Word Of Mouth Ultimate Guide – Updated 2019

Word-of-mouth is important to retailers, business owners and marketing professionals for a number of reasons. The most important reason is that customers trust word-of-mouth more than any other form of marketing. In a 2012 global survey by Nielsen, results showed that 92% of consumers make buying decisions based on recommendations from their friends. This compared to 70% of people who trust online consumer opinions and 58% trust level for editorials.

As an online seller, if your clients are not making recommendations for your business to their friends and family, you are missing out of a revenue stream that should be under your control. McKinsey & Company also did some research into new marketing models and the results are still consistent with the current school of thought that word-of-mouth marketing is indeed indispensable today. Here are some of the insights gained about the importance of word-of-mouth:

1. It influences as much as 50% of buying decisions

Word-of-mouth is the main reason for between 20 – 50 percent of buying decisions today. Think about most of the things you have bought recently and think about why you chose to buy them. It is likely that you got some as suggestions from friends or as a result of conversation other people.

2. It generates over twice the revenue of paid advertising

One of the key observations of the McKinsey report was that purchases as a result of consumer-to-consumer recommendations resulted in more than double the amount of sales that paid advertisements result in. Paid advertising is quite visible with many experts singing its praises. It still costs money, and this should be considered when thinking about the net revenues accrued after advertisement. On the other hand, a referral from a family member or friend is free and still leads to almost the same amount of revenue, even more in most case without any attendant costs of advertising. This means that developing word-of-mouth recommendation opportunities from your business is worth the effort.

3. It influences all the stages of a client’s buying journey

Of all the factors that affect consumers, word-of-mouth is the only one has an effect on all the stages of a customer’s journey. What this means is that word-of-mouth can be a tool in helping business owners to change the way customers typically shop. If you would want to get a customer to change their buying patterns, it is more likely that they would do so if someone that they trusted gave them an experience or opinion about products and services that they were considering buying. There is the initial consultation stage where customers are still shopping around undecided about what to buy, then during active evaluation, work of mouth can convince them on why they can use the product or service and enjoy it. The moment of purchase too, a comment from someone else on the checkout line can convince a buyer that they are making the right decision or also help them choose something to buy.

4. It causes maximum disruptions to consumer buying decisions

Word-of-mouth can either prompt a consumer to try a new brand or product more effectively than paid advertising spending. This is because individuals do a lot of research on their own and have lots of ideas about what they are looking for and how to get it. Now just before making the final decision to buy, if a respected friend raises an objection with a tale of a bad customer experience, then it is possible that the options then become different based on the new information. Word-of-mouth especially coming from a trusted friend can override all the work done by other forms of marketing to either convince or dissuade a client from following up with purchasing your products or services.

5. It can enhance a company’s brand and market share in its industry by up to 10%

The McKinsey study obverted that the pass-on rates for key brand messages, both positive and message can cause inflate a company’s market share by as high as 10%, or cause a deflation by as much as 20% in just over two years with other things being equal. This implies that having a product that is easily recommended by your customers can help your business to increase its market share and gain an advantage over other companies in the industry. This is possible because once a person enjoys the services of your company, they are likely to share the information with their friends and family who are also in need of your services or products. This is because helping other people to have a similar excellent customer service experience will make the person look better as a good friend. The best part is that the person recommending your business may not even be in your target demographics to share the word about your business with friends.

6. It is a high variability rate

A customer is extremely likely to buy a product based on the recommendation of a known friend or family who can vouch for the product. The McKinsey research showed that there are ways that a high-powered recommendation from a close family or friend is likelier to influence a purchase than one from someone who isn’t so close.

Conclusion

Word-of-mouth is a powerful, extremely powerful tool that is underappreciated by retailers because of availability bias. Because it isn’t everywhere like commercials, social media adverts and web banners, retailers tend to underestimate its power. What it lacks in availability, it makes up for in being extremely personal, effective and influential. It is essential to pay all the attention to encouraging word-of-mouth recommendations.