Was it Milton Friedman that said that there are four types of spending?

1. Spend your money on you.

This makes the spender cautious–interested in acheiving an individual ratio of cost versus value. You want a nice car that you like to drive but that doesn’t break your budget in gas bills. This is where the consumer gets the best ROI, return on investment, because the consumer dictates the value of a purchased good or service.

2. Spend other people’s money on you.

Now the spender can be a bit less concerned with price and more concerned with quality (or status). You can blow a bit more cash on a nice car if your parents promise to cover the insurance. Not such great ROI for the spender, but a lot of fun (or at least less cost anxiety) for the person that ultimately consumes the purchase.

3. Spend your money on other people.

Do you buy Grandma a piece of jewelry or a nice sweater? What if it’s for your girlfriend? For Valentine’s Day? After a fight? The logistics involved in this question merit a certain amount of cost/value math modified for the person on whom you’re spending the money as well as the reason why. ROI can be hard to judge here. As a consumer, Grandma may get a lot more satisfaction out of a sweater than a diamond ring, but the ROI on a ring for your girlfriend may make you, the spender, happier.

4. Spend other people’s money on other people.

This is where a spender generally wastes the most money and gets the worst returns. This is why a lot of government spending is notorious-there is too much cash with not enough accountability or consumer satisfaction. If, as some studies suggest, the United States economy spends close to 11.3 billion dollars on health care yet some 47 million Americans, 16 percent of the population and growing, are uninsured and unable to access satisfactory, much less appropriate care, one has to wonder where the money is going.

Number 4 is also where marketers get stuck. They spend corporate cash on campaigns geared towards nebulous customer niches. Measuring the returns on some of this marketing can be difficult. Are consumers happier because they are consuming more? Or is a brand better off because consumers are more appreciative of the corporation’s reputation and sense of civic sponsorship? How to tell?

Measure online buzz.

Most online communities attract like-minded individuals. These communities congregate around topics, ideas, events and even brands that interest them. They talk about these initial community interests, but they also discuss other issues of importance to them.

For example, an online community built on interests in individual health and lifestyle will inevitably discuss favoured lifestyle trends and diets. Measuring and monitoring the buzz produced by these communities allows producers to anticipate the needs and desires of their customer niches. It lets them measure the possible returns on marketing before launching a campaign, identify where to launch the campaign and attract the most relevant and most reactive consumer audience. Lastly, after launching a campaign, monitoring and measuring online buzz can demonstrate how the buzz picks up and reacts to the campaign.

Listening to buzz lets a marketer know whether Grandma would buy herself a sweater if she had the cash or a diamond ring. It lets a marketer know not only whenand why the girlfriend wants the ring, but how big, how many carats, and with what setting. Online buzz puts a marketer as close to the market as s/he can be by letting the consumer dictate the best way to spend corporate cash and get real, measurable reactions (and returns) from consumers.

An Economist article explored the trend of medical tourism in Europe and the United States. Consumers of medical services are going abroad to escape high prices and long lines at home. Hannaford, a grocery chain, and a few intrepid insurance programmes, are exploring the possibility of lowering total employee heathcare costs through incentivising traveling abroad for health care needs.

Physical travel, however, is the tip of a rapidly decentralising (disintegrating?) health care consumer paradigm. HCPs (Health care consumers) also go online rather than travel abroad to find products and services that they couldn’t otherwise access. In doing so, they frequently discover new and innovative products and services that pique consumer interest and fuel further individual (as well as corporate) research.

HCPs find communities of like-minded patients and caregivers and exchange information, ideas and opinions about health care goods, services, even specific providers. They research medications and treatments through forums and health care social networking sites like Trusera and PatientsLikeMe.

HCPs that share languages compare and critique public health systems. They let each other know what’s available where and who or which insurance is willing to fund what. Even institutionally-based medications, once limited to the institution that provided them, can now limit the institution. If a patient can’t access the med that s/he thinks s/he needs locally, s/he goes online and finds a provider that is willing to access the HCP–through the mail, through a network, through travel.

Health used to be geographic. What the next-door neighbor perceived as “health” could be considered standard for the neighbourhood. Now, the community of patients or HCPs determines what is “health” for their community. A patient suffering from dysthymia, a mood disorder, can go online and ask fellow patients across the globe how they best deal with depression. Then that community can advise, support, sympathise and even supply a patient with the products and services that patient wants.

The casual gaming market reaped over 2.25 billion dollars in revenue in 2007. And this is just a bottom of the bottom line expected for this year’s casual gaming industry.

A casual game is “a stand alone entertainment software title that is digitally distributed by one or many ‘portals’, or independently owned Internet retail sites”. Like traditional board games, a casual game is picked up by a group of individuals. If they like it, they pass it on—through forums, through blogs, through Facebook or other social networks, and through on and offline conversation.

Producers love casual games because they offer a number of ways to identify and engage with a consumer demographic. Put a casual game on a website to increase return traffic to the site. Play viral ad videos between game levels or while a game is downloading. Use a game to promote a product, display a potential service, or highlight a brand. Games let consumers practice and review a product, a brand, or service, giving producers insight into what their consumers like and dislike.

Users love casual games. Casual games offer users try-before-they-buy trials for bigger, more expensive games and applications. Users play games that let them interact with their favourite books, TV shows, and social networks. Users use casual games to improve time management skills, brain train, practice for offline games (from poker to chess), and generally waste time.

The newest demographic to either stimulate or exacerbate the casual game trend is the female user. Casual girl gamers have given games some of their best word of mouth. It’s about time that the big game companies took notice. And the industry is doing its best to attract the young ladies; games sporting cute ponies, puppies, and dancing abound in new releases. Ubisoft is cashing in on the girl gamers transitioning from cute to college and even corporate, producing games like My SAT Coach, my Spanish Coach, and My Weight Loss Coach. Casual games generated around 25 percent of Ubisoft’s full revenue last year, five percent more than expected. Nintendo, Microsoft, and Sony are jumping into the market, trying to cultivate a consumer base with women of all ages and interests.

As the generation of girls that grew up with the Internet begins to raise daughters, the online gaming world is made up more and more of social entertainment networks. The communities of online ladies dish about games, game sites, and game graphics. They talk about what makes a game worth the time it takes to download or play it. In forums, blogs, and discussion boards, women pass on sites and names, recommending their favourites and criticizing the games that could be better.

For example, Attentio’s software notes that French women fawn over word games, while many North American ladies want games that simulate office skills. Wives want games that they can play with their families and Moms want games that stimulate and hone their children’s academic abilities. Each network is a community, and each community cultivates its own network of games and online entertainment through online conversation—through buzz.

There is a lot of WOM about WOMM these days.

A study published by JupiterResearch suggests that advertisers under-spend on social media marketing. BuzzAgent has been stung by some bloggers for its recent campaigns to “prove” how WOMM works in social media. Advertisers complain that there are too many possible social media and other types of online outlets and no proof that any of these are especially effective.

Social media marketing, online WOMM, etc. is much like any marketing concept. It is an extension, not an alternative, to traditional advertising, market research, and PR. Successful communication with clients and stakeholders, along with customer engagement is as limited in methods of communication as are its customers.

Customers, clients, and stakeholders are online, generating social media as well as other forms of online content, so advertisers and marketers are too. And determining how to listen to and engage with different groups online is as multifaceted as it is offline. Online content and strategic involvement runs the market research and advertising gamut, from online focus groups to online billboards. Social media, however, is something different.

For example:

Synthetron, a neighbour or ours, identifies stakeholders and uses online formats to create targeted stakeholder conversations around an important issue. How? Synthetron first selects stakeholders for a study. Stakeholders must have an interest and a desire to impact a certain conversation. Invitation-only online discussions are then used to create an open forum for stakeholders to dialogue. Individual stakeholders included in a study remain anonymous; their ideas and concerns do not. This sort of online stakeholder forum aggregates and evaluates relevant stakeholder WOM, rather than target individual complaints and concerns. To me, it sounds like an online focus group, one in which stakeholders are invited rather than solicited. It permits incentivized stakeholders to be heard as a group without being hurt as an individual.

BuzzAgent is criticized for soliciting content in the manner of a traditional marketing focus group. As with any solicitation, the individuals solicited do not offer their information for free. They are not concerned stakeholders but paid informants–the information that they offer is rarely given for free. These individual informants want something for their time–free samples, extra influence, or face time with an influencer. This is not a new way of collecting ideas, and it can be quite useful in understanding why people are or are not discussing a particular brand or product. Focus groups can help stimulate conversation and generate new ideas. Holding a focus group online or offline involves parallel benefits and risks. Individuals can fib in person as well as in email.

And then there’s social media. Conversation. Buzz.

Creating a WOMM campaign online is not all that different from creating a WOMM campaign offline. But the means of measuring WOM online are more exact. That’s what the Attentio software targets.

Attentio does not solicit online content. Attentio measures and monitors spontaneous buzz as it emerges online. The tools size a social media conversation and measure it in comparison with other conversations. What generates more buzz, pharmaceuticals or automotives? In which online media are cars more popular, blogs or forums? Within the automotive conversation, do people talk more about Opel or Toyota? Do they discuss car design or price more? Attentio monitors the conversation around certain topics as new government regulations are implemented or tax systems are changed or general social opinion turns from red to blue. These trends show up online in numbers that can be quantified and, with a little analysis, qualified. Unsolicited, self-identified stakeholder/client/consumer/producer conversation filed and displayed for anyone interested in a particular market.

Knowing buzz numbers help a marketer—traditional, innovative, online, offline—plan an effective and efficient campaign. Knowing the buzz from social media lets a marketer know if a focus group might be useful, or a stakeholder discussion necessary, or an offline sale worthwhile. It is not a means of marketing; it’s a means of measuring the market and determining how to best engage.

Buzz Agency is looking to compare (compete?) WOM with traditional media through a “WOM Impact Guarantee” programme. The challenge requires a 300,000 US dollar investment in both traditional and word-of-mouth media. If WOM doesn’t outbase traditional competitors across four brand metrics–brand awareness, consumer opinion, purchase intent and actual sales, BzzAgent promises to refund the marketer the full cost of the campaign.

Maybe its because we’re Brussels based–and what is the EU if not a conglomerate of co-creation and (sometimes over-extended) collaboration?–but we just don’t know if this kind of competition is necessary. WOM and traditional media complement; they don’t compete. Successful media campaigns look to integrate traditional media and word-of-mouth, not to separate or isolate the results.

We measure mainstream media trends at the same time we meausure social media trends here. Comparisons demonstrate the efficacy of both WOM and traditional campaigns, as well as where the interests of both intersect. Analysis suggests which consumer profiles finds which types of media campaign most appealing.

This is the objective of online co-creation and collaboration. Allowing PR firms to create more effective and integrated campaigns that combine both traditional and WOM. Each industry, brand, product, and service requires campaigns modeled to suit the interests of the clients and the consumers–there is no one size fits all marketing campaign.

The concept of the long tail is that more effective marketing money is spent on more receptive markets. WOM is definitely a strong aspect in this, but WOM itself is multifaceted. What creates buzz and generate conversation is never easy to predict, but with the right tools and a little time, PR Agencies use software to analyse what works for clients or consumer and what doesn’t.

A lasting market is an environment in which consumers and producers look to establish long-term relationships. A market is collaborative. Shouldn’t marketing be too?

I’m a consistent reader of President and CEO Richard Edelman’s blog.

The yearly Edelman Trust Barometer reveals how individuals are increasingly more likely to trust other individuals with whom they share a common interest. This, along with Mr. Edelman’s consistent support of social media, provides a professional underpinning to my interest in the blog.

Outside of this, I like how the blog pulls together a number of my interests, from international relations and business to public policy and politics. The combination of content is important, engaging and prescient. The most recent post describes Edelman’s lunch with Jim Hoge, the editor of Foreign Affairs, the well-known publication that influences the influencers with regard to foreign policy.

Foreign Affairs, in conjunction with other established publications like The Economist, provides the circulatory system to the international body politique. The publication covers the bulk of foreign policy issues, feeding the important points to the four corners of the increasingly interconnected globe. Circulation is fast and multifaceted, both on and offline. And, according to Edelman’s information, it’s about to get better.

If Foreign Affairs makes up the main arteries of influential foreign policy, it is now branching out into the capillaries of foreign influence. Always a global guru, the publication is going regional.

In the tradition of the “Long Tail” and knowing your industrial niches and nuances, Foreign Affairs plans to engage with local publics about international issues. So the publication is upping its interest in social media, with planned policy discussion boards and platforms. At the same time, Foreign Affairs is contemplating versions both on and offline in local dialects. The idea is to engage each and every individual in such as way as to invite feedback and dialogue. The publication knows that general global knowledge is important. But these days, even for James Bond, “the world is not enough”. It’s the regions that matter, and the first to engage the locals will be blessed with the knowledge and the know-how that the individual has to offer to the world, instead of simply offering the world to select individuals.

This trend towards tracking the local communities is growing among global giants. Telecom companies were among the first of the industries to recognise the power of the emerging market, and many are hard at work on methodologies to promote effective local engagement. Telecoms are expanding fast in the developing world, establishing their brands, products and services as connectors within the local community.

Telecoms are also involving themselves in the local linguistic communities here in Europe, promoting their brands and services at the community level and listening to local consumers that, in their initial push towards globalization, may have been left behind in terms of accessibility. Industry leaders in telecom, foreign policy and PR are not limited by local or global initiative; success can best be found through engagement with both.

Our Canuck friends ‘cross the pond are doing a survey on WOM and Buzz. I took it and you can too! Right here.

We often see things the way we’ve seen things. And we talk about things the way we’ve talked about things.

Conversations are a reflection of reality. People go online to converse. They reconstruct and share their opinions of real world concepts, products, brands, and services. More and more, the online world is an evolving reflection of the offline world’s perceptions.

Traditional marketing generates surveys and sponsors “opinion polls”. Traditional marketing depends upon samples of consumers willing to dedicate time and thought to questions and ideas carefully presented to them by corporate mouthpieces with an obvious agenda.

This isn’t a bad way to go about collecting opinion, but it is limited. First, marketers must find individuals willing to respond, and then craft polls in such a way as to bypass predictable answers. Ultimately, the marketer risks pursuing topics chosen by the corporation or its representatives and not the consumer.

How to address this limitation? Complement the offline research with online engagement: social media. Online conversations are a marketer’s every desire. Online conversations are real opinions, spontaneous discussions, and individually initiated networks and communities of clients, customers and potential customers. These netizens share information, opinions, and recommendations. And all this is recorded and stored forever on the Internet. The only issue then becomes finding it, measuring it, and monitoring the buzz for trends. Trends online can initiate offline surveys or validate a virtual or real world marketing campaign.

Take, for example, a viral video initiated by Carlsberg beer. A clever “whistle” ad with a universally recognized tune, it’s attracting a lot of views on You Tube. Not only has this ad attracted viewers, its generating copy-cat fan ads that compete for attention online. And below each video are comments that admire critique and encourage a growing fan base for the ad as well as the product.

Carlsberg is already a something of a house name for You Tube ad fanatics. Fans self-select based on favoured ads. Perhaps surprisingly, a football ad by Carlsberg attracted not masculine ballers but a number of feminine trawlers. Girls scanning You Tube in search of the celebrity sports star rather than the beer, left a number of comments about the ad’s…aesthetic qualities. The whistling video earned attention from guys and gals looking for a nice tune and a laugh, and the football ad sported a girl-groupie appeal. Both audiences left their comments and criticisms below the videos and no doubt surfed some additional related videos suggested by the You Tube platform.

Social media is more than a target consumer base. In social media, the consumers target the market and let the marketers hear who they are and what they like. Traditional marketers can use this information in framing their own off and on-line research.

Paul Dunay, the Director of the Global Field Marketing for BearingPoint in the United States, interviews Adam Lavelle, Chief Strategy Officer of iCrossing here. They discuss the pre-Search and post-Search society and its current transition. Lavelle and Dunay call traditional search engines “reputation management systems”. Lavelle predicts that methods of search for the average consumer are evolving from open-ended exploration to a more established collaborative sharing.

An online Search used to be the map that a searcher wrote herself. The virtual world was wide and uncharted. A self-motivated Searcher chose her terms and clickedthrough to her consequences. Then adwords rewrote the rules, subtly shifting the unchartered territory in favour of those communities with the best technology and technical know-how.

But Search is no longer a lone spot of civilization on the online map. While we haven’t stopped expanding the virtual world, we’ve civilized the territory, erecting our online databases, networks, and communities. We’ve established highways and byways that constrain but also simplify life for the online traveler.

But signposts have been (and are ever being) erected along the highways and byways of the information superhighways.

These signposts are erected by social media. These signposts are the brands, products, services, and ideas that the original searchers carried with them from the real world to the virtual. These signposts now dot the online landscape. Communities cluster around them, discussing, buzzing and bickering about the brands that delight and bug the people back home.

This is what Lavelle refers to when he stresses the changes wrought by social media in the realm of search. Now communities want networks of shared experience to validate the expertise offered by the trailblazing technology of Search. Social media offers this combination of expertise validated by shared experience, making these conversations, this buzz, both authoritative and influential.

Tracking these communities is essential for any successful brand. Its new territory out there and you need to know where your brand stands (or rather, where it’s been stood).

Advertising is changing very rapidly nowadays. To a big extent, this is connected to social media becoming increasingly popular online content. On one hand, consumers have more control over what they want or don’t want to see, not only on TV but especially online – spam filters, pop-up blockers and other tools give internet users the capability to select the content they are watching. On the other hand, the audiences become more and more fragmented due to the variety of media available. Especially for teenagers, internet and social networking sites become more a common entertainment medium than TV.

Because of that, advertising has to become more creative. It needs to offer higher entertainment value and more variations of the same ad, which – to be possible – must go along with lower costs of producing advertising. These points are connected to social media. Social media has already made tools available that allow consumers to create their own content through much cheaper methods than those used by professional agencies (e.g. video making). These users’ and semi professionals’ content is incredibly creative and more and more visible via services like Current TV, which pays users for videos the company decides to air, or Pitch It, which launches campaigns and asks users to create videos about the topic of the campaign.

According to an IBM study, in European countries like the UK or Germany, ca. 35% internet users visit user generated content sites and ca. 10% of these visitors contribute to them. Consumers are not only creating content, they also influence the choices of other consumers regarding which content to view – 32% of YouTube users are watching particular videos because they were recommended to them by their friends.

Marketers have been trying to engage blogs, networks and discussion forums knowing that social media has the biggest power of creating consumer evangelists from all types of media. A recent study compares spending and gain on different types of media collecting these interesting findings:

• The media costs to deliver 500,000 consumers who are informed about a product range from 400K (television) to $200K (print) to $160K (WOM).
• The media costs to deliver 50,000 consumers who indicate purchase intent range from $2M (television) to $300K (print) to $150K (WOM).
• One WOM conversation carries the impact of 200 television ads.

It is of course impressive how much more impact can be achieved at such a lower cost, but the last and most important part of the changing advertising landscape is the possibility to measure the impact of social media campaigns. Using social media monitoring services allows marketers to not only to identify influential bloggers, platforms and the like that should be targeted with the content achieving the most impact but also to measure how responsive they are to the offered advertising content, if they are spreading the ads, and if so, to which audiences.