How much does word of mouth drive sales?

Discussion
Nov 24, 2014

According to a study organized by the Word of Mouth Marketing Association (WOMMA), online and offline consumer conversations and recommendations account for 13 percent of consumer sales, on average, which represents $6 trillion in annual consumer spending. In higher price point categories, word of mouth’s impact is almost 20 percent of sales.

Measuring the impact of "consumer word of mouth" in six diverse categories, the study was based on sophisticated econometric modeling of sales and marketing data provided by participating brands on a confidential basis. These include AT&T, Discovery Communications, Intuit, PepsiCo and Weight Watchers, all WOMMA sponsors who helped pay for the study. Analysis was conducted by Analytic Partners, an independent analytics consultancy.

The results offered a positive view for both paid and earned marketing. About one-third of the sales impact is attributable to word of mouth acting as an "amplifier" to paid media, such as television, with consumers spreading advertised messages. But most of the impact of word of mouth works independently of advertising, whether stimulated by product or customer service experiences, public relations, owned and earned digital content, referral marketing, and so on.

Other key findings include:

  • Offline and online word of mouth are both strong purchase drivers, with offline accounting for two-thirds of sales and online accounting for one-third.
  • Researchers found that an offline word-of-mouth impression drives at least five times more sales than a paid advertising impression, and much more (as much as 100 times more) for higher-consideration categories. A similar finding for online word of mouth requires more comprehensive data, which are not yet publicly available.
  • Word of mouth’s impact happens closer to the time of purchase than traditional media — often within two weeks.

On his blog, Joel Rubinson, president, Rubinson Partners, Inc., noted that the findings come on top of an academic paper from the University of Maryland that showed a favorable correlation between social media listening data and brand equity metrics. Both studies, he asserts, show that social media data is "truly DATA … with predictive value," creating a new urgency for researchers to create new brand metrics from social media data.

Said Mr. Rubinson, "We need to stop treating social media listening as a hobby and find its mainstream roles alongside surveys and other important data streams such as clickstream and transaction data."

In what ways can retailers capitalize on the strong influence of word-of-mouth, whether it’s offline or online? What are the study’s implications for other forms of social media outreach?

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15 Comments on "How much does word of mouth drive sales?"


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Tony Orlando
Guest
4 years 5 months ago
Word of mouth goes back to the horse and buggy days, and you know what, it is still the most effective tool to date. I have done more catering from word of mouth, as I do not advertise this part of my business. Your reputation can grow in a positive way if the customers are treated well in your store. And that, my friends, is what separates us from the BIG BOYS. Is it enough to grow your business? Maybe, but with the competitive nature of price-matching, and the race to the bottom on giveaways, word of mouth won’t change opinions on buying staples for consumers, as they are starved for money right now. The niche items and signature foods and services will do best by word of mouth, along with an honest repairman or an auto body shop (my friend has grown his business almost exclusively by word of mouth). Just remember the next time you are engaging a new customer in your store, it could be worth a lot of extra business if… Read more »
Ian Percy
Guest
4 years 5 months ago

The best books I’ve read on word of mouth marketing come from Robin Phillips et al, of the Brains on Fire agency. Seems to me word of mouth marketing is like “going viral,” that is, you’re not really in control of it. It either happens or it doesn’t. Don’t get me wrong, you can create fertile ground conducive to getting people talking positively about you, but if you try to “make” it work, it will likely backfire.

The secret, according to Phillips, is learning to create “meaningful movements.” Marketing evangelism at its deepest level. Ironically, the Brains on Fire people suggest focusing on various social media outlets is not how you create word of mouth. It’s a strategic focus on strategic tribes.

Keith Anderson
Guest
4 years 5 months ago

Word of mouth and its cousin “brand advocacy” are increasingly important to both retailers and brands, but they’re also among the more challenging disciplines because they demand authenticity and giving up some control.

My take is that retailers and brands should start with a focus on building products and stores that people love. Once you have organic fans, amplifying their passion gets more realistic. And it can’t be forced.

Chris Petersen, PhD.
Guest
4 years 5 months ago

Retailers need to stop viewing social media as an “either/or” and start viewing it as a multiplier (not additive).

One of the biggest things retail and brand marketers can do is plan and execute social media in conjunction with traditional media.

For example, Joel Rubinson mentions the that social media is “truly data … with predictive value.” Enlightened retailers are using Pinterest in predicting fashion trends. More importantly, they are putting consumer Pinterest choices on display in-store, which in turn amplifies the use of Pinterest.

Ed Rosenbaum
Guest
4 years 5 months ago

Face to face. I am glad you are here. How can we help to make this the shopping experience you are looking for? Starting with these points can make word of mouth a very strong outreach. It will bring that customer back, and several of those s/he has told will become new or return customers.

Tom Redd
Guest
4 years 5 months ago

Word of mouth IS THE KEY to new shoppers and more loyal shoppers. This is especially true as you go into retail sub-verticals like sporting goods, etc. Word of mouth is based on people-to-people trust vs. marketing to people/attempted trust.

You need as many voices out there as possible to gain the new, highly profitable customer.

Camille P. Schuster, PhD.
Guest
4 years 5 months ago
Word of mouth has always been the most persuasive form of communication because people trust what their friends and acquaintances say more than they trust what the company says in planned promotion. Social media is the way many people talk with each other so, of course, it is an important part of word of mouth communication—whether it is a post, a comment to followers, a comment to one person or a review. Social media does not make word of mouth any more “controllable” than in the past. However, social media provides a unique opportunity for retailers to “listen” to word of mouth communication. They ignore this opportunity at their own peril. Whether someone is reading what is posted every day about your company or you use a service that collects and categorizes comments or you use neural language programming software to analyze the comments, you can actually hear what the word of mouth comments are. In addition, you have the opportunity to participate in word of mouth conversations, stimulate word of mouth comments, change something… Read more »
Anne Howe
Guest
4 years 5 months ago

Word of mouth has forever been the most powerful and authentic method of influence. Retailers would do well to staff real humans that can create real stories and get conversations going amongst fans and shoppers. Doing this online, in the stores and in the community on an integrated and “managed” basis is the key. Monitoring and shaping the conversation is essential, as is the “fearless” trust that your audience of brand fans will rise up and defend you if some random crazy person tries to be an idiot.

There’s a trust factor to ramping up word of mouth. But beginning, building and sustaining a relationship with shoppers should be natural for retailers. Ideally, as we go into the biggest selling season of the year, we should NOT even have to have this conversation! This is ESSENTIAL to the practice of retailing.

Joan Treistman
Guest
4 years 5 months ago

The power of word-of-mouth should caution marketers that consumers have the last and most significant words. Buy or don’t buy.

Success in the marketplace has always been difficult to achieve. Remember that about 90% of all new products fail.

One of the advantages of word-of-mouth off line and online is that it is in the moment. Retailers and brands don’t have to wait a month to find out the opinions of their customers. More importantly smart marketers will look deep into what is being said to understand how their products and promotions influence positive commentary. Leveraging that understanding is what will bring about future success.

Gajendra Ratnavel
Guest
4 years 5 months ago

A really good way to boost word of mouth is targeting your most loyal customers with encouraging email campaigns to share their purchase with their friends, most likely social media or social gatherings. This is even more important now when people are getting together a lot more often. Just simple reminders, because they will probably talk about it if they get a little push.

Perhaps run a promotion around “photos with your friends” where retailers can get your customers to send in photos of their products in pictures with their friends for a discount on the next purchase. This will surely get everyone talking about the purchase your loyal customer has made.

This is so critical in the B2B world where a higher percentage of sales are based on word of mouth.

Shep Hyken
Guest
4 years 5 months ago

WOM is the best form of marketing/advertising a retailer can have. It comes from an amazing product, amazing customer service experience or both. It is assumed that the product you sell is good. So, mostly it is the experience the customer has that drives the WOM. That is why some say that customer service is the new marketing. So, take advantage of how social media can help you spread the word about how great doing business with you can be. Get customers to interact/engage with you and watch how their friends and colleagues join the conversation—and ideally become one of your customers.

Mark Burr
Guest
4 years 5 months ago

Jeff Bezos has been quoted as defining “Brand” as “What people say about you when you are not in the room.” This is easily transferable to to “word of mouth.”

When you are not in the room, you have little control over the conversation. When the consumer is “in the room,” you have at least 50% of the conversation at your benefit. What do you want to say at that time? What do you want them to say when you are not in the room?

Comments from Tony, Ian, and Anne are right on target on how to form that conversation.

Ryan Mathews
Guest
4 years 5 months ago

First of all, if this was April 1, I’d congratulate somebody on creating the Word of Mouth Marketing Association.

That said, the game has not changed. Treat your customers right and they’ll tell their friends, and a certain percentage of their friends are likely to shop with you as well.

Now, as a report I just read by the Bearded Marketing Gurus living in Detroit states ….

Ralph Jacobson
Guest
4 years 5 months ago

Merchants and CPG brands need to better leverage some of the social media analytics tools available today. Several vendors have some great capabilities for deriving insights from both online and offline WOM advertising.

Dan Frechtling
Guest
4 years 4 months ago

This is wonderful quantification of a qualitative medium. The state of the art advances on the predictive value of word of mouth.

I differ with some of the comments above. Social media paradoxically leads to both less and more control at the same time.

Most observations focus on the spontaneity of comments and ability to broadcast dissatisfaction more quickly on social media. This is true.

At the same time, social media enables propagation of the kinds of comments from your most positive customers, aka brand advocates. I don’t believe hiring people to do this is the right move. Next time, try this:

  1. Survey your customers to find out how you’re doing. The NPS “ultimate question” is a great single question
  2. Ask those who rate you highly if they will be willing to share their comments online
  3. Allow those high raters to make comments on the social site (e.g. Facebook) or reviews site (e.g. Amazon) thru APIs or redirects directly to those sites

Vendors like Zuberance or Evocalize in B2C, Influitive in B2B facilitate the above. I write more about this here.

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