What is word-of-mouth marketing?

A definitive guide to Word of Mouth marketing

Since the dawn of time, word-of-mouth between friends and family has been the most trusted source of information about new products and services; in fact ever since one person first recommended to his or her friend which rock was best to smash another rock with or which berries will and won’t make you sick. 

In its simplest form, it’s where person A asks person B for his or her recommendation of where to shop for a widget, and person B recommends Acme Widget Stores, because either person B shopped there before and had a good service, or heard from another trusted friend that this was the case. In short, it’s the flow of positive information about a place, product or service. And it happens whether or not a brand or retailer takes any steps to encourage it.

Obviously, since the earliest days, we’ve become much more sophisticated, and today we recommend not just our favourite food delivery apps, stores, movies and TV shows, but also banks, insurers, telecoms and internet service providers. That is because word-of-mouth has become very easy to share with modern communication tools and, particularly with the advent of social media, consumers now have few barriers to stop them from sharing their opinions and personal recommendations widely, and even reach beyond their immediate networks of friends and family, to influence the actions of complete strangers. As a result, word-of-mouth now plays an ever more important element in determining the success of a brand or retailer.

In this article we will look at:

  • what is word-of-mouth marketing;
  • why is word-of-mouth marketing so important;
  • how to measure word-of-mouth marketing; and 
  • different ways to track word-of-mouth

 

What is word-of-mouth marketing?

 

If word-of-mouth is the channel by which we share our stories, opinions and recommendations with friends, family and colleagues, then word-of-mouth marketing (or WOMM for acronym lovers) is the collection of strategies and tactics used by brands and retailers to directly or indirectly leverage word-of-mouth channels to promote their brands and lead to positive outcomes. Those positive outcomes include not only sales, subscriptions, app downloads, lead generation and free trials or freemium adoption, but can also include contributing back to the cycle of positive word-of-mouth by leaving reviews, user-generated content or making referrals.

Simply put, word-of-mouth marketing refers to your attempts to create a conversation about your brand and/or, where a conversation already exists, influence it in your favour and direct it towards generating a desired outcome. The common elements of word-of-mouth marketing include encouraging customers to refer your brand to a friend, soliciting ratings and reviews from them, asking them to share social posts about you or to create and post user-generated content about their experience with your brand.

If you’re curious about some of those strategies and tactics, I highly recommend you check out our guide to building an Organic Discovery strategy like the one used by Airbnb; starting with part one right here.

 

Why is word-of-mouth marketing so important?

 

I assume all of us have taken an action or made a purchase based on a recommendation from friends and family; whether a simple recommendation of a good restaurant, a clothing retailer or binge-worthy TV series, all the way up to more considered purchases like insurance providers, banks or cars.

But aside from anecdotal evidence about the importance of word-of-mouth marketing, the following statistics and sources provide empirical evidence to demonstrate the value of WOMM and should hopefully convince you why you should make this one of your most important marketing channels. 

Quite simply, the numbers simply don’t lie.

  • 92% of consumers trust recommendations from friends and family more than traditional marketing.
  • 91% of 18-34-year-olds trust online reviews as much as personal recommendations.
  • Word-of-mouth is 5X more effective than paid ads.
  • 83% of consumers are willing to refer after a positive experience, although only 29% actually do.
  • 74% of consumers cite word-of-mouth as a major influence over their purchasing decisions.
  • Word-of-mouth accounts for $6 trillion in annual consumer spending, 13% of all global sales.
  • Millennials are 38% more likely to discover brands through recommendations.
  • 88% of people place the highest level of trust in brands that have been recommended by a friend or family member.

We could go on and on, as there is no shortage of evidence as to the effectiveness and potency of word-of-mouth as a customer acquisition channel. In fact, many of the sources we have mentioned list several powerful statistics about the worth of WOMM.

 

How to measure word-of-mouth

 

It’s genuinely quite hard to track something as unstructured and as tacit as word-of-mouth. Particularly as so much of it happens informally and offline, either in a conversation between friends in a bar, cafe or at work. Even much of online word-of-mouth can be difficult to track due to dark social with conversations on Whatsapp or Telegram and so on, not being tracked by analytics or where tracking links are often broken.

Some attempts to track offline word-of-mouth include using a memorable word or code, like saying ‘tell your friends to say Bill sent you’ or ‘tell them to quote Summer2021 to get the deal’. Others involve asking a percentage of new customers, ‘how did you hear about us’ whether by actually asking them in-store or via the call centre, or in post-purchase or exit surveys online. Additionally, brands can try and measure the potential of word-of-mouth using Net Promoter Scores and other surveys that ask ‘how likely are you to recommend us to a friend?’ 

This information can be used to extrapolate how many new customers, that can’t be attributed to known sources like paid search or affiliates, come from positive word-of-mouth, although you will likely find that the proponents of other hard to track marketing sources like television and radio commercials and banner ads will also be trying to claim those customers. Obviously, any model you create can be biased towards the conclusions you want to draw, as anyone who has read studies trying to justify huge expenditure on banner ads will see. 

However, relying on a small sample of surveyed customers and NPS surveys to build a model is unlikely to be satisfactory. Thankfully, with the advent of digital tracking technologies and the displacement of many consumer conversations to online and mobile, it’s now possible to track and record the effect of WOMM, whether actually tracked referrals or the number of times ratings and reviews and user-generated content was consulted in a conversion path. 

Here are some of the best ways to track WOM:

 

Customer feedback and reviews

 

A great way to get comprehensive insights into your word-of-mouth performance is to get customer feedback and customer reviews.

Feedback from your current and past customers is a rich source of information, not only on where they heard about you, but how well you’re doing now and how you can improve in future and may even let you score your brand against competitors and best in practice brands. How you can get feedback will depend on the nature of your business, as a hotel or restaurant will have many occasions to ask customers while they are on the premises. And even businesses that don’t have a lot of contact with clients but have a physical presence can add means to get feedback, as you will have seen by the installations that ask you to touch a smiley face or a frown after an airport check-in.

Every visit to a website or mobile site offers an opportunity to ask visitors their opinion and how they heard about you, as does every interaction with your call centre or online chat. And where your business has collected customer emails and the necessary consent to email, sending email surveys or NPS surveys can be a great way to ask customers as to their assessment of your products and services, and their perception of the overall customer experience. And, by using NPS surveys, you can even identify customers who are willing to recommend and promote your brand to their friends and family, which is ultimately the most important information as far as word-of-mouth is concerned. In order not to bias results, a good tip is to ask former customers, particularly those terminating subscriptions, as to their views. 

However, the main drawback of asking people how they heard about you is that customers may not actually remember, or may not remember correctly, particularly for a complex user journey with many touchpoints. Alternatively, they may not be willing to tell you, or only give you generic high-level information such as that they heard about you online. And of course, any survey will only give you responses from a small percentage of your customer base.

Customer reviews and testimonials typically don’t ask where the customer heard about your brand, although this information can sometimes be volunteered in text responses. Of course, while parsing through mountains of customer reviews can be a daunting task, it can give you detailed and honest feedback from your customer base as to how well you are doing and how likely you are to get business from positive word-of-mouth. But where those ratings and reviews are online you can track conversions directly from the reviews using tracking links or use an attribution solution in analytics to see how often the reviews were consulted before purchase.

 

Social media analytics

 

With much of today’s discussion about brands and retailers taking place online, you can’t ignore the potential of social media, whether with behemoths like Facebook, YouTube or Instagram or simple online forums and message boards, or direct messaging apps like WhatsApp and Messenger. Today, an estimated 3.7 billion people currently use social media and on average, spend over 2.5 hours every day on their preferred social media platforms and messaging apps.

From the perspective of word-of-mouth, many online conversations and mentions can be monitored using social media tools like Cision/Brandwatch, Salesforce (Radian 6) and Meltwater (Sysomos) and analytics tools can measure visits from social networks, although you may be disappointed at the number of last-click conversions attributed to social media. Where a tracking link is shared on social media, that can be tracked to the social network and, sometimes, to the originator.

As mentioned above, a problem with social media is that such sharing takes place on Dark Social such as SMS or by simple copying and pasting. Another comment is that social media vanity metrics should not be confused with word-of-mouth as they often don’t actually paint a real picture or move the needle.

Because social media is fundamentally a word-of-mouth channel, by analyzing the data, you can examine the quality of the ‘word’ in word-of-mouth by seeing what folks are saying about you and where they’re saying it. A good indication of the strength of word of mouth can be obtained from monitoring social media metrics like shares, mentions, engagement, user-generated content and clicks to see the overall engagement with your content.  

 

Referral, Influencer & Partner Programs

 

Any marketing expert will tell you that you need an advocacy marketing program, whether it’s a refer-a-friend program, a partner or an influencer campaign. What these all have in common is that they invite your engaged audiences (customers, employees, partners and influencers) to recommend your brand to their own circles of influence, by providing an easy means to share and the incentive of a reward for a successfully confirmed referral. The key to these programs is that they provide a reliable means to track the sharing to the successful outcome, whether using a tracking code, tracking link or other tracking means. So rather than inferring that a sale came from word-of-mouth, you have the actual proof. 

A good advocacy marketing platform should allow you to collect and manage data all the way from the number of registrations, the number of sharing actions taken to the number of visitors to a dedicated page and, of course, final conversions. This can allow you to assess the performance of your chosen advocacy program and model a customer journey that reduces pain points and increases opportunities for optimization.

Of course, no advocacy platform will track all your word-of-mouth conversions, and some will still happen offline and not be tracked. But by actively pushing your referral platform across all customer touchpoints, using attractive rewards and incentives and smart psychology, such as gamification, tiered rewards, triggers and booster campaigns, you can get a large part of your customer base referring again and again. While performance will vary across different industries, for brands that do all of these things, we have seen up to 20-30% of all conversions coming from referrals, which is a powerful testimonial to the power of WOMM.

 

Getting the full picture

 

As mentioned above, word-of-mouth is notoriously hard to measure and some WOM conversions will still slip through untracked, but its importance means that you should still try to measure and continuously improve it. It is likely that using a combination of the above will allow you to get a more clear-eyed picture, particularly as to the trends and what you could and should improve on.

Ultimately, word-of-mouth (WOM) is the channel in which your customers are sharing their opinions, stories and recommendations, and word-of-mouth marketing (WOMM) is the collection of strategies you employ to influence that channel. Having a solid WOMM strategy and the right tools and techniques to encourage sharing and track success across all touchpoints is vital if you want to make the most of the potential of word-of-mouth. 

If you’re interested in the sort of strategies that can positively influence word-of-mouth, then we recommend you check out our 3-part guide to building an organic discovery strategy. You can start with part one right here. Or if you would like to chat further, don’t hesitate to get in touch. We’d love to talk.

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