Word of Mouth Is the Best Ad

Advertising via traditional and electronic media—as well as customer reviews on websites—still lacks the strength of good old word-of-mouth recommendations. Pro or con?

Pro: Consumers Trust Their Friends

What’s more valuable for choosing a restaurant, dentist, gym, or new smartphone—an online review or a suggestion a close friend makes to you? Even with the explosion of review applications and sites (eg, Yelp, Google, Urbanspoon), research clearly demonstrates that word of mouth—product or service recommendations made by friends, co-workers, or neighbors you know and trust—is still the most effective way to win new customers.

Why? While traditional advertising such as TV spots and newspaper ads, as well as digital marketing such as sponsored links on Google, can build brand awareness, they increasingly do not resonate with target audiences. This is especially true among the 18-29 demographic, a group that’s notoriously suspicious of advertising and well aware of the proliferation of fake positive (and negative) reviews.

While there’s no single formula for word-of-mouth success, I’ve found it often starts with creating a culture that encourages your clients to consider themselves valued partners in your business. Word-of-mouth referrals stem naturally from an unparalleled customer experience that fosters clients’ identification with your brand.

I’ve seen firsthand the power of word of mouth. In 2006, I launched a test preparation and admissions counseling firm out of my Manhattan apartment with just $5,000. Word of mouth has been the driver of my company’s success, translating into hundreds of new business referrals each year. Primarily through word of mouth, my firm has grown 50 percent annually, acquiring clients in Europe and Asia as well as in the U.S.

Despite the multitude of media platforms available, verbal buzz about your business or product passed from one reliable person to the next is still the most cost-effective way to build a loyal following, expand your business, and reach new customers.

Con: Multiplatform Works Best

Word of mouth is a marketing channel that most consumer marketers should explore. It is hardly sufficient, however, as a way to reach potential customers. There is no “one best channel” for marketing campaigns—customers are increasingly “omnichannel” in their consideration of different products and their actual buying behavior. Therefore, any marketer that wants to reach them also needs to market products and brands across multiple channels.

Think of all the channels to customers that an organization would miss if it pursued only word of mouth. The Internet, for example—this is one of the most exciting ways to market in history. Who would abandon the ability to employ targeted e-mails and websites with customers? The emerging fields of mobile and location-based marketing—sending offers to mobile devices or those devices in the vicinity of a store location—would also be left out in an exclusively word-of-mouth world. Even good-old direct mail, telemarketing, events, in-store kiosks, and broadcast ads still have their places in today’s marketing approaches.

The most sophisticated marketers today view the particular channel used to contact customers for ads and offers as just another variable in the marketing mix. The idea is that different channels, along with different messages, formats, and offers, are useful for particular customers at particular times, places, and purchase contexts. To restrict yourself to one value of that variable—word of mouth only—would be extremely unwise.

Of course, it’s not easy to work across multiple channels in marketing campaigns. Deciding what channel is best under what circumstances is difficult, as is keeping track of all the ads and offers to which a customer has been exposed. It would be far easier to go with a single channel—but also far less effective.

Opinions and conclusions expressed in the Debate Room do not necessarily reflect the views of Bloomberg Businessweek, Businessweek.com, or Bloomberg LP.

Reader Comments

erik

Ostensibly, the word-of-mouth concept is little more than an uneducated rumour mill. I speak with my friends on a number of subjects, and most of the time the conversation is nothing but opinionated dribble. When I need a relevant, well-informed, verified review of a product I am about to spend my hard-earned money on, I choose to go to peer-edited journals or expert reviews. If you look at more than a few, you should be able to find enough information to help you cut through the marketing, advertising, and nonsense.

Jeff Swystun

Great debate. I only wanted to chime in with a quote from Bill Bernbach, DDB's founder: "Word of mouth is the best medium of all." He said this over fifty years ago and its application to social media is fascinating.

Tim Tracey

No one denies the value of word-of-mouth. So powerful -- 80% of small business customers make their choice on trusted referrals. Yet so simple. If social media can facilitate the connection of one's trusted network with the local businesses they trust, that would be cool. Kind of like Facebook meets Yelp or the Yellow Pages.
Then, if it can be monetized in a webby way, you've got a winning formula.

Eric

As Erik mentioned, for a good review, an expert opinion is often necessary (although some reviews often looked biased). On the other hand, if a friend has used a product, had good results with it, had some problems with it and more importantly had very good customer services with it then this is a winner. I'm all for companies to redirect money on quality development (see what Apple did, no cheap plastic here) and excellent customer services (no Indian call centers and no automated voicebox please) rather than expensive and often stupid advertising. By the way, I have nothing against indians as I have many Indian friends but I'd rather have a local call center with extended hours so people can call after work hours and no more than 5 minutes waiting time before speaking with a human. Interestingly, all the comments that will appear on this debate represent free consultation services for the companies that will read them.

Sue Harrison

O’Connor’s right about the importance of WOM, but I agree with Davenport's "no one best channel" means to getting there. This is apparent through review of industry research and individual experiences with the link between advertising and sales. Word of mouth, long documented in the sales process, is a trusted referral, often the tipping point to response and purchase. But rather than a starting point, it’s more likely the end result of interest and knowledge built through other means. It occurs after a brand achieves a top-of-mind position. And that can take a varying amount of time, based on investment and audience relevance. The first mouth to spread the word needs one or more of the following: positive awareness, personal experience, a perception of quality through familiarity or a vested interest. But enough mouths to generate noticeable impact requires considerable, consistent reinforcement. And the quickest, most efficient means to shorten that sales cycle process still comes from a strategic measurable, multichannel platform.

christian

For being an advocate of word of mouth only, the test prep writer sure is using ALL of the latest, greatest internet vehicles and "gadgets" on his web site including Facebook, Twitter, Yelp etc etc etc

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