The Power of Word-of-Mouth Marketing

By:Terry H Hill

Let’s say you just opened a new café that designs and makes customized cakes, and you take your first order: a cake for a five-year-old child’s birthday party where over 30 parents were invited.  The client is extremely impressed with your work, and all the guests loved the cake!  In fact, several of the guests asked for the name of the bakery that designed and made the cake.  Within a short period of time, the number of cake requests doubled, and then tripled, and your café was gaining notoriety—all this without any major marketing strategies to date!

What was the magical key to your success?  The process is known as “word-of-mouth” communication and it can literally make or break your new business venture.  If you take the same example and reverse the situation (where the cake was a total disaster), you would have a situation where 30 parents are telling other parents never to order from your café! Word-of-mouth (WOM) is product information transmitted by individuals, to individuals who we know personally.

WOM appears to be more reliable and truthful than the suggestions/recommendations we receive from more formal marketing channels.  WOM is more effective than formal advertising because of the social pressure factor: recommendations by people we know tend to have greater credibility and less risk. According to a research, WOM accounts for two-thirds of all consumer good sales, meaning while you are busy spending thousands of dollars on making your marketing campaigns work, customers who have already bought from you are spreading negative or positive information about your company which ultimately will have a great impact on future company purchases or non-purchases.

According to a study by the White House Office of Consumer Affairs, 90 percent of unhappy customers will not do business with a company again.  Each of these people is likely to share his or her grievance with at least nine other people, and 13 percent of these disgruntled customers will go on to tell more than 30 people of their negative experience.

So how do you effectively and successfully control negative word-of-mouth communication that may lead to a decline in sales?  As the power of WOM is increasing, marketers are developing innovative ways to sell their products by making consumers “third-party marketers.” Here are three successful strategies:

Virtual Communities

The first strategy that many companies adopt is to create virtual communities online that have been proven to be a strong marketing tool.  Companies today locate people with similar interests from around the globe and create an online community of people who share their love for their product or service.  These fans spread the news on various forums highlighting the benefits of the product and/or services and praising the company which, in turn, builds the company’s credibility.

Guerilla Marketing

The second strategy involves using unconventional locations and strong word-of-mouth campaigns to push products.  This strategy develops unique, engaging and thought- provoking concepts that create a huge buzz in the market before a product is launched.  The reason this strategy is so successful is because the campaign’s message becomes the talk-of-the-town and once people become aware of it, the message spreads quickly by word-of-mouth marketing.

Jay Conrad Levinson, author of the book — Guerilla Marketing — says that when implementing guerrilla marketing tactics, small size is actually an advantage.  Small organizations and entrepreneurs are able to obtain publicity more easily than large companies, as they are closer to their customers and considerably more agile.

Viral Marketing

The third strategy is viral marketing.  Viral marketing describes any strategy that encourages individuals to pass on a marketing message to others, creating the potential for exponential growth in the message’s exposure and influence.  Like viruses, such strategies take advantage of rapid multiplication to explode the message to thousands, to millions.  Hotmail, widely cited as the first example on online virtual marketing, gives away free e-mail addresses and services.

What they originally did was attach a simple tag at the bottom of every free message sent out: “Get your private, free email at http://www.hotmail.com.”  And, then they stood back while people e-mailed to their own network of friends and associates.  These friends and associates who saw the message, then signed up for their own free e-mail service from hotmail.  This process propelled the message exponentially.

Other examples of viral marketing include making online games for your products or by giving away free gifts for promoting the product online.  For example, WD-40 promoted a word-of-mouth campaign by offering 1000 AM/FM radios in the shape of oil can to individuals who signed up 10 other members to their site.  Now that’s what you call promoting positive word-of-mouth communication!

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