In the present age, when skipping of television commercials is merely a matter of pushing a button of television remote and traditional advertisements reach fewer number of people, marketing professionals are increasingly moving away from mass media to word-of-mouth marketing (Brooks, 2006). In addition to the traditional word-of-mouth communications, emerging marketing channels like blogs, buzz, viral and e-mails are gaining popularity as the new electronic word-of-mouth (Jerving, 2008). While a positive word-of-mouth accelerates the acceptance of brands in new markets and reduces brand promotional expenses in existing markets, a negative word-of-mouth may hamper a brand’s acceptance and tarnish its reputation (Lam et al., 2009).
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Since word-of-mouth marketing has been playing a major role in marketing of organizations and some of its aspects are still evolving and have strong potential in future marketing campaigns of organizations, the focus of this report would be to explore issues related to word-of-mouth marketing in developing a strategic marketing plan for an organization. First, an explanation of the word-of-mouth (WOM) marketing will be presented. Subsequently an analysis of its importance and scope will be presented, keeping in mind the current issues in marketing which have informed the strategy, specifically in relation to word-of mouth marketing.
“Word-of- mouth marketing is the intentional influencing of consumer to consumer communications by professional marketing techniques.” (Kozinets, 2010, p71). It has been well documented in the marketing literature that consumers frequently obtain information about products and services through other people including their family members and friends (Bayus, 1985). People share such information, not just to justify their decision of buying that product or service, but also to express their good or bad experiences related with those product or services (young, 2008). Consumers have been vocal about their opinions but now they are increasingly using numerous mediums, like internet, to broadcast their their opinions, judgements and advices (Hedges and Chung,2009). However, although word-of-mouth marketing was conceived as a naturally occurring phenomenon, situations changed as internet became an essential part of peoples’ lives and communications, and word-of-mouth marketing became a prominent feature on the internet, like blogs, forums and social networking sites. As a result many more terms became associated with word-of mouth marketing, like social media marketing, viral marketing and buzz marketing (Kozinets, 2010). Numerous techniques have been identified and some are still evolving; still, the basic strategies have remained the same, which are to encourage people to talk about a brand or company and to involve consumers in marketing and creative projects by making effective connections with the public (Young, 2008).
According to Misner (1999) word-of-mouth marketing is the world’s most effective, yet least understood marketing strategy. However, currently word-of-mouth marketing has gained considerable importance among practitioners who are greatly interested in understanding its fine nuances because traditional types of marketing techniques like print and television advertising appear to be losing their grasp on consumers. Word-of mouth marketing, not only provides the benefits of low cost and fast deliveries, but also has an advantage of lesser consumer resistance compared to other techniques as it is easier to believe the views of friends and acquaintances about a product or service than a corporation bragging about the quality of its product or services (Trusov et al., 2009). Word-of-mouth marketing is influential not only in increasing the customer base but also in retaining the old customers, as positive word-of-mouth builds credibility to products or services (Young, 2008). A recent Inc. Magazine study found that 82 percent of the fastest growing private companies use word-of-mouth techniques (Ferguson, 2008). In America, food and dining category is top-most favourite in word-of-mouth marketing as generally people talk about food and dining brands more frequently than they do about other brands (Brooks, 2006). Similarly, a study by East et al. (2005) found that word-of-mouth had greater influence on brand selection than advertising or personal search. For example most of the top- ranked beers in the United States have never been advertised and yet were successful largely on the basis of the word-of- mouth promotions (Clemons, 2008). Still, it is important to understand whether word-of-mouth marketing is actually effective compared to other marketing activities and whether there are some other issues, like ethics, which can affect the future propagation of word-of-mouth marketing.
The earliest study to ascertain the effectiveness of word-of-mouth marketing was conducted by Katz and Lazarsfeld (1955) and since then more than 70 such marketing studies have followed with researchers trying to highlight the conditions under which a consumer is more likely to make a purchase decision influenced by other peoples’ opinions, the relative strength of different peoples’ influences and the motivations for such people to propagate the word-of-moth marketing communications (Trusov et al., 2009). The word of mouth communication is influenced by certain factors which affect its market-based message and its reception by the intended audience. These factors may be the forum under which the communications are taking place, like blogs, dinner parties or social networking web sites, the communal norms that influence the expression and reception of the message and its meanings, as well as, the promotional characteristics of the word of mouth marketing campaigns (Kozinets et al., 2010). For example, a restaurant may benefit by knowing the likes and dislikes of the restaurant critics along with the customers, because the positive word-of-mouth publicity generated by these critics and their reviews can help the restaurants to generate more business. However simply generating the buzz is not sufficient, and the restaurant would have to make efforts to stay in news by organizing wine cooking classes, wine tastings and other special events to generate constant word-of-mouth communications ((Cebrzynski, 2004). Additionally, in the context of restaurants three factors are more likely to influence word-of-mouth communications and these include complaints regarding food, effort spent on correcting the error and whether or not the customers were planning to return to the restaurant in which case they told a significantly larger number of people about their experiences than those who planned to return to the restaurant (Susskind, 2002).
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Word-of-mouth is among the few marketing techniques that have permeated through the no-marketing zones that the general consumers have built around their lives, the basis of which is trust on the communications. However there might be differences in the quality of the naturally occurring or organic word-of-mouth communication and that stimulated by a marketing agency (Trusov et al., 2002). Several tactics are being used to generate word of mouth referrals and a common practice is to offer financial or other incentives to existing customers to provide word-of-mouth referrals and according to a research by (Trusov et al., 2002), each outbound referral sent out is worth approximately 0.75 dollar per year in increased advertising revenue. However there are also instances of some practitioners running campaigns that dupe the consumers which may taint the credibility of word-of-mouth marketing campaigns. Consumers are increasingly getting aware that advertisers are buying words on search engines and bloggers are writing praises for the products in return of financial incentives. Some companies are even using their employees or hiring external agents to write or propagate fake glorious reviews of their products or services or discouraging reviews against their competitors (Hofman, 2006). The issue of transparency is increasingly being raised in response to the information circulated in various blogs, especially after the revelation of the fake Wal-Mart blog in 2006, where the enthusiastic blogs were actually written by the company itself (Fernando, 2007). These unethical tactics sow seeds of suspicion in the minds of the consumers and may adversely affect the future successes of the word-of-mouth marketing campaigns as well as instigate heightened measures of government scrutiny over such campaigns. Another issue which has been largely ignored in word-of-mouth communication is the effect of cultural values on such communications (Lam et al., 2009). According to the research conducted by Lam et al. (2009), the pattern, type and target receivers of consumers’ word-of-mouth activity are related to their cultural values. The frequency and intensity of word of mouth is also related to certain other factors like the context of the type of products and markets (Gelb and Johnson, 1995), the social networks involved (Alsop et al, 2007) and the social class of the individual (Hugstad et al., 1987).
Word-of-mouth marketing is not a new phenomenon, but has only recently been defined, studied and explored in depth. However, one fact that has very clearly surfaced is that, this type of marketing should not be faked or staged but rather encouraged and helped along. The truth which cannot be ignored is that people will talk about a brand or company whether or not a company uses formal word-of-mouth marketing campaigns; therefore it is beneficial for a company to keep track of what is being communicated about it as well as try to ensure that such communication is positive and beneficial for the company (Young, 2008). A carefully designed word-of-mouth marketing campaign can not only save a lot of money which would have been spent on advertising, but also prove to be an effective means to attract new consumers while retaining the older consumers.
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