The power of word of mouth

The power of word of mouth

Mon, 16 Jun 2014

The world of marketing has many buzz words and the majority of them lasts only a couple of seasons. However, some of these concepts endure and have earned their place in the marketing hall of fame; word of mouth (WOM) is one of these.

Withstanding the test of time

WOM has always been recognised as a powerful marketing tool, and its effectiveness has increased in concert with the proliferation of media channels. In 1955 WOM was proven to be seven times more effective than newspaper advertising. In 1967 36% of consumers first learnt of an innovation through WOM, and 48% were influenced by WOM when making a purchase decision.

Fast forward to today, and 61% of people are more likely to trust people like themselves when considering how to spend their money than they are to trust media advertising.

Whilst traditional advertising is still effective in building brand awareness, it struggles to resonate with today’s audiences who, weary of brands overpromising and underdelivering, are blocking out these messages as a matter of course.

It’s also very hard to get the edge on competitors using traditional advertising as the returns are very small, but WOM is able to reach more people more effectively. With marketing budgets stretched more tightly than ever, and multiple channels fighting for the marketing dollar, WOM has a significant role to play.

Opinions matter

Trust is key. People are inclined to trust their fellow human beings more than they trust any other information source. In fact, nearly half of all Americans say that they will be influenced by a review from their peers. Today WOM is the crucial factor in 20 to 50 percent of all purchasing decisions, particularly for first-time or expensive purchases where trusted opinions matter.

From a business perspective the key drivers for engendering trust are the quality of products and services sold and the attentiveness to customer needs. Satisfied customers who have had their issue successfully resolved are likely to tell four to six people about their experience. Dissatisfied customers will tell between nine and 15 people about their experience. Today a large number of those people are going online to voice their opinions and post their reviews, with two in five wanting to influence others by doing so. As WOM now functions on a one-to-many basis through online platforms, their potential reach is great.

The impact of word of mouth

The impact of word of mouth referrals should not be underestimated. Recent studies have shown that the long-term elasticity of WOM referrals is about 2.5 times higher than that of advertising. And over time the elasticity of word of mouth endures, being approximately 20 times higher than that of marketing events and 30 times higher than media presence. It is thought that word of mouth has a much longer carry over period than traditional marketing with WOM continuing to affect consumer actions for much longer periods following initial contact.

Preparing your brand

Most customer experiences are unremarkable and, as a result, people are indifferent to the brand providing it. It is unlikely then that the brand will feature in discussions. However, brands that people talk about make a connection and have meaning that extends beyond monetary terms.

Every contact your customer has with any aspect of your organisation is an experience they have with your brand. The responsibility for ensuring that the experience exceeds their expectations and becomes the subject of positive conversations lies, therefore, with the entire organisation.

The following insights are fundamental to achieving positive word of mouth for your brand:

1.  Be clear on your brand positioning and your ideal client

Knowing who you are targeting and what your brand stands for enables you to be true to your values and consistent in your messaging. This creates a clear, concise and consistent picture of your company which means that your customer will have no difficulty in representing your company accurately.

2. Your employees must “live and breathe” your brand positioning

Every single person in the company must thoroughly understand how your brand is positioned and the role they play in delivering the customer experience you are striving to provide. Internal mechanisms should make them accountable for delivering that experience, and processes should enable them to manage and log referrals and repeat custom which ensue.

3. Have a compelling brand story

Very few companies have a powerful story to tell about their brand. However, a compelling story not only sets a company apart from the competition, it also provides your customer with an opportunity to share interesting information which could serve to raise his profile – and yours.

4. Create an unparalleled customer experience that fosters loyalty to your brand

Wherever your customer chooses to interact with you, the experience he has should be consistent across all channels and exceed his expectations. The more overtly positive experiences he has, the more he will consider himself a valued partner and not just one half of a transaction – and the more his allegiance to your brand will grow.

5.  Have brand measurement systems in place

Customer information is vital. Your company should know what’s important to your customers and should be able to track exactly how your brand is performing against those metrics. Having an NPS mechanism in place will help you understand how you’re performing relative to your goals.

When all is said and done, it’s important to remember that you can’t control word of mouth. You can, however, influence it with every interaction your brand has, so it pays to have the structures in place to ensure that WOM is working in your brand’s favour.

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