1. A Report on the Results of the 2013 LoyaltyOne Social Media Transaction Impact Study
THE POSITIVE POWER OF
NEGATIVE WORD-OF-MOUTH
Turning the Danger of Negative Social Media Into Positive Results
JULY 2013
Neil Everett
SVP and CMO, LoyaltyOne

2. page 1
www.loyalty.com
Introduction
Next to financial results, customer feedback about a product/service or shopping experience is
usually foremost on the minds of marketers and executive management. Much like the “numbers,”
the voices and buying behaviors of consumers deliver the surest way to measure the impact of an
organization’s products and services on the marketplace. And these days, the customers’ voices have
reach like never before.
Of course, the voice of the customer is sometimes favorable and sometimes negative. In this
document we reveal insights from the 2013 LoyaltyOne Social Media Transaction Impact Study
regarding the business and behavioral impact of Negative Word-of-Mouth (WOM).
Word-of-Mouth is the oldest and in some ways
the most engaging form of advertising. Social
media has fed its impact, creating soapboxes for
influencers who can both help and hurt a brand
with the speed of a finger tap. Conventional and
proven thinking is that Negative Word-of-Mouth
can hurt a brand. The classic example is the
“United Breaks Guitars” video – a musician
expressing frustration with an airline over a
damaged guitar with more than 13 million views
on YouTube.
These days, brands learn from and react instantly
to consumer Word-of-Mouth. One example is the
wise move by distillery Maker’s Mark, which
swiftly reversed its decision to reduce the alcohol
content of its product (as a way to increase
production and meet exploding demand) in
response to vehement social media reaction.
Will Maker’s Mark’s reversal return sales to where they were prior to this misstep? Likely, yes,
but here’s another possible impact: The 2013 LoyaltyOne Social Media Transaction Impact Study
suggests that the brand’s swift response, promptly communicated to the general public and to
The 2013 LoyaltyOne Social Media
Transaction Impact Study highlights two
major points:
1. Loyalty program members who spread
Negative Word-of-Mouth
are often your best cus-
tomers. Their passion
can be leveraged as the
core of a well-designed
recovery program.
2. Taking the “temperature” of the
Negative WOM guides appropriate
action in response.

3. its best customers, might lead to increased sales. Why? A combination of “arousing” the customer
base and therefore indirectly reminding them of their passion for the brand, followed quickly by
re-establishing what customers love.
This isn’t to suggest that you want to incite your customers with bad news in order to fuel Word-of-
Mouth and subsequent engagement. Yes, it’s an interesting twist on “Surprise and Delight” – the
concept of giving program members, particularly best customers, an unexpected perk to refresh
their appreciation of the program, remind them of the benefits and bring the program top of mind.
The goal of Surprise and Delight, of course, is to spur future activity. But
as one of my colleagues noted, “If you’re going to wake anybody up,
wake them up with a kiss instead of a kick.”
Also, this isn’t a matter of the dusty public relations axiom of “We don’t
care what you say about us – just spell our name right.” It’s a matter of
knowing who your most engaged, valuable and vocal customers are,
and leveraging their passion to your benefit – and, of course, to theirs.
And that’s the important point. Customers’ negative “vocal” activity is a
type of engagement with the brand, engagement that reflects the
intensity of brand passion. The very instance of a “negative” engagement is both a warning and,
when best practices are employed, an opportunity.
Passionate customers are often the quickest to praise you, recommend you and advocate for you.
They are “Brand Champions,” as described by COLLOQUY in its 2009 and 2011 Word-of-Mouth
Studies. On the other hand, those same Brand Champions are also the quickest to take you to task
when they’re disappointed. Brand Champions who feel slighted can swiftly
convert to what COLLOQUY calls “Madvocates,” with the passion and
power to influence a network of other consumers. But the conversion to
Madvocacy can be reversed – and remediated to an overall positive –
because of the Champions’ passion that fuels vocal expression and
transactional behavior.
When a company’s customers start to control the rhetoric concerning a
brand’s reputation, it might seem like a good time to duck for cover. But
such a reaction fails to leverage the hidden power of Negative WOM.
Instead, companies must determine the specific level of Negative WOM
that triggers a call-to-action, and what that action should be.
www.loyalty.com
page 2
70%That’s the increased
value of customers in
our study who were
active in social media
36%That’s the transaction
lift demonstrated by
customers posting neg-
ative comments who
redeemed for rewards
after their posts were
made

4. Keyboards heat up
To demonstrate this point, we turn to the 2013 LoyaltyOne Social Media Transaction Impact Study.
Specifically, recent initiatives by theAIR MILES Reward Program, Canada’s most recognized loyalty program,
provide a case study that illustrates how social commentary impacts consumer purchasing behavior.
In December 2011, AIR MILES – which serves more than ten million members (known as “Collectors”) –
simultaneously launched two program changes:
• A feature called AIR MILES Cash, which allows Collectors to instantly redeem reward miles
collected in the program in full or partial payment when shopping at participating Sponsor
locations.
• A program change regarding the guidelines for unredeemed AIR MILES reward miles.
The resulting social media commentary gave AIR MILES an opportunity to analyze Negative WOM and to
determine how it impacted subsequent transaction and redemption behaviors of both those posting
the comments and those simply viewing them. In this case, LoyaltyOne followed the Community website
commentary of a subset of Collectors who had previously opted in and granted permission for such
observation.
Sensitive to the needs of its Collectors, AIR MILES had anticipated a certain level of Negative WOM
from its customers regarding the new redemption policy. As with any established program, when
program rules are adjusted or changed, engaged members express their opinions. As can be expected,
some customers who expressed negative opinions were only mildly upset by the changes, while others
were much more expressive in their sentiments.
But what we couldn't forecast was the degree to which those reactions would impact customer
involvement with the program.
The 2013 LoyaltyOne Social MediaTransaction Impact Study uncovered the temperature range of Nega-
tive WOM, including nuances in words that determine how concerned a brand should be when gaug-
ing the sentiments that customers express. For example, consumers who were simply disappointed or
concerned typically use words like “doubt,” “surprise” and “confusion” in their commentary. Frustrated
customers, those most at risk of leaving the program, tended to use words like “disgusted,” “angry”
and “outraged.”
www.loyalty.com
page 3
DoubtfulDoubtfulDoubtful OutragedOutragedOutragedSurprisedSurprised
ConfusedConfused
Surprised
Confused
DisgustedDisgusted
AngryAngry
Disgusted
Angry
Disappointed and/or Concerned Frustrated and at Risk of Leaving

5. www.loyalty.com
In analyzing the impact of such
commentary, the study first deter-
mined that the people who posted
comments were generally more
valuable customers overall. The
study examined Collector activity
by posters in the four weeks prior to
the two announcements, versus
non-posters in that period. The dia-
gram on the right shows that Col-
lectors who later posted were
significantly more engaged than
those who later only viewed the
posts or those in an offline control
group. (In this context, “engage-
ment” is associated with earning
loyalty program currency, redeem-
ing for rewards, and otherwise ac-
tively participating in the program.)
Posters were 70% more actively
engaged with the AIR MILES Re-
ward Program as Collectors than
non-posters.
We can conclude that many neg-
ative commentators were angry
precisely because of their emotional
connection with the program.
They were more engaged in thefirst
place, and therefore were more
passionate in expressing their
opinions. Their commentary con-
tained more detail, with greater
intensity of anger and a length
three times that of the typical
post.
page 4
The Power of Social Media Posters
On the AIR MILES Reward Program Community Page
Transaction and redemption activity shows that posters are
70% more valuable than non-posters.
Source: 2013 LoyaltyOne Social Media Transaction Impact Study
• Numbers scaled to base 100
• Posters: n = 76
• Viewers: n = 1,094
• Control Group: n = 10,000
Transaction Miles
Redemption Miles
Posters
Transaction Miles
Redemption Miles
Viewers
Transaction Miles
Redemption Miles
Control

6. www.loyalty.com
There was further proof that producers of
Negative WOM emerge from the program’s
most engaged member base. About a third of
negative posters made redemptions after
they posted their commentary. The study ex-
amined the downstream activity of Collec-
tors who made redemptions after the
negative comments were posted. The nega-
tive posters who redeemed exhibited a lift of
36% in collection activity over the level be-
fore the announcements. That compared to a
21% increase from redeemers within the
Control Group over the same time period.
The catalyst? Heightened engagement. The announcements and the resulting Negative WOM com-
mentary appear to have acted as a reminder, placing the program at the forefront of the negative
posters’ minds. By redeeming, these Collectors were further reminded of the value they extracted from
the program, leading to increased activity. The reasons members had established their relationship
with the brand in the first place had been highlighted, and these more-valuable customers responded.
During periods of Negative WOM the
temperature of commentary will reach
a threshold at which your company
feels compelled to craft responses, as
appropriate, that lead the conversation
back to the brand’s core benefits. In
this case, AIR MILES responded by
monitoring customer comments, pro-
viding answers to specific questions
and addressing rumors or inaccuracies
as they were expressed. With careful
management, Negative WOM can
prove a positive boost for engagement,
but only if mediated by a simultaneous
positive experience linked to the pro-
gram’s core value proposition.
page 5
Source: 2013 LoyaltyOne Social Media Transaction Impact Study
Control Gr
oup
LIFT
21%
Negative W
OMRedeemers
LIFT
36%
Redemptions Fuel Transaction Lift
Experiencing value inspires
heightened activity from the most
passionate customers, as demonstrated in
the AIR MILES Reward Program study.
Source: 2013 LoyaltyOne Social
Media Transaction Impact Study
The combination of angry
words and threats to leave
the program inflicted this
impact on downstream
purchase frequency in the
AIR MILES Reward Program
study:
The Impact of the
“Hot-Negative”
Social Media Poster
12%
Miles
Accumulated
Purchase
Frequency
34%

7. www.loyalty.com
Taking the Temperature of WOM
The 2013 LoyaltyOne Social MediaTransaction Impact Study also revealed the different “temperatures” of
Negative WOM. Some customers may say they are disappointed or confused by changes in a program (or
simply have questions), while others will express anger and possibly threaten to leave (what we
call a “Hot-Negative” response). Angry customers may create short-term storm clouds, but
brands must separate that from the potential long-term damage created by ignoring or mis-
handling an angry poster. Brands should concentrate their efforts on the vocal commentators.
In the study sample, 64% of the posters expressed anger, and over half of them threatened to quit the
program. The combination of “anger” plus “intention to exit” created a 34% decrease in such posters’
subsequent reward miles accumulated, and a 12% decrease in purchase frequency, adjusted for seasonality.
Other combinations of emotions, such as “disappointment” plus “intention to exit,” and “concern/
confusion/surprise” plus “intention to exit” didn’t have a statistically significant impact on behavior.
Therefore, “Hot-Negative” comments, coupled with a stated intention to exit, are where marketing
interventions should focus.
Keeping the passion positive
Of course, loyalty programs want and need passionate members. But with any relationship, emotion
doesn’t always flow in a favorable direction. Programs must attentively monitor the relationship with
an eye to keeping it positive, particularly when implementing program change. Madvocacy is
damaging to the business in the short term. Negative WOM in this socially-connected age is a
reality no brand can afford to ignore. While the best remedy may be prevention, a strategy
of service recovery is required.
Consider these recommendations.
Use the data. Analyze transactions, redemptions and social media traffic
data from both posters and viewers during and after any period provoking
Negative WOM. If there is a brief impact followed by a quick return to nor-
mal levels – as there might be with a small change like a price increase –
further action is likely unwarranted. While customer disappointment over a change, service
issue or another matter may compel a company to react beyond normal customer commu-
nications, that’s not always appropriate, effective or even necessary.
page 6
•••

8. www.loyalty.com
Take action if the social media “buzz” and sales indicate a more negative
customer sentiment. Prepare a targeted recovery plan for when Negative
WOM strikes. Employ communications strategies that emphasize the value
that both parties receive from the relationship. For example, express appre-
ciation, and promote positive program incentives and features such as redemption in order
to counter negative commentary.
Be swift and sincere in your response. Recognize Negative WOM posters’
opinions and remind them of the benefits they derive from being members
of your program to maximize the potential of critical posters remaining en-
gaged at high levels, and increasing future transactional behavior. React in
a non-confrontational manner to reassure posters and viewers alike that the brand cares
about customer opinion.
Go public. Angry customers can become better customers downstream if
they continue to experience the benefits provided by the brand. Yet, ex-
pressions of anger and intent to exit may not only signal lower future pur-
chase behavior by those posting messages, but can also precede dampened
transaction activity for the viewers of such messages. Therefore, we recommend publicly re-
sponding, through the same social media channels, to ensure that the positive changes are
noticed by the same viewers of the negative posts.
Ultimately, a good starting point for your reaction plan is to focus on what makes members loyal to a
program in the first place – and doing so publicly. As with personal relationships, arguing is not fun, but
making up is.
Conclusion: Be positively engaged
Nobody likes to hear negative comments, but those comments don’t necessarily have a negative impact
on your business. Even a company’s most outspoken critics have passion for the brand, and their activity
can actually be proof of high customer engagement. Understanding the source of criticism, focusing on
the “temperature” of the comments, and preparing a strategy for recovery can spur surprisingly positive
consumer behaviors from even the most bitter grumblers.
To gain timely insight into this and other important loyalty topics,
sign up for the LoyaltyOne INSIDER www. loyalty.com/e-newsletter
page 7
•••
•••
•••

9. www.loyalty.com
Appendix: Methodology
LoyaltyOne worked with a team of researchers and linguistic analysts from Northwestern University’s
Medill IMC Spiegel Research Initiative. The analysts examined the actual posting experience of 76 indi-
viduals who posted 110 separate comments which were viewed by 1,094 other unique Collectors. The
team categorized every post by the emotional tone and nature of its content, separating questions from
statements and measuring emotions such as “Anger,” “Confusion,” and “Concern.” They also recorded
whether a Collector had posted, viewed posts, or both. Linking each posting and viewing event back to
each Collector’s transaction and redemption data, the analysts compared behaviors in the four weeks
before and eleven weeks after the announcements against a control group of 10,000 offline Collectors
over the same period. This information was collected only from a sub-set of Collectors who had granted
permission to the company to track their social media behavior there.
page 8

10. ABOUT
The Author
Neil Everett is Chief Marketing Officer of LoyaltyOne. He is responsible for all aspects
of marketing the AIR MILES Reward Program, including brand management, marketing
strategy, and communications, encompassing mass and integrated marketing as well
as emerging channels such as mobile and social, rewards strategy, procurement and
fulfillment. His focus as CMO is on growing and evolving consumer engagement to
ensure the continued leadership of North America’s premier coalition loyalty program. Everett also leads
SquareKnot, a full-service integrated marketing agency under the LoyaltyOne umbrella.
ABOUT
LoyaltyOne
LoyaltyOne is a global leader in the design and implementation of coalition loyalty programs, customer
analytics and loyalty management solutions for Fortune 1000 clients around the world. LoyaltyOne’s
unparalleled track record in the loyalty marketplace stems from its unique combination of pragmatic,
hands-on experience and continuous thought leadership. LoyaltyOne has over 20 years’ history lever-
aging data-driven insights to develop and operate some of the world’s most effective loyalty programs
and customer-centric solutions. These include the AIR MILES Reward Program, North America’s premier
coalition loyalty program and a working partnership with Latin America’s leading coalition program,
dotz. LoyaltyOne is also the owner of COLLOQUY, a group dedicated to research, publishing and educa-
tion for the global loyalty industry. LoyaltyOne is an Alliance Data company.
For more information, visit www.loyalty.com.
www.loyalty.com
linkedin.com/company/LoyaltyOne
@LoyaltyOneInc
facebook.com/LoyaltyOneInc
Connect with LoyaltyOne
page 9