Web 3.0 can scale new heights with word-of-mouth marketing – it’s perfect for blockchain-native protocols
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A company’s success is intricately linked to its marketing strategies in a highly competitive consumer market. The CMO survey found that 72% of CMOs felt that “the importance of marketing in their companies increased” significantly in 2020-21.
It also highlighted that traditional advertising recorded negative growth of -0.2%, while digital ad spend increased by 17%.
The need for effective marketing is thus obvious. But the final word on the best marketing strategy is yet to come. Perhaps there will never be an answer set in stone. Nevertheless, word of mouth (WoM) is a promising contender in this race one of the most effective marketing strategies, if not the most.
To put things into perspective, the Nielsen 2021 Trust in Advertising Study found that 88% of global respondents favor recommendations from friends and family over other forms of advertising. Confirming Nielsen’s findings, 64% of market leaders also consider WoM to be the most effective form of advertising. On the flip side, however, only six percent of these managers have mastered WoM marketing enough to implement it effectively.
Some Web 3.0 protocols are therefore innovative, disruptive but practical WoM marketing solutions. This makes WoM more accessible to businesses, strengthening their marketing arsenal and return on investment (ROI). Indeed, it is as if WoM and Web 3.0 were made for each other.
The power of word of mouth marketing
Spreading information through word of mouth is perhaps as old as human civilization. Humans have a basic tendency to share their opinions and give advice about the most influential things around them.
In addition, cultural practices such as food, clothing and customs have often traveled from one region to another via word of mouth. This innate connection with human existence makes WoM such a powerful marketing strategy.
Researchers have formed several theories to thoroughly understand WoM. Some explanations attribute the success to empathy or altruism, while others refer to psychological dynamics of influence and control. Based on these understandings, marketing researchers have experimented to find the best possible combinations to optimize marketing ROI.
In one such study published in the Harvard Business Review, researchers discovered that the right incentives could encourage people to become effective marketers.
However, existing Web 2.0-enabled WoM solutions have several critical drawbacks. In general, there is a lack of transparency in the distribution of value among participating stakeholders.
As a result, companies often do not adequately and fairly transfer the rewards to WoM promoters, despite doing the hard work of bringing in new customers through WoM. There is also no effective mechanism for quantifying a marketer’s contribution to multiplying a company’s profits.
That said, the problem runs deeper than the quantification and distribution of rewards. In 2021, US advertisers lost $15.9 billion to digital ad fraud from hackers and automated bots. It put consumers’ confidence in following up on someone’s recommendations at risk.
They have now become anxious about losing money to scams instead of receiving genuine feedback from WoM. Enter Web 3.0, where you don’t necessarily have to “trust” a company or project to get involved.
Web 3.0 word-of-mouth protocols archetypal with a difference
Blockchain-powered Web 3.0 platforms have the potential to transform word-of-mouth marketing with reward tokenization, immutable chain preservation, and improved provenance. The best part these protocols directly reward marketers for contributing to a company’s growth.
Users prefer Web 3.0 protocols over their Web 2.0 counterparts for several reasons. Trustless Web 3.0 ecosystems protect customers from fraud and hacks. Without an intermediary, marketers and consumers can directly share the benefits of adding value to the parent company.
Also, an on-chain ledger facilitates proper measurement of that marketer’s contribution while automating reward distributions.
As such, decentralization has significantly improved the reward distribution process in Web 3.0. For example, in Web 3.0, when a marketer shares referral links through WoM, oracles can help track and distribute rewards based on the true value added on the blockchain.
Suppose Bob buys five NFTs or 100 crypto tokens using George’s referral link. Oracles can verify the purchase and proportionally distribute tokenized rewards in a trustless manner to both for a successful referral.
Also, unlike Web 2.0 platforms that offer static rewards, blockchain-based WoM protocols offer dynamic reward systems. The most famous examples are staking and farming principles in DeFi. They incentivize early marketers and adopters with higher rewards than those who join late.
For token-based projects, marketers can also take advantage of premium rewards if they convince others to HODL. Such buy-and-hold incentive schemes can also encourage marketers to bring in long-term customers, promoting sustainable growth for the company.
By further expanding the scope of dynamic incentives, innovative protocols can offer new revenue streams through referral farming with single and multi-referral tokens.
Also, the blockchain-agnostic nature of the platform enables cross-platform WoM marketing. Besides Web 3.0 native protocols, marketers can also spread the word on Web 3.0 platforms like metaverse and social media like Twitter.
In sum, a company’s future depends on how well it utilizes the three E’s of marketing engage, equip and empower. Web 3.0 word-of-mouth protocols have the ingredients for this mastery, ensuring better sales and customer retention.
In addition, proportional rewards can “equip” users to “engage” with the Web 3.0 economy, and “enable” them to become an integral part of Web 3.0. This will usher in a robust advertising methodology and open up unexplored opportunities for revenue generation.
Erwin Werring, CEO of Attrace, has experience from several industries, including finance and entertainment. He co-founded a gaming startup and a data and solutions consolidation platform, which he sold to nine banks in 32 countries, before founding Attrace in 2018.
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Featured image: Shutterstock/Oleg Nebesnyy
