Consumer Decision: The Effect of Word-of-Mouth - Research Paper Example

Purpose: The report has primarily been created to present a study on the significance of the word of mouth and its impact on the consumer decision. Approach: The study has been conducted on the basis of secondary resources. The researches of different authors and theorists on the subject of word of mouth have been consulted and analysed to present a research study through this report. Journal articles have been mainly used for the secondary based study. Results: The study regarding the word of mouth has shown that the positive effect of the word of mouth has surprised the negative effe3ct and has been comprehensive in perusing the customers decision-making while purchase. Results from the study have shown that the consumers who have been a customer of the organizations products and services have added more value to the firm in the long run than the conventional customers. The online word of mouth has also been significant in influencing the purchase decisions in a positive way. Conclusion: The study has provided with a detailed understanding of the word of mouth and found to be highly significant in influencing the purchase decision of the consumers. It has been obtained from the study that the use of word of mouth has yielded promising results for the organizations as a marketing tool Word of mouth has been successful in perusing the customers to act positively. The study of word of mouth can thus be said to be an important contribution in the marketing aspect of an organization and have been a profitable solution for the success of different companies. Discussions: Word of mouth has a strong role to play in guiding the customers. Marketing professionals have exploited this aspect to their benefit. However organizations also need to be careful about the negative aspect of the word of mouth. Customer who prefers uniqueness in their product also hesitates in giving a positive word of mouth and the organizations needs to be ware of such issues. The presence of online word of mouth has also been helpful in providing positive word of mouth and organizations should look to dedicate themselves more in such areas. Consumer Decision: The Effect of Word-of-Mouth Introduction: Word of mouth deals with the process of transferring of information from one person to the other through oral communication. The concept of word of mouth has become an important term in the marketing activities conducted by various organizations. Interpersonal communication or the word of mouth has gained importance in the decision making of the consumers. Word of mouth is gaining importance among the societal changes observed in the environment and has become one of the most important and effective communication channel. The paper studies the various aspects of the word of mouth and its influence on the consumer decision making relating to purchase of products. The negative aspect and the positive aspect of word of mouth have been studied in the paper. The paper discusses the online word of mouth which has been the latest trend in the present technological era and the effective role played by the social networking sites. The study also focuses on the factors affecting the word of mouth. Literature review: Word of Mouth Positive and negative word of mouth Word of mouth has been an age old concept where a person shares his view with another person. The views of the person can be related to a product or the service he have received. The studies in consumer behavior suggest that words of mouth have a strong influence on the psychology of the person. The influence of word of mouth can have both positive and negative aspects. Relating word of mouth to the consumer behavior, it can be interpreted that the positive word of mouth increases the likelihood of the consumers in opting for the product, whereas the negative word of mouth does the reverse. The overall effect of the word of mouth is dependent on two factors. The total number of people being exposed to positive word of mouth or negative word of mouth helps in judging the final influence. (Romanuik, 2007,p. 462) The individual influence of word of mouth also determines its overall effect. People like to share their negative experiences more than the positive ones and so negative word of mouth is much more in abundance in comparison to the positive word of mouth. The high presence of negative word of mouth often strikes a major problem for the marketers. Institutional word of mouth deals with the influence of the corporate in providing views relating to their products or services. The concept of positive word of mouth has been largely used by marketing professionals as it can serve both the purpose of measuring the effectiveness of the marketing tools like advertising and also at the same time be used as a credible source for gaining information relating to the product (Li & Zhan, 2011, p.239). The word of mouth involves the major brand organizations. Research has reflected that each days Americans take part in over 3.5 millions Word of mouth conversations which involves the brand names of 92 organizations. The spread of word of mouth involves different media. Television is the major source of the word of mouth which accounts for 16 percent of the total media. The other important media source comprises of the internet, and newspaper which has 12 percent and 7 percent contribution respectively. (Keller, 2007, pp. 450-451) Motivation and cultural factors affecting the word of mouth A careful study on the research conducted by Berger and Schwartz reflects that popular or more interesting products are generally most talked about and creates a motivation among the people to be discussed about it more in public thus giving rise to the word of mouth. During the sharing of the Word of mouth it has been found in the research that consumers not only talk about the products but also about themselves. The research also highlights that one of the major factors driving ongoing word of mouth is the factor of accessibility. Other than the factor of interest word of mouth is also motivated by the amount of accessibility a product has with the common mass of people (Berger and Schwartz). Cultural values of the customers also play a significant role in the communication process of the word of mouth. The action of the consumers who receives the customer’s word of mouth is often guided by the value of the culture from which they belong. Research carried out in the context says that the respondent with more value for individualism has a tendency to spread more positive word of mouth among the out groups but not to their in group (Lam et al, 2009, pp.55-70). The effect of the word of mouth is stronger in the process of the evaluation of the customers who are in high uncertainty avoidance cultures. The results also reflected that people belonging from a culture which has high uncertainty avoidance gives much more importance to the words of mouth before the onset of the purchase or any service. (Schuman, et al, 2010, pp. 62-80) The effects of word-of-mouth on purchase decision making: Influence of word of mouth on the purchase behaviour of consumers: It has been accepted in the present market scenario that word of mouth has become a powerful strategy for the marketing professionals. The effect of the word of mouth has a huge significance in influencing the purchase making decision of a consumer. It has been found that the word of mouth has a significant role to play in influencing the customers to purchase a product; it has been found that often organizations induce their views in the word of mouth. Research conducted by Villanueva et al tried to find out the effect that the word of mouth induced customers have on the firm’s value. The long term results show that purchasers who are influenced to be the customers of the organization under the influence of word of mouth adds more value to the firm and adds a lot to the overall customer equity of the firm. The VAR model used for the research process also concludes that words of mouth has become one of the major tool for the customer acquisition of the organizations and also remains loyal to the firm in the long term (Villanueva, et al, 2008, pp.48-59). Research conducted by Godes and Mayzlin tried to focus on the ways a firm should try to use the exogenous word of mouth to foster the sales. The research result showed that exogenous word of mouth accounts for the higher level of sales for the organizations. The concept of word of mouth acts a solution to the difficulties associated worth the promotional problems and word of mouth appears to be a rational and overall profit maximization solution. The research also reflects the fact that products which have not gained much awareness on the initial stages have no effect on the campaigns taken by the loyal customers. The result of such lesser effect can be referred to the fact that the network of the loyal customers already knows his view regarding the product ad pays no further attention to the words of mouth. It has been suggested in the research that the less loyal customers should be used more in the word of mouth campaigns (Godes & Mayzlin, 2009, pp.721-739). Further research was carried by Trusov et al to find the difference between the impact of the traditional, marketing and the word of mouth. The impact of the word of mouth was studied from the rise in number of member referrals in an internet based social networking site. The VAR models used for studying the impact shows that the customers who have been referred by the words of mouth accounts for a carry over effect which lasts longer than the effect gained by the traditional marketing. The VAR model used for the research also suggests that the response elasticity of the word of mouth is much more in comparison to the traditional marketing.(Trusov, et al, 2009, pp.90-102) The effects of the inconsistent word of mouth also have a striking significance in influencing the purchase decision of the customers. A study conducted by Wang involved six scenarios to measure the effect of the inconsistent word of mouth. The participants in the research involved were the students of a major university located in China. The final outcome of his research held the conclusion that the buying behavior of the customers and the perception of the consumers regarding the service quality are more guided by the final word of mouth and that the initial word of mouth has significant role to play to play in influencing the customers. The results also suggest that the positive word of mouth has more influence among the customers (Wang, 2011, pp. 252-259) Online impact of Word of mouth A research conducted by Cheng et al tried to find out the impact of the Word of mouth and the online social interaction on the sale of products, and their overall effect considering the time period of the product life cycle. The research also aimed to study the effect of the word of mouth interaction among the consumers. The result of his research focused on the fact that the influence of the negative Word of mouth is more among the customers. Sales are found to increase as a result of the positive online interaction whereas no significant effect of the negative online interaction was observed. Finally the study of the research also pointed out that both word of mouth and online interaction tends to decrease as the product reaches the last stages of its life cycle.(Chen, et al, 20011,p.238-254). The word of mouth has gained its importance and the effects of the word of mouth in the virtual space have also become important over the years in changing the perception of the consumers. The offline behavior of the word of mouth can also be implemented in the online mode to fetch benefits for the organization. A research carried out among the consumers in Hong Kong mall shows that the similar views of the customer’s interest and the topics discussed in the online forum regarding the service of products of an organization can strongly predict the purchase intention of the product. The attitudes towards the forum also have a significant effect on the purchase intention of the consumers and have an indirect influence through the persuasiveness of the product (Prendergast, & Ko, 2010, pp.687-708). Research by Cheema and kaikati studies the difference of the words of mouth expressed by the consumers who gives more value to the unique products. On this context it has been understood that the consumers who have their high inclination towards the unique products will express lesser amount of the positive word of mouth. The uniqueness of the product expressed through positive word of mouth provides more validity among the consumers. The studies also reflect the fact though the high unique product users hardly have any willingness among them to provide recommendation but they are often found to discuss about their products. (Cheema and Kaikati, 2010, pp. 553-563) Development of Propositions: Positive and negative word of mouth influences the customers differently: The effect of the word of mouth has a huge significance in influencing the purchase making decision of a consumer. Positive word of mouth influences the consumers to get inclined towards a particular product or service whereas negative word of mouth creates a level of suspicion among the consumers to purchase a product and keeps them away from certain products. Motivation and cultural factors have positive effect towards the word of mouth Culture and motivation has a positive effect on the words of mouth. Accessibility and similar level of interest creates a motivation among people to spread positive word of mouth. Persons with high individualism also contribute significantly towards the positive build up of word of mouth. Word of mouth has a positive effect on the purchase behaviour of consumers: It has been found that the word of mouth has a significant role to play in influencing the customers to purchase a product. The effect of the negative word of mouth has considerable lesser influence towards the customers. The success of word of mouth has become so popular that it has evolved as the major marketing tools by the professionals and often they induce positive word of mouth to gain increased amount of sales. Word of mouth has a positive relation to the consumer decision making process. Word of mouth appears to be a rational and overall profit maximization solution. Online impact of word of mouth has a positive effect on the customers. The word of mouth has gained its importance and the effects of the word of mouth in the virtual space have also become important over the years in changing the perception of the consumers. The outlooks of the customers for the online forum also have a significant effect on the purchase intention of the consumers and have an indirect influence through the persuasiveness of the product. Conclusion: The study has provided with a detailed understanding of the word of mouth and found to be highly significant in influencing the purchase decision of the consumers. It has been obtained from the study that the use of word of mouth has yielded promising results for the organizations as a marketing tool. Word of mouth has been successful in perusing the customers to act positively. The concept of the word of mouth has been significant for the organizations that provide intangible service benefits to the customers (Ng. et al, 2011, p.134). In the latest generation of technology enhancement the online reviews and the word of mouth has high significance and the social networking sites has huge role to play in the building up a positive effects upon the psychology of the consumers. The study of word of mouth can thus be said to be an important contribution in the marketing aspect of an organization and have been a profitable solution for the success of different companies. Discussions Word of mouth has a strong role to play in guiding the customers. Marketing professionals have exploited this aspect to their benefit. However organizations also need to be careful about the negative aspect of the word of mouth. The frequency of the product usage generates the word of mouth , and organizations needs to gather more amount of the word of mouth from the non loyal customers in order to create a effect upon the prospects who are planning to purchase the product. (Samson, 2010, p.459) Customer who prefers uniqueness in their product also hesitates in giving a positive word of mouth and the organizations needs to be ware of such issues. The presence of online word of mouth has also been helpful in providing positive word of mouth and organizations should look to dedicate themselves more in such areas (Katona, et al, 2011, p. 442). The study has significantly shown that the products which have low involvement in the market, the word of mouth of the highly networked customers play a substantial role in achieving the benefits for the organizations. References Berger, J & Scwartz, M, (2011), what drives immediate and ongoing word of mouth, Journal of marketing research, XLVIII, 869-880. 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