DIPLOMARBEIT

Viral Marketing
A crucial new dimension in 21st century marketing?

an der

HOCHSCHULE MITTWEIDA (FH)
university of applied sciences
Fachbereich Medien
Mittweida, 2004

von

Bryce, Michael

contents ... 2

introduction  ... 4

1 fundamentals of viral marketing  ... 8
1.1 Origins  ... 8
1.2 Characteristics and definitions  ... 9
1.3 Redefining viral marketing  ... 10
1.4 Types of viral marketing  ... 12
1.4.1 Frictionless / Low-integration  ... 12
1.4.2 Active / High-integration  ... 13
1.5 Objectives  ... 14

2 key elements of communication  ... 17
2.1 Word of mouth  ... 17
2.1.1 Strong and weak ties  ... 19
2.1.2 Communication flow in social networks  ... 21
2.1.3 Opinion leadership  ... 23
2.2 Word of mouse  ... 25
2.3 Cross-cluster communication  ... 26

3 critical issues in viral marketing ...  28
3.1 Research and targeting  ... 28
3.1.1 The message ...  29
3.1.2 The first-tier recipients  ... 30
3.2 The viral element  ... 32
3.2.1 Benefits  ... 34
3.2.2 Viral hosts ... 34
3.2.2.1 E-mail  ... 35
3.2.2.2 Website  ... 35
3.2.2.3 Mobile phone and PDA  ... 36
3.2.3 Viral incentives  ... 36
3.2.3.1 Laughing  ... 36
3.2.3.2 Greeting  ... 37
3.2.3.3 Playing  ... 36
3.2.3.4 Thrilling  ... 39
3.2.3.5 Rewarding  ... 40
3.3 Forwarding  ... 41
3.4 Speed and simplicity  ... 42
3.5 Methods of measuring success  ... 43
3.6 Summary: critical success factors  ... 44

4 viral marketing in context  ... 46
4.1 Opportunities for integration  ... 46
4.1.1 The clutter problem  ... 46
4.1.2 The permission approach  ... 47
4.1.3 Viral marketing and permission marketing ...  49
4.1.4 Further integration  ... 50
4.2 Suitability  ... 50
4.3 Threats  ... 52
4.3.1 Infected attachments  ... 52
4.3.2 Spamming  ... 53
4.3.3 Control  ... 55
4.3.4 Viral clutter  ... 56
4.3.5 Privacy  ... 57

conclusion  ... 59

bibliography  ... 62

introduction

“Markets today are changing fast. Price-sensitive customers, new competitors, new distribution channels, new communication channels, the Internet, wireless commerce, globalization, deregulation, privatization… the list goes on. And it is not only markets that are changing, but the technologies that support them: e-commerce, e-mail, mobile phones, fax machines, sales and marketing automation, cable TV, videoconferencing. It is imperative that companies think through the revolutionary impact of these new technologies.”¹

The above quotation illustrates two essential considerations for marketers operating in the 21st century. Firstly, it emphasises that in today’s marketing world the way companies communicate with their customers as well as how customers interact with each other have changed significantly. Secondly, it points to a key implication of these changes – the necessity for companies to find innovative ways of embracing these new technologies and of dealing with the changes in a manner that supports their corporate objectives. 

These revolutionary changes are due first and foremost to the advent of the Internet. Following the initial stages of its development, in which it generated exuberant excitement and exaggerated expectations among companies and consumers alike, it has evolved into an important distribution and communication channel for a large number of companies. Great significance now attaches to the Internet as an integral part of many companies’ promotional activities. At the same time consumers have become savvier in the use of the Internet; they appreciate that having more information at their fingertips puts them in a significantly better purchasing position: “Buyers today can compare prices and product attributes in a matter of seconds. They are only a click away from comparing competitors’ prices and can even name the price they want to pay for a hotel room, airline ticket or a mortgage and see whether any willing suppliers respond. Furthermore they can enter a chat room about an area of common interest and exchange information and opinions.” ²

Companies neglecting or underestimating the implications of this changing marketing environment, especially in the area of customer communication will almost certainly experience disadvantages when vying for customers’ attention. Also, companies relying solely on established and conventional means of advertising will in all probability lose those customers who have moved on to use predominantly new communication channels. The reason they have done so may well be that “these (conventional) advertisements assume a level of naiveté on the part of the viewer or reader that no longer exists. Today’s consumer is jaded and fed up with overt distortions and onesize- fits-all attempts to influence.” ³

Finally, another root cause of the changing marketing environment is a phenomenon most commonly referred to as clutter. In his book Permission Marketing, Seth Godin claims that consumers today are exposed up to an overwhelming 3,000 marketing messages a day. ⁴ The attempts made by some marketers to deal with this phenomenon are astonishing: “The ironic thing is that marketers have responded to this problem with the single worst cure possible. To deal with the clutter and the diminished effectiveness of interruption marketing ⁵, they are interrupting us even more.” ⁶

Nonetheless, some marketers are attempting to counteract this trend by exploring a number of new and alternative marketing techniques. Amongst them are innovative approaches to customer communication, such as permission marketing ⁷, guerrilla marketing ⁸ and viral marketing. The latter has experienced tremendous growth since the remarkable success of free web-based e-mail service, Hotmail. Hotmail went from 0 to 12 million subscribers in just 18 months, largely because it included an advertisement link for the service at the bottom of every e-mail. Steve Jurvetson, senior partner at the investment firm of Draper Fisher Jurvetson which financed the start-up Hotmail, says that “almost 80% of the business plans we at DFJ see today have the word ‘viral’ in them.” ⁹

Due to the incredible growth of Hotmail and of other high-profile examples, such as the instant messaging software, ICQ ¹⁰, and the free e-card provider, Blue Mountain Art ¹¹, there are some who believe that viral marketing could function as a panacea to counteract the difficulties marketers are experiencing in targeting consumers with traditional advertising. The following quotation illustrates this point of view: “Think of a virus as the ultimate marketing program. When it comes to getting a message out with little time, minimal budgets, and maximum effect, nothing on earth beats a virus. Every marketer aims to have a dramatic impact on thinking and behaviour in a target market; every successful virus does exactly that.” ¹² Furthermore, viral marketing currently seems to be eliciting more discussion among professionals and greater excitement among practitioners than any of the other new communication techniques that were mentioned.

With that in mind, the purpose of this paper is to critically evaluate both the opportunities and the pitfalls that viral marketing presents to marketers in the 21st century. In an environment with new communication technologies, shifting marketing emphasis and changing consumer behaviour the key questions are:

[....]

1 Kotler; Jain; Maesincee, 2002, p.ix

2 Kotler; Jain; Maesincee, 2002, p.16

3 Salzman; Matathia; O’Reilly, 2003, p. 1

4 Godin, 2002, p. 26

5 According to Godin, interruption marketing refers to any marketing activity that involves exposing customers to company messages and information they did not explicitly ask for and which therefore ‘interrupt’ other activities. TV and print advertising are usually cited as examples of interruption marketing.

6 Godin, 2002, p. 27

7 Permission marketing is explained in detail and evaluated in section 4 .1.1

8 Guerrilla marketing primarily focuses on the use of uncommon advertising techniques such as placing advertisements in unusual places. One key element thereby is meeting marketing objectives with minimal budgets.

9 Sansoni, 1999, p. 118

10 ICQ ( www.icq.com ) is an instant messaging service that enables its users to see which of their friends are online and to send them messages in real time. Another popular instant messaging program is Microsoft’s MSN ( www.msn.com ).

11 Blue Mountain Art enables its users to send customised electronic cards to other users for a variety of different purposes. Every outgoing e-card includes the option of instantly sending an e-card back to the original sender ( www.bluemountain.com ).

12 Rayport, 1997, p. 68