Facts, Quotes and Studies that show the Effectiveness of Word-of-Mouth

Word-of-mouth has always been a big deal even more today that advertising expenses have skyrocketed. From Jimmy Page acknowledging that the band’s first visit to America in 1968 was a word-of-mouth thing, to Bo Bennett, Author of Year to Success saying that “In sales, a referral is the key to the door of resistance,” many marketing folks have benefited from the power of word-of-mouth referrals.

McKinsey Report

According to a study carried out by McKinsey Institute, word-of-mouth is one of the most important factors to consider which has an impact on every stage of the consumer decision journey. The impact is even more important in developing markets in driving revenue with a significant cost saving. Here are some key insights from the McKinsey Report on word-of-mouth:

  • Word-of-mouth drives up to 50 percent of all buying choices. The opinion of a learned friend or family has an impact on most buying decisions
  • ord-of-mouth saves advertising dollars. When marketing induces customers to make referrals to others, it generates double the revenue of paid advertising in business niches like skincare and cellphones.
  • Word-of-mouth influences consumer decision making. A customer will significantly change their buying patterns as a response to a word-of-mouth referral, something that paid advertising will take much longer to accomplish.
  • Word-of-mouth has variable effects. Research shows that a high-impact recommendation like a close friend or trusted colleague is as much as 50 times likely to cause a change in purchasing decision.

Boston Consulting Group

In their report, BCG came to the same conclusion that word-of-mouth advertisement was more reliable than paid advertisements in its reach and customer conversion. Customers have been shown to trust people that they know more than 90% of the time for buying recommendations and customer opinions online another 70% of the time. Also, when it comes to business-to-business clients, respondents to the survey were also willing to accept recommendations from colleagues or friends 53% of the time. Here are some more insights from their report:

1. Consumers depend on word-of-mouth advertising up to 10 times more than paid media.

A 2013 survey carried out by BCG on more than 32,000 respondents located in the United States and Europe indicated that two-thirds of respondents get their buying recommendations from friends and family. 50 percent of respondents indicated that they took buying opinions from other consumers online up to 5 times more than they listen to media adverts or articles or even the company’s website.

2. Consumers prefer word-of-mouth over paid advertisement

Neilsen indicated in a recent research that more customers trusted other friends and family members with important buying decisions far more than they would trust the television or print media. Trust for other media has plummeted over time with more people preferring to ask other consumers like them before committing to a purchase.

3. Word-of-mouth referrals are better when there is an incentive

When planning marketing campaigns, it is important to note that it is possible to increase revenue gains by over 20 percent when there is a concrete plan to encourage customers to recommend their buying decisions to other friends and family. In fact, for new products, BCG’s research showed that businesses can see as much as 100 percent increase in their revenue streams.

Other Reports

4. Word-of-mouth is the most relevant touchpoint in sales

Other studies have shown that telecom revenue can increase as much as by 41% when customers give feedback about their experiences to other customers. This further reaffirms that word-of-mouth has a great impact in many industries with a significant effect on revenue.

5. Word-of-mouth is more convincing that radio, print and television jingles

Katz and Lazarsfeld in 1995 studied the effects of word-of-mouth advertising and discovered that it had twice the efficacy of radio adverts, and four times the efficiency of personal selling and seven times that of printed advertisements.

6. WOM customers tend to spend more and refer others

In a research by Villanueva, Yoo, and Hanssens, customers that keyed into a brand through WOM were able to add twice the lifetime value of customers converted via other traditional marketing practices. Another insight discovered was that customers acquired via WOM also spent twice as much as customers acquired via traditional marketing which could be attributed to the fact that they are more loyal and trusting as customers.

Quotes from reputable companies

1. Facebook: “A referral from a trusted source is the Holy Grail of marketing as it provides a lot of influence to the person which is more effective than the best broadcast message which are seen as impersonal and gimmicky” – Mark Zuckerburg, Facebook CEO.

2. Amazon.com: “If you build a great customer experience, chances are that they will tell each other. Word-of-mouth is a powerful marketing tool that impacts businesses” – Jeff Bezos of Amazon.com

3. Threadless: “Our company is built on a foundation of trust and honest and we don’t like pushing our brand on people that typically won’t hear about it. WOM is an organic, natural way of marketing that helps us to reach people.” – Jake Nickell, Threadless CEO.

4. The Customer Revolution: “Simply making customers happy is not sufficient to make them loyal to a brand. You must be able to repeat the same exceptional service so that they can be convinced enough to share the word of mouth to others and refer them to your business for the same feeling that they have.”

Conclusion

It is a universally accepted fact that word-of-mouth is one of the most effective ways to grow revenue, brand loyalty and customer base. Providing excellent service experiences, high-quality products and a commendable customer experience are ways to ensure that your customers are willing to make referrals for you.

6 Response to "Facts, Quotes and Studies that show the Effectiveness of Word-of-Mouth"

  1. Comment From Oluchi Harrell

    Interesting stuff to read. Keep it up.



  2. Comment From Katlego Rodgers

    This is very informative and interesting for those who are interested in using word of mouth.



  3. Comment From Tewodros Woods

    Thanks for sharing



  4. Comment From Margareta Schröder

    Usually I never comment on blogs but your article is so convincing that I cant’ stop myself to say something about it



  5. Comment From Clemence Wash

    Really very happy to say,your post is very interesting to read.



  6. Comment From Isaaku Wesley

    Found your post interesting to read. I can’t wait to see your next post soon.



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