What is 'Word of Mouth' Marketing?

‘Word Of Mouth’ Marketing – Is It Worth It For Small Businesses?

Monday, August 31, 2015

What Is Word Of Mouth? Does It Work?

At first glance, marketing a product on the basis of word of mouth seems almost counter-intuitive.

After all, ‘word of mouth’, by the very definition of the phrase, speaks to recommendations coming from sources like family and friends. If the recommendation comes from you and your marketing department, it’s somewhat discounted from that particular circle of influence, surely? How could you even begin to influence factors like that?


But, companies do it all the time. For a really simple example, we can look at Dr Dre’s Beats headphones. Prior to being acquired by Apple in 2014, Beats dominated the high-price headphone market – boasting a 64% market share. One of the (many) marketing tactics that got them to that position was word of mouth and it was accomplished by simply having a unique visual design.

In stark contrast to many other headphones in the market, Beats have an immediately identifiable visual design – they’ve got a company logo emblazoned on each earbud and they tend to be brightly coloured. If someone is using Beats headphones, you know about it. This immediately identifiable design acts as an advertisement of a friend or family’s choice and recommendation.


That might sound like thin logic to some. It isn’t. Why would you buy a set of headphones just because your brother or friend bought a pair? Well, it’s an example of a company leveraging a psychological phenomenon called Social Proof. This is a name for people’s tendency to change their behaviour to conform with that of those around them (sometimes known as herd behaviour).


We’re social animals. When making a decision, our innate psychological tendency is to look to those around us for what is the correct choice – both consciously and subconsciously. Now, if we take our headphones example, if the first thing we see when we’re looking around for guidance on purchasing high-price headphones is Beats headphones, we’re more likely to choose that option.


And, of course, by virtue of their bright and unique visual design, it’s likely that Beats headphones will be the first thing we see when we start looking for guidance from family and friends. At the very least, they’ll be one of the first things we notice. This is one of several ways companies manage to market to us through word of mouth – even without anyone actually saying a word to us.


And, to be clear, it definitely works. It works very well. 


Even ignoring the obvious success of Beats (who, let’s not forget, Apple paid three billion dollars to acquire last year) and their marketing tactics (which have established Beats as synonymous with high-quality audio despite many experts arguing that they don’t actually offer higher quality audio than many of their cheaper competitors), reports, surveys and studies consistently demonstrate the value and importance of word of mouth marketing.


For example, a 2010 article published in the McKinsey Quarterly found that word of mouth was the primary motivator behind 20-50% of consumer purchases. Nielsen’s 2013 ‘Under The Influence: Consumer Trust in Advertising’ survey found that 84% of respondents trusted recommendations from people they know above all other forms of advertising. A 2013 study conducted by MarketShare, meanwhile, found that word of mouth marketing generally increased marketing campaign effectiveness by up to 54%).


So, while it might initially seem counter-intuitive, word of mouth marketing is actually an incredibly powerful tool that can have a very positive influence on the success of your business. And, to be clear, social proofing and snappy visual design are just some tactics that can be used – they’re far from the only ways a business can use word of mouth to its advantage. 


What About Small/Micro Businesses? Is It Worth It For Me?

Budget and resources can often seem like a huge hurdle to marketing for a small or micro business. If you’re a micro business and you are your company’s sole permanent worker, you may even find yourself having to handle all of the marketing for your business – despite having little to no genuine expertise in the field.


With that in mind, you may think word of mouth marketing is simply too complex and expensive for you to really make use of it within your business plan. After all, you can’t afford to redesign your product and get it endorsed by a legendary music producer to take advantage of social proofing, can you? But, you don’t need to go to those lengths or spend that much with your business.


It’s important not to get too distracted by examples when thinking about things like this – Beats Headphones’ strategy didn’t succeed because of the amount of money involved. It worked, in part, because it understood human psychology and took advantage of an aspect of how we happen to make decisions. It’s entirely possible to do that in a cost-effective way.


One example cited by marketing expert Jonah Berger is when he was sent a recently published book by a publisher. The publisher included a small note outlining why they thought it might be a good resource for Berger to use when teaching his students and, at the end of the note, mentioned they’d included a second copy for Berger to pass on to an interested colleague, if he knew anyone.


Far from an expensive exercise, that particular tactic is actually more cost-effective. Rather than swamping professors and lecturers with promotional copies (each of which constitutes one less copy of the book they could sell), that publisher targeted a handful of professors and encouraged them to share the book (and effectively do their marketing for them).


A more basic example is to simply think of any business that rewards referrals. By rewarding customers who refer new customers, a business encourages people to share and talk about their product. And, the overall cost of such exercises is negligible. Yes, you provide a discount to one customer – but, with the addition of new customers, you ensure that discount pays for itself.


That’s all word of mouth marketing has to be. Like our Beats example, those two examples above simply identify something within human psychology (e.g. exclusivity, a tendency to share, a love of a bargain) and take advantage of it to promote their product in a natural way. It’s not so much about using a lot of money and resources as using a little in just the right way.


How Can I Use Word Of Mouth Marketing In My Small or Micro Business?

While it’s obviously impossible to speak comprehensively to the needs of any particular business (particularly within just one article), there are some approaches that will help you in developing your approach to word of mouth marketing within your business. As with our examples above, it’s simply a case of identifying opportunities and taking advantage of them.


In order to do this effectively, it helps to have a deeper understanding of consumer psychology. Or, to be a little less cold and clinical about it, what people value in their interactions with others. The aforementioned Jonah Berger has spent over a decade studying word of mouth marketing and has identified five key motivations for why we share and connect with others:
  • Dealing With Emotions
  • Getting Information
  • Being A Better Friend
  • Persuading Others
  • Improving Your Image


Examples of these in action can include sharing novel or useful information to seem more worldly and knowledgeable (Improve Your Image) or calling a friend to take advantage of their expertise in a particular area of life (Getting Information). By understanding these motivations, you can better devise marketing campaigns that people will want to share and discuss with their friends.


If we want to get a little meta, we can look at this article as an example. I’ve created this article to specifically provide you with useful information about a key area of business (word of mouth marketing). I’ve helped you with Getting Information. If I’ve done my job right and you find this information useful, you’re more likely to tell people about me, this article and this little blog here.


While you can obviously be much more complex, that’s a nice simple formula that demonstrates how straightforward and pragmatic you can be with word of mouth marketing. You can try it with your business right now, if you’re so inclined.

  • What does your business provide?
  • How does it tie into those five values?
  • How can you make it clear to people that you’re going to help them with one of those five values? 


You might consider a blog entry. A free consultation for new customers. Berger himself has a free booklet available from his website that you get by subscribing to his email list. Just think about what your business provides and how it dovetails with those values above and act accordingly. It’s a nice, simple way to get started.

If you’re unsure of exactly what your business provides, there’s a relatively easy way to find out – simply ask your existing customers. A couple of years back, I studied Value-Based Marketing with John Paul Fischbach as part of Auspicious Arts’ Incubator initiative. He told me marketing can boil down to a couple of simple questions

  1. What do you like best about product?
  2. Why?


When people answer those questions, they tell you exactly what they value most about your product. That can help you identify how to secure new customers (particularly when combined with Berger’s values above). If you’re unsure of how to ask your customers these questions, Survey Monkey is a great online tool that will help you create and send email surveys for free.


You may also wish to consider other psychological factors in developing your word of mouth marketing strategy. Specifically, you may want to consider looking into the Consumer Decision Making Process – which is a series of steps that all consumers go through when making a purchase. Again, it’s more complex than we can go into here but it can help immeasurably.
  1. Need/Problem Recognition (I have a headache)
  2. Information Search (Do I have any painkillers in the house? Where can I buy painkillers? What kinds of painkillers are there?)
  3. Alternative Evaluation (Is it worth leaving the house? Which is the best painkiller brand?) 
  4. Purchase Decision (I’ve made my decision and I will purchase some painkillers that my friend recommended.)
  5. Post-Purchase Behaviour (These painkillers did/did not work and I will now tell everyone about them.)


While every consumer will navigate that process differently and weigh their options differently, you can greatly strengthen your company’s marketing strategy by viewing it in the context of that decision-making process and targeting areas where you can seize an advantage. If we go back to our Beats example, their strategy excelled in the Information Search area through Social Proofing.


(If you want a more in-depth understanding of the decision-making process, I’d fully recommend examining The Consumer Factor’s comprehensive breakdown of each of the five steps.)


Finally, you may want to simply consider some pragmatic universal business advice to ensure your word of mouth strategy isn’t undermined by other aspects of your company’s profile. For example:


Prioritise Dissatisfied Customers
It’s a widely acknowledged truism that a dissatisfied customer will speak more often and more loudly of their experience than a satisfied customer. As such, it’s important that such customers are dealt with seriously and respectfully. Doing so not only ensures that your business protects its reputation but, if handled correctly, can purchase you a loud, positive advocate for your business.


Personalise Each Exchange
One of the easiest ways to poison word of mouth is to have customers feeling unvalued or as if they’re simply a number in a line. As much as you can, try and personalise each exchange to each customer. Similar to the above, this sidesteps dangerous mistakes while also helping you build better word of mouth.


Visibility & Accessibility
Ensure that customers can contact your business easily and that, when people provide testimonials or feedback, it can be equally easily seen. Something like a Facebook page is a very simple example. Having a Facebook page allows customers to tag you when praising you on social media, allows you to respond to feedback immediately and to be seen to be doing so. A business Facebook page also allows you to display your reviews and testimonials with ease.

You needn’t use Facebook specifically. It may not be a fit for your business. But, if you don’t, you should make sure that people who praise you can be seen by prospective customers and that people who want to find and talk to you can do so with ease.


And, with that, hopefully you can see how word of mouth marketing can be easily and thoughtfully implemented by even the smallest of businesses.

Best of luck!