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Social Media Marketing (SMM): What It Is, How It Works, Pros and ...
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eWOM
The dynamic nature of the interaction on social media—whether direct communication or passive liking—enables businesses to leverage free advertising opportunities from <anchor>eWOM</anchor> (electronic word-of-mouth) recommendations between existing and potential customers. Not only is the positive contagion effect from eWOM a valuable driver of consumer decisions, but the fact that these interactions happen on the social network makes them measurable. For example, businesses can measure their social equity—a term for the return on investment (ROI) from their social media marketing campaigns.
Word-of-Mouth Marketing: Meaning and Uses in Business
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# Word-of-Mouth Marketing: Meaning and Uses in Business

By

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

Updated July 02, 2024

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Reviewed byDavid Kindness

David Kindness is a Certified Public Accountant (CPA) and an expert in the fields of financial accounting, corporate and individual tax planning and preparation, and investing and retirement planning. David has helped thousands of clients improve their accounting and financial systems, create budgets, and minimize their taxes.

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Word-of-Mouth Marketing: When a consumer's interest in a company's product or service is reflected in their daily dialogues.:max_bytes(150000):strip_icc()/word-of-mouth-marketing.asp-final-92ae282ddc074b1a94ce139a8ceb3176.png)

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## What Is Word-of-Mouth Marketing?

Word-of-mouth marketing (or WOM marketing) is when a consumer's interest in a company's product or service is reflected in their daily dialogues. Essentially, it is free advertising triggered by customer experiences—and usually, something that goes beyond what they expected.

Word-of-mouth marketing can be encouraged through different publicity activities set up by companies or by having opportunities to encourage consumer-to-consumer and consumer-to-marketer communications. Also referred to as "word-of-mouth advertising," WOM marketing includes buzz, viral, blog, emotional, and social media marketing.

### Key Takeaways

- Word-of-mouth marketing (WOM marketing) happens when consumers talk about a company's product or service to their friends, family, and others with whom they have close relationships.
- WOM marketing is one of the most powerful forms of advertising as 88% of consumers trust their friends' recommendations over traditional media.
- Companies can encourage WOM marketing by exceeding expectations on a product, providing good customer service, and giving exclusive information to consumers.
- The Word of Mouth Marketing Association (WOMMA) cites the best word-of-mouth marketing strategies as being honest, credible, social, measurable, and respectful.
- WOM marketing includes various marketing techniques, such as buzz, blogs, and social media marketing.

## Understanding Word-of-Mouth Marketing

Word-of-mouth marketing differs from natural word-of-mouth references to a company's products and services in how it may come as the result of a promotion, encouragement, or other influence by a company, otherwise known as "seeding."

When a diner has a wonderful time at a restaurant because their expectations were exceeded and later tweets about it, or when someone had a great experience using a product in a new way and tells everyone they know about it, those are examples of word-of-mouth marketing. Also, word-of-mouth marketing does not stop at the first interaction; it tends to lead to a cascade of follow-on interactions.

The encouragement on the part of a company may take one of several forms. The best way is to give them a reason to talk, such as exceeding expectations or providing insider skills or information about a product.

Other strategies include offering consumers new ways to share information about a company's products and services, and engaging and interacting with the consumer, such as through exemplary customer service. This is especially valuable with social media-based customer service, which provides for seamless sharing and promotion.

## Benefits of Word-of-Mouth Marketing

Eighty-eight percent of people around the world said they trust recommendations from people they know (earned media) above all other forms of advertising, according to a 2021 Nielsen study. This shows just how effective word-of-mouth marketing can be.

Consumers are more emotionally bonded to a company when they feel they are listened to by the company. That is why many companies will have sales representatives discuss their products and services with consumers personally or through a feedback phone line. This kind of interaction, as well as promotional events, can stimulate conversations about a company's product.

There is a significant temptation to fabricate word-of-mouth marketing. Accordingly, the Word of Mouth Marketing Association (WOMMA) crafted a code of ethics checklist for the industry, advising that the best word-of-mouth marketing strategies are credible, social, measurable, and respectful, and there is no excuse for dishonesty.

WOM marketing expert Andy Sernovitz has boiled down WOMMA's code of ethics into three key rules to avoid issues:

- Say who you are representing (always disclose a relationship)
- Say only what you believe (be honest with an opinion)
- Never lie about who you are (be honest about your identity)

## What Are Some Examples of Word-of-Mouth Marketing?

Word-of-mouth marketing includes the marketing tactics companies use to prompt their consumers to talk about their levels of satisfaction with the company's service or product. These strategies include brand loyalty programs, which reward customers for repeated business and provide them platforms for user feedback; giveaways, contests, and sponsored influencers.

## What Is the Digital Version of Word-of-Mouth Marketing?

Digital word-of-mouth marketing employs technology, particularly the internet, to facilitate word-of-mouth exchanges. Review boards, social media sites, and blogs are popular digital platforms consumers use to share their experiences, good and bad, and these shared testimonials significantly influence consumer purchase decisions.

## Why Is Word-of-Mouth Marketing So Important?

Word-of-mouth marketing is important as it is an effective way to increase sales, promote products and services, increase brand recognition, and build customer loyalty. Many companies employ strategies that prompt customers to recommend their services and/or products and share positive experiences. Essentially, companies create the spark that causes the firestorm of chatter among consumers, and since studies show that most people trust the advice of family and friends, focusing on word-of-mouth marketing can be more beneficial and cost-effective than other forms of marketing.

## The Bottom Line

Word-of-mouth (WOM) marketing is when a consumer shares a positive experience about a good or service. WOM marketing is great for businesses as it generates business without incurring additional marketing costs. Businesses can, however, purposely contribute to word-of-mouth marketing efforts.

WOM marketing is usually experienced over dinner parties, texts, and casual encounters between friends and family. It can also be set through buzz, viral media, blogs, and social media marketing.

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Related Terms

Viral marketing seeks to spread information about a product or service from person to person by word of mouth or sharing via the Internet or email.

Volume discounts are financial incentives for individuals or businesses that purchase goods in multiple units or in large quantities.

Network marketing is a business model that generates sales through independent representatives.

Guerrilla marketing is when a brand or business uses unexpected marketing and promotional techniques.

Hard sell is an advertising or sales approach that features especially direct and insistent language. The pressure of a hard sell can offend or drive away customers.

Advertising elasticity of demand (AED) measures a market's sensitivity to increases or decreases in advertising saturation and its effect on sales.

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