The Power of Word of Mouth Marketing

Overview

Recent research has shown an almost complete disconnect between what marketing execs think “works” and what really works to actually make consumers buy their products or services. Despite all the emphasis on new media and new ways of marketing, satisfied, talkative customers are still your best promotional tool today! Here’s why - and how - to start putting the power of word of mouth marketing to work for your company today.

Introduction

The dreaded disconnect. As a strategic management consultant and professor, I can safely say that when executives misperceive the reality of a situation, your company is in - to put it in academic terms - “heap big trouble!” So many times, executives - particularly those with a “C” in their title - have a unique - and often distorted - reality of the how’s and why’s of what goes on inside their companies. And sadly, this is an easy trap for top and even middle-level executives to fall into. After all, they are often removed - both by physical distance and in their daily focus and activities - from what is “really” going on in their stores, in their facilities, and with the front-line people inside their own organizations. And when looking at what is going on with those especially crucial stakeholders - especially, the ultimate one, their customers - it may be “once in a blue moon” that one in a top management position actually interacts with a living and breathing customer, unless one intentionally does so.

That is why I advocate so much for the time-proven strategy of MBWA - Management by Wandering Around - for anyone in charge of major functions in any organization, and especially for those in the top ranks of them, as it is a crucial way to stay “in touch” with reality. This is even more important today, in an age where we manage more and more based on data and reports, and yes, the human tendency is for that information to be upbeat and generally reinforcing of what we think is going on, both inside and outside of the organization. Thus, the dreaded disconnect can happen literally anywhere today in organizations - from misperceiving the reality of operations, customer service, and yes, marketing and advertising.

The Critical Importance of Word of Mouth Marketing in Today’s Marketing Mix

Exhibit A of this dreaded disconnect in the marketing area comes in a research report recently released by R.R. Donnelley, a leading global provider of multichannel business communications services & marketing solutions. It was entitled, “The (Un)Expected Report: Comparing 2021 consumer expectations to marketer priorities.” Based on recent surveys that the company conducted both of marketing executives and consumers, their report showed a very real disconnect between what marketers believed works today and what actually does work today in selling products and services! And foremost among the marketing pros misperceptions was a very real misunderstanding - and significant underappreciation - of the power that word of mouth (W-O-M) marketing has in influencing actual consumer behaviors today! For all the focus on digital ads and targeting potential customers with the “right” message for their demographic/social/income grouping, the most powerful influence on consumers today to actually buy something is word of mouth recommendations from their family, their friends, their neighbors, and their colleagues. As the authors of The (Un)Expected Report put it bluntly, their study “uncovers significant differences between marketer assumptions and what consumers say actually influences their brand awareness and purchase decisions.”

Just how bad is the disconnect between marketing executives beliefs about what influences consumers today and what really does work? In Figure 1 (Consumers’ Preferred Method for Learning About New Brands, Products, or Services), put together by the market analysts at MarketingCharts, based on the findings from the R.R. Donnelley report, you can vividly see the disparity across the board between marketing executives and consumers today in regards to how “real people” learn about what to buy. Marketers vastly overestimated the influence of online/digital advertising, ads placed on streaming services, and social media, while underestimating the influence of traditional cable television ads. In fact, the only area where the two groups were even close to agreement today was in their perception of the influence of podcast ads, which, admittedly, are still in their nascent stage. However, the greatest disparity to be found between the views of the marketing pros and real consumers surveyed was in the role of word of mouth played in influencing how shoppers discovered new brands, products, and services. In fact, while only 4% of marketers rated word of mouth as the most important source of such information, more than one quarter of consumers - 28% - rated word of mouth as their preferred source!

Figure 1: Consumers’ Preferred Method for Learning About New Brands, Products, or Services

Source: MarketingCharts, Are Marketers Underestimating the Power of W-O-M?, November 2021 (Used with permission).

And yet, the R.R. Donnelley report highlights the fact that not only are consumers today relying more on word of mouth recommendations and information in researching what they buy than any form of paid marketing, word of mouth is the most important of all forms of influence in terms of the most important metric of all - sales! As can be seen in Figure 2 (Role of Various Marketing Influences on Consumer Research and Purchases of Products and Services) below, word of mouth is the most influential factor of all in marketing that causes consumers to research about buying a particular item or service and ultimately in actually making purchases happen! In fact, when asked by the R.R. Donnelley researchers which marketing method was most influential in sparking actual consumer buying decisions, marketers rated word of mouth far too low - at just 7% - versus the reality of the 40% of consumers who saw W-O-M as the most influential factor in their purchasing decisions!

Figure 2: Role of Various Marketing Influences on Consumer Research and Purchases of Products and Services

Source: R.R. Donnelley, The (Un)Expected Report: Comparing 2021 consumer expectations to marketer priorities, November 2021 (Used with permission).

How does word of mouth still play such a vital role in marketing today? Consider these two facts. First, in spite of the explosion of alternate ways to communicate electronically - via text, chat, email, voice calls, and yes, Zoom and online meetings, research shows that the majority of word of mouth marketing still takes place in person! In fact, as can be seen in Figure 3 (Where Word-of-Mouth About Brands Takes Place), today two-thirds of all word of mouth conversations pertaining to buying products and services still takes place face to face. In all, according to marketing research in this area (“The Vast Majority of Word-of-Mouth About Brands Still Takes Place Offline”), there are 14 billion face to face conversations each week pertaining to brands and product/service selection between individuals in the United States alone! And as can be seen in Figure 4 (Trust in Brand and Service Information Sources), the recommendations that come W-O-M from friends and family are viewed as the most reliable sources of information regarding products and services today, with advertising being far less trusted and therefore influential in shaping consumer decisions!

Figure 3: Where Word-of-Mouth About Brands Takes Place

Source: MarketingCharts, The Vast Majority of Word-of-Mouth About Brands Still Takes Place Offline, March 2021 (Used with permission).

Figure 4: Trust in Brand and Service Information Sources

Source: MarketingCharts, Friends and Family Still the Most Trusted Sources of Brand Information, June 2020 (Used with permission).

Analysis

So, given this information, how can - and should - marketing and top corporate executives view this reminder on the important role that word of mouth plays in influencing consumer purchasing decisions today? Let’s address this in a twofold manner. First, we will examine why the disconnect is present between what marketers believe to be the case regarding the role of W-O-M in the marketing mix and the actual state of affairs. Then, we will make suggestions on how to shape and influence the positive word of mouth about your company and its product/service offerings, and more importantly, how to encourage your customers to share their opinions with those around them about your brand and what you are selling.

So, why do marketing executives discount the importance of word of mouth still today, in spite of the evidence of just how crucial a role word of mouth marketing plays in consumers purchasing decisions? Simply put, it is likely because word of mouth is messaging that they cannot control. Unlike paid advertising, marketers can’t “push the button” to launch a new advertising campaign, create a new ad, or try a new form of media for their marketing. In short, with W-O-M, they can influence current customers to speak well of their firm and their use of their products and/or services, but they can’t make it happen. In an influence business, too many marketing execs look upon word of mouth marketing as a much more indirect form of influence than anything they could do from an advertising standpoint. And as such, word of mouth can often be the most neglected part of a company’s marketing mix, even though the research shows that it is the most influential - and effective - form of marketing that a company can have working for it today!

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So, how can you work to actively shape positive word of mouth about your company? Fundamentally, word of mouth is based on customer satisfaction. So, striving to have not just satisfied, but delighted customers, is essential to make W-O-M happen. Of course, there are tremendous benefits from having truly satisfied customers in and of themselves - repeat business, higher spending, loyalty, etc. However, the true challenge in all of this is how to turn the satisfied customer into a vocal advocate for your company, its brands, and its products/services. From my management consulting perspective, there is one simple way: Incentivize customers to do so! And the best way to do this is one word: Money! Reward them for referring new customers - their friends, their families, their work colleagues, their neighbors - to you in person and through social media as well. With the demonstrated power of word of mouth marketing, those referrals are likely to become referrers themselves if they are afforded good customer service and are satisfied with your product/service offerings, furthering this virtuous cycle and providing an ROI on whatever you might spend in this area that is far, far better than any other advertising and/or marketing expenditure you could make!

In sum, promoting positive word of mouth marketing among your customer base is the best way to expand that base, increase your sales, and augment your company’s bottom-line. So if you have been encouraging customers to spread the word about your company and its products or services, you should do so with even more enthusiasm - and yes, resources! If you haven’t, there is certainly no better time to start than right here and right now, as it is simply the smartest marketing move one can make today!

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About David Wyld

David Wyld is a Professor of Strategic Management at Southeastern Louisiana University in Hammond, Louisiana. He is a management consultant, researcher/writer, publisher, executive educator, and experienced expert witness. You can view all of his work at https://authory.com/DavidWyld.

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