Saturday’s FT ran a piece by Ellen Kelleher about the rise of personal finance blogs. In it the former Wall Street analyst Henry Blodget was quoted: “The blogosphere functions the same way the stock market does–by incorporating millions of individual opinions into a general consensus. By itself, the influence of any one blogger is small, but if the ideas are persuasive, they will rapidly begin to influence the “blogosphere” as a whole.”

This is a profound remark. The blogosphere indeed functions as a marketplace in information, where spam takes the place of hype, and where a measurable consensus emerges around which companies have good products, and which ones are poor. Where a company’s employees, channel partners and customers spill the beans on how the company is doing 24 hours a day, 7 days a week. The blogosphere can be seen as “setting the price” of goods by forcing those with a bad reputation to discount in the search for buyers. Conversely those with a good reputation can charge a premium.

The interesting thing about this marketplace is that - unlike the stock exchange - the numbers are very hard to extract. You have to use social network analysis, natural language processing and statistical profiling to establish authority and sentiment. Having said that, these techniques exist (we and others are using them) and over time Wall Street and The City will track reputation indices as avidly as they track Standard and Poors ratings.

When we first speak with a brand manager or a PR person they normally ask us these questions:

“What are people saying about my brand in blogs?”

“Can you help me monitor that?”

We say: we can help you monitor blogs, but first you need to do to help us define the questions you want answered. Monitoring blogs, review sites and messageboards on its own gives you large quantities of information, but few answers that can help your business. It is easier to make a business case for spending on online research and analysis if you can be pretty specific about the question that you need to have answered and about the relationship between that question and the business’s bottom line.  These are the questions that we suggest the client starts with: Question 1: “Why do people choose my product?”

Question 2: “Why do people choose my competitor’s product?”

Question 3: “Why do people recommend my product to their friends?”

Question 4: “Why do people recommend my competitor’s product to their friends?”

Questions 1 and 2 may seem at first blush to resemble questions 3 and 4. But actually they are dissimilar. When someone recommends a product they will often choose a reason that says something about themselves. People will rarely say: “I chose this product because it’s cheapest”, but they may often say: “I chose this product because I care about the environment”. Conversely, why people actually buy a product is often around a combination of product features, reputation and price.

(Reputation and price are in some measure inversely related. Products with good reputations generally achieve that reputation by good service. Good service costs money and although consumers are tempted by cheap offers, they know that “free broadband” generally carries a cost in poor customer support. We recently completed some detailed research in this area which shows that brands with good customer support can keep their prices higher for longer than their competitors. )

All these questions are answerable from online research, and we can put numbers against the characterisitics of a product which are most likely to drive adoption. Those numbers have direct benefit to a key hiearchy of stakeholders within the company:

a) the product managers suddenly know which aspects of the product are key to marketing success (and which need most attention);

b) the marketing managers know what is the key product strength to push in relation to the corresponding weakness of a rival’s product;

c) the word-of-mouth marketers and PRs know which messages are most likely to drive viral adoption amongst users and can devise appropriate campaigns.

I am addressing a CBI conference this week in Birmingham, UK, where the agenda is to discuss Crisis Management and digital media.

When we established Market Sentinel two years ago we thought that online monitoring and response would be a leading part of crisis management. As time has gone on and we have learnt more about crisis response, we now have a much clearer idea of what works and what does not. Onlinetools have a part to play, but they are more effective in crisis prevention and in dealing with the aftermath of a crisis than they are in managing the crisis itself.

The nature of a crisis

A crisis rarely comes out of the blue. Normally it is something which was previously an “issue” - poor earnings, a problem with a product, a safety worry - which suddenly flares up. In principle the web is a great medium for addressing such issues before they get to the crisis stage, but in practice this rarely happens (more on that below).

When such crises arise the management of a company has an imperative first to act and only then to speak. When they speak they do well to speak to the nearest mass media, radio, TV and print - ideally simultaneously. Such statements should of course be carried on the website or blogsite, but that is not the first outlet for them. Most media outlets will put the full text on their news websites in any case.

When a crisis happens the senior management of a company would naturally be well advised to monitor the response to their words. PR company Weber Shandwick recently reported that a large majority (61%) of business executives were sceptical about responding to bloggers, even if they had their facts wrong. They instead highlighted fixing the underlying problem. The communications professionals should perhaps be exercised by the response to the message, but in practice - again - their time is better spent talking personally to key stakeholders, answering questions and getting the message out.

There is, however, a huge opportunity for using the web to speak directly and in detail to smaller stakeholders where call centres can simply not cope. For example - is your laptop battery one of those which is likely to explode? Here is a link to the webpage.

The nature of the web

The web is an accretive, not a narrative medium. It helps to think of the web as a palimpsest of information, where new information does not quite efface old information, but gradually becomes more prominent, thanks to the impact of new links, new ways of looking at the old information.

Search engines react to changes in corporate reputation only slowly, as the consensus around a topic changes over time. Google indexes only part of the web, and indexes disproportionately the pages that change frequently. Often the key pages in corporate reputation management belong to influential but staid bodies like institutes of safety, or regulators, or tax authorities.

This means that it is only when the immediate firefighting of the crisis is out of the way that the web comes into its own. Perhaps the brand has sustained some damage. How much damage and from whom? Who needs persuading of the error of their information?

This is the time when the tools that could usefully have been deployed earlier, in the pre-crisis, issue management phase of the problem can be deployed. Here it is useful to benchmark corporate reputation in relation to an issue, to identify key stakeholders who need to be communicated with, on or offline, to monitor those stakeholders, to analyse their own networks of influence and to work at understanding how knowledge flows through the group.

So, I am in the lucky position of not having a crisis on my hands, what should I do? First: write down the issues that might become crises; second; note what I am doing to keep an eye on them from a communications perspective; third: ensure that I know who the key authorities are in relation to these issues. Understand them, listen to them, monitor them. When they start talking about these issues, you know that the issue has moved one step closer to becoming a crisis, but you also know where to address news of your response.

A client, reviewing some of the sentiment scores on the net approval work we have been doing for them recently asked: “why are these people so negative? We don’t get these scores from our off-line net promoters work.”

The client was identifying a pattern we see quite regularly. Online commentary is more negative than off-line. Why? There is no systematic answer to this question, but if you were to attempt an answer you would divide it into three sections:

The squeaky wheel. People are likely to post on a blog or message board or a consumer review site when they have a reason to. The post can often be prompted by a problem they wish to solve, for example - difficulty with the product - if a car won’t start or a program won’t install. Because of this, and given the likelihood that the problem may persist, complaints about the product and the brand are likely by-products of a web session.

Monologue is more negative than dialogue. Research we have previously published  refers to work done by Delahaye pointing out that blogs are more negative that messageboards. 23% of blog commentary is negative, compared to 11% of message board commentary. The reason? People tend to be more measured, more polite face to face than they are in monologue. They do not make such bold, inflammatory “look at me” negative comments. The reason is that in dialogue a speaker is unsure of the feelings of the interlocutor. If he or she makes an emphatic statement about a product or service, he or she risks spoiling their social relationship with the other speaker (or poster) who may be a big fan of the product in question. This politeness factor may also explain why the results of face to face conversations are less negative than a sample of online opinion might suggest.

The third reason is that, particularly for bloggers, staking out one’s social territory online involves a certain amount of display activity - particularly for men! A vehemently negative comment about a large brand demonstrates a certain kind of alpha male aggression. It is show-off behaviour. Bloggers want to be linked to, and being showily negative, particularly in a witty way, may garner more links than a considered “one the one hand, on the other hand” approach.

Paradoxically, as we explained in our “Measuring blogger influence” report, this negativity amongst bloggers actually reduces their authority on a topic. For the casual reader, strongly negative views are off-putting. A neutral is more likely to be impressed, and influenced by the argument of someone who has weighed up the evidence for and against a brand, citing their evidence, than by someone who says: “Brand X SUCKS!”So … although brands are worried about extreme negative commentary online, it generally has little influence. That is, unless there is a special case.

The special case is, as in the example of Jeff Jarvis and Dell:

a) the issue complained of is real and the complaint justified, and echoed by others;

b) brand makes no direct statement on the topic, leaving the existing authorities no choice but to link solely to the complainant.In that one case, bloggers can be VERY influential.

How do you measure word of mouth? The increasing importance of social networks to brands and advertisers has raised this problem very sharply in the last few weeks. Media owners, pharmaceutical companies, automotive manufacturers all need to know the same thing: how am I doing?

If a brand can establish how it is doing in “word of mouth” in relation to other brands this information can drive decisions about the allocation its marketing or campaign spend.

We would need to agree what a ranking in the word of mouth market means.

In the Market Sentinel methodology there are three possible ways of ranking in word of mouth:

• Buzz (numbers of citations)
  
• Approval (sentiment compared to benchmarked competition)
  
• Authority
  

“Buzz” is chat, pure and simple. Measuring it gives you an indication as to whether something is worth mentioning. Britney Spears has buzz. It ebbs and flows. The weakness of buzz as a measure is that you can be talked about without your product necessarily being purchased, or your value endorsed. Key to consumer brands is the central flaw that not all brands have talk-about-ability. Some products and brands are worthwhile, and do their job well (like car insurance) but they are just kind of boring. That doesn’t mean that they are bad products, or that they aren’t relied on, but it means that using “buzz” to track them is bound to fail.

Approval is better, as it equates to the likelihood of customers to recommend your products. We measure it using the “Net Promoters’ Index” - that is a simple index of how many people promote and how many detract from a product or brand in relation to industry benchmarks.

Authority is best of all, it equates to trust, which means that your marketing messages are more likely to be believed, and it corresponds approximately to Google ranking, since it relies on authorities citing you and linking to you. We measure this using a “Stakeholder Analysis” - an index of all the stakeholders in a topic as to who they view as authoritative.

Here is how we would address the problem of benchmarking a brand in relation to word of mouth:

• Identify the topic in which the brand seeks greater authority
  
• Benchmark its existing authority (conduct a stakeholder analysis)
  
• Identify the key authorities to whom the brand would need to communicate its broader proposition
  
• Profile those authorities in terms of their ego-net (who they link to and by whom they themselves are cited), and in terms of the statistically improbable words they use (i.e. their idiolect or individual language)
  
• Assess the brand’s own “Clarity” (consistency of message on the topic) and “Resonance” (the extent to which the brand’s language is picked up - or ignored - by stakeholders). I will return to these concepts later and examine them in more detail
  
• Then we work with the brand’s communications people to produce high value content designed to appeal to those authorities. This communication material could often be contained in a blog, but could form the kernel of a buzz marketing campaign, or a strategy for offline communications.