags: Metrics, Social Media, Strategy

• Metrics , Social Media , Strategy
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