March 08, 2004
How To

How Patagonia Uses Word of Mouth Marketing (Instead of Traditional Campaigns): Seven Steps

SUMMARY: Instead of spending big bucks on traditional media to spread the word, outdoor gear retailer Patagonia relies on its own customers. When you depend on word of mouth for growth, you have to be darn good at eliciting it.

We asked Patagonia's ecommerce Director to detail the seven key steps for growing word of mouth, including:

  • Learn where your word of mouth (WOM) comes from

  • Develop ROI models that reflect cross-channel interactions

  • Refocus communications from the transaction to the relationship

Especially useful for marketers who want to make a stronger brand statement with their site:
Outdoor gear supplier Patagonia has some self-imposed limitations when it comes to marketing their products.

"We're not going to partner with companies that don't have environmental activism as part of their values, as part of their behavior." says Craig Wilson.

And many traditional marketing vehicles - like TV, radio and print ads - are out, too, "...we don't philosophically go there and we don't go there financially either."

Instead, Wilson says it's customer loyalty and word of mouth that drives the business. Here are the Patagonia's seven steps to supporting WOM-based growth:

Step #1. Learn where your word of mouth (WOM) comes from

Wilson's team used online and email surveys to understand customer behavior and opinion. They learnt, for example, that just over half of their customers eventually go out and recommend the brand to friends and family.

In fact, WOM is so influential that Wilson sees it as perhaps the most important success metric for the company.

But they also learned that it took longer than the industry average for customers to actually start recommending Patagonia. Why?

Two reasons:

a. The quality of Patagonia brand gear drives loyalty and WOM, but " takes a long time for you to realize that (the product) lasts a long time."

b. With low-key marketing and a limited retail presence (17 stores in the USA), Patagonia wasn't reaching customers often enough.

The team also discovered that visitors who read the environmental and similar information at the website go on to become the best online customers.

The logical conclusion; "The thing that really tips the scale for our customer to become a loyal customer are more and more interactions with us." In other words, both sales and customer advocacy depends on getting people to interact more frequently with the company and learn more about its core values and activism.

So how did Wilson and his colleagues respond?

Step #2. Develop cross-channel customer visibility

Previously, Patagonia's distribution channels (including own retail, wholesale, catalog and online) each operated on a standalone basis. Wilson's team are now integrating customer data across all channels, so that communication is more coordinated.

He explains, "Any communication that goes out of our retail, or anytime a customer goes into a retail store or anytime they go on the internet or they receive a catalog or receive an email - we need to have visibility over all those transactions or interactions with Patagonia."

Step #3. Encourage cross-channel interaction

With this visibility, Wilson's team can identify obvious gaps in customer communication. They found, for example, great catalog customers living near a retail store, but who'd never bought from that store.

Wilson recollects, "We've been sending them catalogs but we hadn't been inspiring them to go into a retail store. And we had people shopping in retail stores that we were not sending catalogs to." Now, for example, they're targeting retail store catchment areas with catalog mailings.

Step #4. Develop ROI models that reflect channel interactions

Of course, once you start to also see a channel as a marketing vehicle for other channels, there are the usual organizational conflicts.

Wilson says the solution is in the way you measure channel success.

Based on their own research and experience, Wilson's team built revenue allocation formulas. So, for example, when a catalog goes out, the dollar sales per book figure used to evaluate the ROI goes beyond direct telephone sales to include a dollar figure for the likely contribution to local retail store revenues and internet sales.

Step #5. Refocus communications from the transaction to the relationship

Cross-channel interaction also means the customer communications within each channel no longer have to tell the whole Patagonia brand story.

In pre-Internet years, customers might have learnt everything about Patagonia and its products from the catalog alone. Wilson explains, "Everything that you absolutely knew about the brand was captured in that catalog and in whatever product you've purchased."

Now the catalog isn't under the same pressure to "carry" the brand. Instead, it can present selected products in more detail and drive customers to, for example, the website for a fuller Patagonia "experience."

This website itself reflects the WOM-inspired relationship focus. For example:

-- The press room features organic cotton brochures and child care information, rather than sales records and product announcements.
-- The homepage has as many links to information on the company and its environmental initiatives as it does commercial links to store pages.
-- Product descriptions often incorporate relevant anecdotes or stories from the field.
-- the "About" pages are extensive and focus almost entirely on environmental issues and campaigns, and company culture and philosophy.

It's this kind of information that Wilson knows drives sales, loyalty and WOM. And the team are working on ways of making it even more accessible to visitors.

He says, "The problem is that we have not done a great job of prioritizing what those stories are and making certain that they are very high up, so that any paths through the website that a customer takes, they can be exposed to that information."

Step #6. Avoid basic site problems through usability studies

Of course, access to website information presupposes a functional website. Wilson's team conducts usability studies before any significant website changes, plus an annual total site usability audit.

Of the various techniques they employ, Wilson says the most insightful is to pull customers out of a retail store, sit them down in front of a PC and give them a gift certificate. Then watch them shop online.

"They're in a more normal mode when they're going to spend some money. That was a gift to them basically for their time...but they really act as though that's not free money. They spend it very much the way they would normally spend a hundred bucks out of their pocket."

He also notes that you don't need a lot of people to identify problems. He explains, "You really discover the issues very quickly looking over the shoulder of somebody...We don't have to run 50 people through it. We can find out what's wrong with about 5-10 people."

Step #7. Avoid explicit solicitations and over saturation

One obvious question - what specific tools or communications are Patagonia giving customers to facilitate this WOM?

Wilson's answer - nothing. He explains, "Just trying to make a good product...that's more our style - not to be proactive or push or incentivize people to do things."

This trickles over into email marketing. The in-house list gets an average of just one or two emails a month, mainly highlighting new products, but with environmental information included, too.

Wilson explains, "We're not desperate to have emails drive sales. We more want to utilize them to maintain a presence with our customer and let them know what's going on."

Needless to say, he's keen to avoid any spam taint. "We've pulled back a little on our emails in the last few months...We're pretty aware of what's going on industry-wide and we for sure don't want to be a company that's looked at in that way!"

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