Welcome to the wonderful world of word-of-mouth marketing, an enchanting place where gossip can be turned into piles of gold.
It is currently estimated that over $6 trillion of consumer spending can be attributed to this type of marketing strategy, meaning that it accounts for a staggering 13% of all sales.
In fact, Brad Frey, the co-author of a recent study about the impact of word-of-mouth conversations, concluded that:
'By cracking the social code and understanding how word-of-mouth truly drives business outcomes, brand marketers have an opportunity to greatly improve sales performance and efficiency.'
Now, understandably, you may well want a slice of this lucrative pie. We get it. After all, it does look incredibly tempting.
But before you take your first bite, we urge you to read this blog to explore how exactly this marketing tactic can effectively convert rave reviews into revenue.
What is word-of-mouth marketing?
Wait a second, you haven’t heard of word-of-mouth advertising? Where exactly have you been? This incredible form of marketing has taken the business world by storm, with over 83% of marketers using this strategy to get their products out to the masses.
But what exactly does this marketing strategy entail? Well, it is essentially the art of utilizing positive conversation to a product or service and gain brand awareness.
Let me explain further with a fictional anecdote. Have you heard about the new Italian restaurant called Pasta La Vista? No? Well, that is surprising because it has become the talk of the town.
You see, it all started when Malcolm had ‘the best meatballs of his life’. He raved about it to Tony, who then told Paula, who just had to mention it to Abdul, and so on and so on until the entire town knew about this exquisite Italian cuisine. Before you could say ‘the world’s best meatballs’, the restaurant was full of endless reservations for months to come.
This is the power of word-of-mouth marketing, where one positive experience from a happy customer can spread like wildfire and create mass interest. This chain reaction provides brands with a completely free and organic form of advertising that, when harnessed correctly, can be incredibly effective.
The different types of word-of-mouth marketing strategies
Now that we have established what exactly a word-of-mouth marketing campaign is, let’s dive a little deeper. Grab your diving gear as we plunge head-first into the different types of word-of-mouth strategies.
There are two main categories of word of mouth marketing, which are:
- Organic: This refers to the natural, unforced spread of information about a product or service from person to person.
- Amplified: This is when brands actively encourage word-of-mouth publicity through marketing campaigns.
However, there are countless different subcategories of word-of-mouth marketing campaigns, all of which are capable of generating increased revenue for your brand.
3 key money-making benefits of word-of-mouth marketing
Now that we have established what word-of-mouth marketing is, let us now examine its numerous benefits that are guaranteed to boost sales and increase revenue.
1. Credibility and trust
Brands make a lot of promises and false claims. Take, for instance, the energy drink Red Bull, which, despite its consistent claims, has yet to give anyone wings or the ability to fly.
In the age of disinformation, it is becoming increasingly difficult for consumers to trust the messaging coming directly from brands. In fact, only a dismal 15.4% of consumers actually believe what companies say in their advertising.
However, a recent study by Nielsen discovered that a staggering 88% of consumers trusted word-of-mouth recommendations from reliable sources, such as:
- Loyal customers
- Influencers and bloggers
- Family members,
- Review aggregators such as, Yelp
This increased trust established by word-of-mouth marketing results in more leads, sales and conversions. It has been shown that consumers who trust a brand are more likely to perform desired actions. Check out the table below for a more detailed breakdown.
Online clothes shopping involves a lot of trust in a brand and their product. This is due to a vast amount of worries, insecurities, and concerns stemming from the buying process, including:
- Will it look good on me?
- Have I bought the right size?
- Is it too revealing?
- Is the material high-quality?
- Is the product image accurate?
Hands up, who else has been in this situation? Or, even worse, the reverse of it?
You are not alone, as 33% of fashion items from e-commerce websites are sent back. A shocking 37% of these returns are due to incorrect fit. This comes as no surprise as over 91% of consumers are baffled by inconsistent brand sizes, causing 27% of consumers to avoid buying clothes online altogether.
SHEIN, a renowned ecommerce fashion outlet, has tackled this confusion and built trust in its product with word-of-mouth marketing.
By using reviews, testimonials, photos, and other user-generated content, SHEIN allows its consumers to hear the opinions of real people before committing to a purchase. SHEIN also encourages users to leave their measurements, which provides further information for potential customers.
This social proof allows their customers to have confidence in their purchasing decision, negating the costly process of returning items and building confidence in their product.
2. Cost effective
Have you ever looked at your yearly marketing costs and had this reaction?
Yep, we have been there too. And this is a disturbing trend that continues to plague countless industries, with most companies having to spend 6%-14% of their revenue on marketing budgets. Shockingly, it is estimated that many small businesses spend between $108,000-$120,000 per year on Google Ads alone.
In such challenging economic times, these ballooning budgets are unsustainable for many businesses. Unfortunately, traditional marketing practices are a minefield of expenses threatening to blow up your budget.
The list of potential expenses is quite frankly endless but includes:
- Online advertising such as: display ads, social media ads, and pay-per-click ads.
- Offline advertising such as: TV, radio, and print.
- Outdoor advertising, such as: billboards and signage.
- Content creation
- Social media marketing on LinkedIn, Facebook, X, and Instagram
- Email marketing campaigns
- Media outreach and press releases
- PR agency fees
- Video production
- Media events and press conferences
- Event planning
Now, you may have heard the old proverb before that ‘nothing in life is free’. Well, word-of-mouth marketing is the glaring exception to that rule.
This remarkable strategy can create completely free advertising using nothing more than a handful of positive customer experiences or gleaming endorsements. Now, that is something to celebrate in a rave review.
Example: Air France
Is this the real New York?
Or is this the REAL New York?
That was the conundrum that Air France's content marketing team wanted to answer when it launched numerous A/B tests for consumers to see the impact of stock and user-generated images in social media posts.
The results were astonishing; not only did user-generated content provide a 4% boost in click-through rate, but it also cut the cost per acquisition by 9%. This means that by using this type of word-of-mouth marketing, a company with a $1 million advertising budget could save an incredible $90,000.
3. Increased brand awareness
Take a look at these logos below. Do you recognize them?
Of course, you do, and that is because these companies have high levels of brand awareness. From Starbucks to Apple, countless companies have made their entire brand image instantaneously recognizable to potential customers.
But why do 89% of marketers state that being in this spotlight is their main goal? Well, 33% of consumers have a brand in mind when they go shopping. And it is incredibly beneficial for that brand to be yours.
With increased brand awareness, companies are more likely to channel traffic and sales towards their business. In fact, 69% of consumers are more likely to buy from a company they know than the cheapest product available.
If you want to unlock the door of brand awareness, then we believe word-of-mouth marketing is undoubtedly the key. And 83% of marketers agree with us.
But why? As individuals share their positive customer experiences with a business, this trusted message transcends social circles and amplifies brand awareness far beyond traditional marketing.
Example: ALS Association
Have you ever heard of ALS? Also known as amyotrophic lateral sclerosis, this rare neurological disease degenerates the nerve cells within the spinal cord and brain.
In 2014, this disease took the world by storm and became the focus of social media.
How? Do you remember the ice bucket challenge?
Yes, the viral trend that saw over 17 million people throw freezing cold buckets of water over their heads was to support the ALS Association and other charities researching this terrible disease.
Countless celebrities also took to social media to show their support, including:
- Chris Pratt
- Bill Gates
- Steven Spielberg
- Lady Gaga
- Harry Styles
- Robert Downey Jr.
This incredible word-of-mouth marketing example had a drastic effect on brand awareness and support for the ALS Association.
- $115 million in donations was raised for the Association.
- Awareness spread across 153 countries, including: Australia, New Zealand, Canada, Mexico, Brazil, Germany, Philippines, United States, United Kingdom, Puerto Rico, and India.
- The ALS Association website received over 10.3 million visitors.
- $90 million was invested into research funding between 2014 and 2018.
- 28 million Facebook engagements about the Ice Bucket Challenge were recorded in 2014.
- The ALS Association gained over 260,000 new donors.
The psychology of word-of-mouth marketing
Now, you may be wondering how exactly this all works. Is it some kind of witchcraft or wizardy? Are you going to live your childhood dreams and attend Hogwarts?
Woah, wait one second. Before you start packing, I have some difficult news to tell you. You can set that wand and broom aside, as I regret to inform you that your Hogwarts letter has not gone astray. The magic at play here is solely the power of psychology.
Word-of-mouth marketing combines psychological and sociological spells that come together to make marketing magic. Here are three examples of the scientific theories propelling word-of-mouth.
1. Social proof
Social proof is at the core of word-of-mouth marketing. This is the belief that if a lot of people are doing something, then it must be the right thing to do. This type of herd mentality demonstrates how word-of-mouth marketing can effectively build trust in a target audience.
Imagine it is time to upgrade your mobile phone. In your research, you find two models that have similar features and prices. How do you decide between the two? Well, one of them has countless gleaming customer reviews and ratings, while the other one has very little customer feedback.
Which do you choose? We almost guarantee that you will pick the phone with more online reviews. The social proof of all those satisfied customers gives you confidence that this phone is a safer and more reliable choice.
2. Cognitive dissonance
When someone tells us our opinions or beliefs are wrong, there is an undeniable struggle to process this conflicting information. This sudden cognitive dissonance makes us feel uncomfortable.
This can have an unusual side effect. In an attempt to restore faith in their own belief, individuals will start to share even more positive experiences to drown out the contradicting information. This means that customers are much more likely to spread word-of-mouth marketing to reinforce their own beliefs about a brand.
We all have that movie we love. The moment someone dares to label it as ‘bad’ or ‘overhyped’ we become defensive.
We immediately begin listing the numerous reasons that make the movie so damn awesome and engage in conversations with others about how great the film is. This helps us minimize the effect of this opposing viewpoint and reduce any contradiction it creates.
3. Emotional contagion
We are infectious. No, not the kind where we need to isolate for two weeks. But our customers are enthusiastic about our service, and that enthusiasm is catching.
You see, emotions are contagious. When we observe emotions, we often unconsciously mirror them. This means the positivity experienced from worth of mouth marketing is often replicated from recipient to recipient.
Think about how many times you have heard the old saying ‘laughter is contagious’. It turns out this phrase is based on truth.
Imagine you are watching a stand-up comedian. He tells a hilarious punchline, causing the entire theater to erupt into uncontrollable laughter and applause. Even if someone did not find the scene funny, the sheer enthusiasm of the audience would make it difficult not to join in.
7 other notable theories
There are countless other theories that are working behind the scenes to optimize word-of-mouth marketing. Here is a selection of other notable psychological theories:
- Fear of missing out (FOMO): FOMO is not just a slang term used by the youths of today; it is actually a psychological theory. When individuals hear about others enjoying a product, they may experience a fear of missing out, driving them to try it out for themselves.
- Anchoring: Anchoring is the bias where people rely heavily on the first piece of information they receive when making purchasing decisions.
- Halo effect: The halo effect occurs when a positive impression in one area influences opinions in other unrelated areas. In marketing, if a brand has one positive attribute, consumers might assume it has countless other benefits as well.
- Social identity theory: Individuals want to maintain a positive image among their social groups. If a product or brand aligns with their group identity, they are more likely to share positive information about it.
- Innovator's dilemma theory: Early adopters of new products are more likely to share their experiences with others. They are driven by a desire to differentiate themselves and gain recognition for their innovative choices.
- Narrative transportation theory: This theory suggests that people are more likely to be influenced by information presented in the form of engaging narratives. Crafting compelling stories around products or services can increase the likelihood of desired actions.
- Authority bias: This theory suggests that people place more credibility and trust in information provided by authority figures, including: influencers, celebrities, and industry leaders.
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Transform positivity into money
Let’s face it: most advertising campaigns feel like a tornado of industry buzzwords and flashy graphics designed to part consumers with their hard-earned cash. However, this approach often feels cold and commercialized, neglecting the human emotion needed to generate real buzz.
It is estimated that 70% of consumers prefer ‘authentic’ brands compared to calculated and controlled marketing efforts. Word-of-mouth marketing is the answer, adding a dose of authenticity to your branding message that can reduce costs, increase brand awareness, and build trust.
So, while marketers scramble to decipher the complex code of algorithms and trends to improve sales, let's not forget that sometimes the most effective strategy is simply encouraging positive word-of-mouth from your customer base.