Will e-WOM Be A Substitute of Traditional Advertising? –A Case Study of Pepsi Refresh Project

Written by Yun Du

Is traditional advertising becoming obsolete?

Internet-dependent segments such as online marketing, e-commerce and social media are currently enjoying a favorable environment, owning to the increasing high internet penetration worldwide. Accordingly, brands are now are redefining their traditional marketing mix to incorporate social media as one of the key aspects (Armelini & Villanueva, 2011). With a huge number of users, social media not only allows brands to communicate directly with consumers, but also enables consumers to converse with one another (Burkhalter, Wood & Tryce, 2014). Consumers are taking the driver’s seats and can freely share their opinions of brands on social media, which is known as interpersonal communication, or word of mouth (WOM) (Burkhalter, Wood & Tryce, 2014). We call those WOM occurrences online “e-WOM”, specifically, e-WOM is defined as “any positive or negative statement made by potential, actual or former customers about a product or company, which is made available to a multitude of people and institutions via the internet” (Hennig-Thurau et al., 2004, p.39; King, Racherla & Bush, 2014). Extremely challenging as it is, quite a few of brands still evolve in this digital age and strategically utilize e-WOM for their benefits.

It is not unusual any more that brands chase for e-WOM to get consumers engaged with them because of the overriding e-trend and relatively lower costs of promotion. At the same time, this emerging approach would inevitably take the place of traditional advertising, which makes a question intriguing and worth further discussion: will e-WOM be a substitute of traditional advertising?

e-WOM V.S. Traditional Advertising

There are some previous studies as follows, focusing on the comparisons of effectiveness between traditional advertising and e-WOM, and revealing some insights to help marketers with their strategic thinking.

Armelini & Villanueva (2011) made a concrete comparison of these two channels (Figure 1), in terms of reach, credibility, control, interactivity, etc.

e-WOM versus Traditional Advertising (Armelini & Villanueva, 2011)

Similarly, Peters et al.(2013) touched upon other differences of e-WOM and traditional advertising (Figure 2).

e-WOM Versus. Traditional advertising, adapted (Peters et al., 2013)

All in all, e-WOM and traditional advertising function in different ways and e-WOM outperforms in terms of cost, interactivity, transparency and credibility. The swiftly changing consumption habits challenge the existence of traditional advertising, and it seems that it has scarified a lot when brands balance their resources between these two channels.

Yes, e-WOM is powerful, but that’s not enough.

“There are still some categories where good old ‘audio-visual impact’ is a must in creating brand likeability, and sometimes TV ads can go viral worldwide and lead to a positive impact on the brand in a subliminal way” (Bhatnaturally, 2011). Barwise & Meehan (2010) strongly claim that it is so not true that we are entering a world where traditional advertising and brands themselves become irrelevant. Instead, e-WOM makes it more urgent than ever before that brands get the branding fundamentals right (Barwise & Meehan, 2010). They hold the view that brands should use e-WOM primarily to gain rich, unmediated insights rather than to sell, and the real value of social platforms lies in learning about consumers (Barwise & Meehan, 2010).

As Figure 1 shows all the similarities and differences between e-WOM and traditional advertising, Armelini & Villanueva (2011) conclude that these two strategies are complementing one another rather than substituting, and brands should keep in mind that the impact of e-WOM is normally difficult to measure or predict (Armelini & Villanueva, 2011).

Chao, Corus and Li (2012) critically indicate that an aggressive shift from dollar to digital doesn't necessarily mean that traditional advertising will fade away in the future. With one thousand two hundred questionnaires distributed, their study concludes that “there are statistically significant differences from the consumers' viewpoints between online and traditional media advertising” (Chao, Corus & Li, 2012). Shocking as it is, the respondents believe traditional advertising to be more effective, which may suggest that e-WOM is not replacing traditional advertising but rather enhancing it (Chao, Corus & Li, 2012). Therefore a strategic balance between e-WOM and traditional advertising will make a huge difference.

The following case study of Pepsi Refresh Project is to some extent an extreme example of devoting all resources to e-WOM, and it turned out to be a humiliating failure.

The Pepsi Refresh Project

Pepsi Refresh Project

The Pepsi Refresh Project (PRP, Figure 3) was a 2010 initiative of PepsiCo to encourage individuals, business and non-profits to submit their ideas for a positive change in and around their community (Zmuda, 2012). The award was up to $ 20 million in grants to winners after fierce competition and voting. What made this campaign most recognizable as well as controversial was that PepsiCo sat out the Super Bowl for the first time in 23 years, spurned other traditional marketing opportunities and embarked an almost 100% e-WOM adventure on social media (Zmuda, 2012). How did this project proceed? After the participants submitted their ideas, it was their job to promote and get votes for their ideas by utilizing social media networks and with the insightful hints and ideas from campaign website (joshsamper, 2011).

The data shows that there have been over 12,000 proposed projects that have motivated and received over 76 million votes from the American public (joshsamper, 2011). It also created 3.5 million ‘likes’ on PepsiCo’s Facebook page, and brought in over 60,000 new Twitter followers (Welborn, 2014). Pepsi has given over $20 million in grants in 2010 that will make a difference (joshsamper, 2011).

People applaud PepsiCo with accurately catching the trends and addressing them with an aggressive project. From the branding perspective, this first-of-its-kind experiment was a smart, strategic move and was intended to be a long-term equity play (Zmuda, 2012). A spokeswoman from PepsiCo asserted that they were more than satisfied with the results, including the level of engagement between PepsiCo and consumers, social ROI and brand-equity results: they claimed that they developed the social network with the largest fan base of any beverage company active today, and consumers perceived PepsiCo as a social responsible, forward-thinking and innovative brand thanks to PRP (Zmuda, 2012).

But wait, here comes the daunting business realities. While the PRP was running, PepsiCo had consistently been losing market share and volume (Zmuda, 2012). In 2010, PepsiCo lost 2.6% of the overall carbonated drink market and Blue can Pepsi sales fell by 4.8% compared to the previous year, leading to a humiliating drop to lowly third place behind Coke and Diet Coke(Welborn, 2014). Obviously PRP failed to translate the viral e-WOM online into sales. Although industry watchers universally admired PRP as a bold experiment and a harbinger of things to come, it quietly fizzled away out of the lackluster performance in early 2012 (Bida, 2012).

PRP garnered broad attention at the beginning as PepsiCo totally stepped away from traditional advertising and redirected millions to fund positive changes in society. After PRP was gone, its influence was still felt no matter for inspiration or painful lessons. When it comes to methodology, it is fair to say a multitude of brands are encouraged by PRP to use crowd-sourcing online and embrace deeper consumer participation (Bida, 2012). However, on the other hand, if we evaluate PRP from its “impact” point of view, as suggested by Professor Wind in University of Pennsylvania, i.e., to what extent has it solved social problems? To what extent has it impacted the brand? And to what was the impact on the interests of its stakeholders? (Zmuda, 2012).I would say PRP was generally ineffective in optimizing social and business impact and engaging with stakeholders, and some lessons as followed should be learned by other brands when using e-WOM:

  • Traditional advertising is still indispensible

In this case, unfortunately consumer behavior and the cause didn't overlap for PRP (Zmuda, 2012). Online popularity didn't turn into actual sales. Brands can use e-WOM to start online conversations and build brand awareness, but there is always no guarantee that it will turn out to be what they expected, because they are not able to fully control it. Conversely, reflect to Armelini & Villanueva (2011)’s opinion, traditional advertising plays a decisive role in awareness and recognition and takes a full control over message and fluency. Overall, the advantages of e-WOM cannot outweigh the shortages, which means e-WOM cannot fulfill marketing goals independently. How e-WOM works may vary from industry to industry, but from my understanding, basically it can gain insights to enlighten brands and then enable them adjust holistic marketing strategies. I believe that marketers should always keep in mind that e-WOM and traditional advertising should go hand in hand, and act as amplifiers for each other to achieve a better result.

  • Seek for tight brand relevance

As Professor Norton from Harvard University pointed out, loyal Pepsi drinkers were often not the active and passionate participants of this project, and vice versa (Zmuda, 2012). It is critical to consider how relevant the project is with the brand identity, how tight the link between the project and what the brand stands for before complementing a project. In this case, there was not a direct product tie-in for PRP, decreasing the chance of driving sales from the very beginning, which is, as Bida (2012) called, “a big no-no in a fiercely competitive category”.

  • Be aware of your objectives

One of the controversies of PRP was the success or impact it had. If the objective of this project was to boom sales of soda, then PepsiCo should’ve been more market-oriented and connected more closely with online campaign. However, if the objective was to nurture a better perception of Pepsi in consumers’ mind, then they made it to some extent. It shows the importance of knowing the objective of a project before launching it, and then brands should strive to accomplish it.

  • Focus on something specific

When it comes to cause, if you don't stand for something, you stand for nothing (Bida, 2012). Two years later, now it is still difficult to articulate what exactly PRP is about and where really results could be found. Every step needs to be thought through carefully beforehand to assure a fluent process afterwards.

Wrapping up

Marketer are now well-schooled of the value and enormous potential of e-WOM; however it is a huge mistake to believe traditional advertising is no longer needed. Some unique characteristics of traditional advertising like unlimited reach, full control of message, etc. can’t be replaced by e-WOM. The PRP is a classic case which offers cautionary tale to these who think e-WOM is the golden role for all. I would say e-WOM is a powerful tool, but it won’t be a substitute of traditional advertising, and what’s really demanding and challenging for marketers is to figure out the best combination of e-WOM and traditional advertising in order to do good for their brands.






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