Word of Mouth importance

Talking about marketing systems and effectiveness I couldn’t help it not to mention word of mouth (WOM) and its place in marketing communications mix.

We are adding Cutomer-2-Customer communications, referral marketing into our planning. We seek some information about permission marketing and how to generate WOM.

First of all, what do researches say?

WOM is more influential on customer behavior than other marketer-controlled sources. WOM is different, it definitely lacks boundaries. That gives the marketers and even the whole company the opportunity to be creative.

Francis Buttle in his article (1998) states that WOM influences awareness, expectations, perceptions, attitudes, intentions, and behavior.

Sheth (1971) stated the following: WOM is the most effective in raising awareness and stimulating trial purchase then traditional direct advertising.

Day (1971) also added that WOM is 9 times more effective than advertising, especially for concerting unfavorable / neutral perceptions into positive attitude.

Murray (1991) added to the discussion that personal communications (C2C) are more trustworthy.

How can we describe WOM giving some characteristics? WOM has valence (positive/negative), focus, timing, solicitation, and intervention.

By solicitation we mean the fact that it could be generated by opinion leaders and other influentials.

We define intervention in case WOM is not spontaneously generated, but pro-actively intervened by the company to stimulate and manage WOM activities.

We are now approaching the interesting question about interventions and negative WOM. It is known that negative WOM generates twice more feedback than positive WOM.

In the times of financial and economic crisis we might saw the numerous facts in the UK and in another countries how WOM was generated publicly about some particular bank problems (i.e. queues to withdraw cash, or deposits, whatever practically). Public made those banks almost bankrupt and then they were bought by another financial institution (you remember, ten times less, or something like that). So, frankly speaking, an effort of a journalist (it is not a topic of a discussion whether it was only the effort or “highly well-paid effort”) created such a WOM buzz that actually almost collapsed banking systems of not only developing countries (“Prominvestbank in Ukraine”), but also developed ones.

Negative WOM (or direct customer dissatisfaction) influence the customer either exit the relationship, or create some voice dissatisfaction, or generate another WOM to social networks.

These three ways are actually pretty different in its consequences for the company. The exit from the relationship means that company won’t sell its products and services to this customer and he/she won’t recommend and generate positive WOM to another audience. The generation of negative WOM to social networks means particular disaster for the company, because it can loose not only one customer (and not gain another from him/her), but also lose its present customer base through negative WOM buzz on the market. However voice dissatisfaction is actually not so bad for the company in case it is managed properly and this particular voice was heard and company did something about it afterall. Customer who expressed voice dissatisfaction is actually a pretty loyal customer who wants to stay in a relationship with company in case some particular problem would be solved for him. Company should actually encourage this kind of customer feedback to find out as well prospective problems and pints of discomfort that may occur for the wider audience and eliminate those. This approach will definitely minimize the percentage of customers who generate negative WOM and who are influenced by it.

Another side of the WOM generation strategies is referral marketing and country culture. Referrals could be either customer initiated (brand advocates or other positions within loyalty ladder) or company initiated (i.e. incentives). The huge development of company initiated WOM started in 1998 by providing incentives for the consumers by banking, telecom, and retail sectors. The emotional response to product/service performance and related incentives evoke WOM directly. The activation starts with WOM generators – knowledgeable innovators, who enjoy to advise friends (and wider community) using their product-related expertise, which gives a power to them. Followers are actually open to seek and receive information from them. So this is definitely a Win-Win relationship between them.

However the second point (first was negative WOM) that is related to WOM and current global marketplace is the reaction and willingness to generate and to be influenced by WOM within different cultures and countries. We know good examples in Europe and North America, but what about Asia, Africa, and South America?