88% of Consumers Trust Word of Mouth

What is Word of Mouth

Word of mouth or WOM marketing is one of the most powerful tools brands can use to acquire new customers.

Also known as viva voce, word of mouth has been around since the beginning of time, and definitely as long as people knew how to talk to each other. It forms part of the natural human social instinct to pass useful information to others in the same social group, and to share experiences and advice that benefit all group members. Whereas you can easily imagine our ancestors telling each other where dangerous animals had been spotted or recommending which berries to eat or avoid, today it’s more often associated with advice about new product or services, such as whether it’s worth your while to go and watch the new Avatar movie. But it can also be a recommendation to avoid something. For example, a recommendation to a avoid a particular restaurant based on personal experiences of being over-charged, having received poor service, getting food poisoning etc.

And while word of mouth always existed offline, in recent years with the adoption of the Internet, mobile phones and social networks, its potential to spread information has greatly increased and it’s now estimated to drive a huge US$6 trillion of annual consumer spending which, to give you an idea, is more than the Gross Domestic Product (GDP) of Japan. In other words, it’s estimated to account for 13% of all consumer sales. That’s a lot of talking.

As a result, today it’s one of main ways people learn about new brands or offers and, because impossible to stop current and past customers talking about their particular experience with a brand, it’s something you can’t ignore. But it’s also represents an enormous opportunity for brands that do have high customer satisfaction to find ways to harness positive word of mouth, increase its reach and spread, and turn it into an effective customer acquisition channel through word of mouth marketing.

Of course, it’s important to emphasize that we’re talking about positive word of mouth here, because if you have a poor product or service, then the spread of negative word of mouth is likely to harm your business. So before embarking on a word of mouth marketing strategy, a first step is research what your customers really think of your product and service and, if you find that there are things you can and should improve, you should look to improve those before trying to get customers to tell friends and family about you.

The Effectiveness of Word of Mouth

According to Nielsen, in its global Trust in Advertising Study in 2021, which surveyed 40,000 across 56 countries, 88% of consumers said that they trusted recommendations from people they know, above all other forms of marketing messaging.

And it’s not just consumers who say that word of mouth is the most effective form of marketing as can be seen from these statistics:

  1. 64% of marketing executives believe word of mouth is the most effective form of marketing.
  2. McKinsey & Co reported that word of mouth is the primary factor behind 20-50% of all purchasing decisions.
  3. BCG reported that word-of-mouth was 2-10 times more effective than paid ads.
  4. Nielsen found that consumers were 77% more likely to buy a product if their friends recommended it.
  5. 23% of consumers talk about their favorite products with friends and family every day.
  6. Word-of-mouth marketing results in 5x more sales than paid media impressions

And the importance of word of mouth marketing is only likely to grow with McKinsey & Co reporting that 82% of Gen-Z trust their family and friends for advice on products more than any other source.

Why does word of mouth work so well?

To understand why word of mouth marketing works so well, we need to look both at the nature of word of mouth and compare this with alternative forms of marketing.

The first reason is that word of mouth is often shared in a social setting, such as a discussion between friends, family and colleagues. Research from the Keller Fay Group back in 2007 found that 9 out of 10 word of mouth conversations occur offline and that those conversations were often more positive about brands and more likely to lead to puchases. While, given the time that has passed since that research, we can assume that more word of mouth will take place online nowadays, the conclusion is probably still valid that offline WOM is far larger than online.

In many ways, it’s obvious why word of mouth, and particularly face to face word of mouth, works so well:

  • You’re typically receiving the information from someone you know and trust and, in the case of a family member or close friend, from someone who cares about the outcome of the recommendation;
  • A family member or friend is likely to know you very well and know what you would like and not like, and can give a more targeted or tailored recommendation for a product or service, particularly when they know you are looking for a product or service like this;
  • Often the person giving the recommendation is actually a customer of the brand in question and has accurate and uptodate experience of using the product or service, and his or her continued use of the product or service gives the recommendation more credibility;
  • The person giving the recommendation, unlike a sales person, often has no vested interest in the outcome other than knowing that you will appreciate the product or service or, where there’s a reward for a referrer, this is disclosed and the amount or value of the reward is not enough to convince someone to give misleading information, and risk losing a friendship, in order to get the reward;
  • Given our tendency to socialize with people like us, in terms of tastes, values, demographics, income, it’s likely that the giver of the recommendation has similar needs and expectations to the recipient and can understand why this would be the right advice.

In other words, it’s targeted advice from a trusted source, often given at the right time. But there’s another reason that’s equally important. In a world where the average American is targeted with between 4,000 to 10,000 marketing messages a day, it’s no wonder that people have learned to block out the majority of these messages whether by ignoring them or via banner blindness or with technology such as spam filters and ad blockers, or by switching away from advertising saturated media, such as terrestrial television to online streaming and video gaming. Whereas, a recommendation from a friend or family member, whether face to face at a family meal, barbecue etc. or online via email or text is likely to be heard or seen. So not only in the message likely to be credible and from a trusted source, it can very timely and targeted and is likely to be seen.

Often a close second to word of mouth in surveys as to what consumers trust, we find consumer reviews, with nine out of ten consumers reportedly checking reviews online before purchasing. However, while these can be considered as a form of word of mouth, they are typically less trusted than advice from people we know, because aside from concerns about the possible manipulation of reviews, when we read them, we really don’t know much about the person giving the review. The reviewer may be very different from us in terms of tastes, values and demographics.

But it’s not surprising to read that consumers don’t really trust advertising, celebrity endorsements and influencers as much as word of mouth from trusted sources. While advertising does fulfil an informational need, and can often be entertaining, it’s clearly written by or for the brand and is not impartial, and the writers of the ads often know very little about the actual recipient of the message, other than broad demographic or persona defined information. And with celebrity endorsements, while the celebrity is attaching some of his or her reputation and credibility to the product or service being advertised, it’s obvious that they are being paid, often large sums of money, to endorse the product and often in cases where they are unlikely to use the actual product being endorsed. Increasingly, surveys also show that consumers no longer trust influencers, aware that they are being paid to promote products and often promote one product one day and a competing product the next day. A recent study from Oracle found that only 37% of consumers trusted influencers more than they trust information from the brands themselves and an Irish study found 90% don’t trust information from influencers.

How can you leverage word of mouth to create a customer acquisition channel

Hopefully, having read the above, you will have been convinced of the power of word of mouth above all other marketing channels. So provided that you do have an excellent product or service, with many happy customers who would be willing to vouch for you to their friends, family and colleagues, then you should be doing all you can to increase the scope and reach of your word of mouth marketing.

To do this you should look to identify and engage with your potential brand advocates to get them to talk about you in their social circles. The best way to do this is to have a referral program that asks your customers, employees and parters to refer you, provides them with an easy and safe way to do so and offers attractive rewards and incentives for each confirmed new customer referral.

The reason you need to take active steps to foster and encourage word of mouth is because, as shown in a study from Texas Tech, while 83% of consumers say that they are willing to refer after a positive experience, only 29% actually do.

If you want to learn more about how to monetize word of mouth through refer-a-friend programs and reward marketing, please reach out – we’d be happy to answer any questions you may have.

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