Contributions of the Word-of-Mouth to Marketing - Coursework Example

Contributions of the Word-of-Mouth to Marketing: A Critical Analysis Introduction Word-of-mouth communication is considered as the "princess of media," which has caused histories to be created, civilizations to be evolved and cultures to survive (Raghavan, 2006, p.61). Though originally it included only oral communication, today it refers to all types of communication from person to person, including face to face, telephone, email and text messaging. Word-of-mouth communication has evolved to become a powerful promotion tool in the business world. The US-based Word-of-mouth Marketing Association classifies word-of-mouth as: the voice of the customer; a natural, genuine and honest process; people seeking advice from each other; and consumers talking about products, services or brands they have experienced (Raghavan, 2006, p.62). Today word-of-mouth marketing includes several categories of communication such as buzz, blogs, and viral marketing where Internet communities and other interactive social media are utilised for word-of-mouth marketing. Influencer marketing is another form of word-of-mouth marketing wherein personalities who are believed to be highly influential over the target audience are made use of for promotion of products and services. Word-of-mouth marketing has gained a great deal of importance as a marketing technique due to its effectiveness, which in turn is due to its credibility. This is because word-of-mouth communication is considered to be honest and without any selfish motive. This credibility is what is made use of by marketers who use the technique of the word of mouth. People usually ask other people like their friends, family, colleagues and others, whom they trust, when they decide to purchase something and before they begin to look for what brand or label to buy. Word-of-mouth marketing is actually "giving people a reason to talk about your stuff, and making it easier for that conversation to take place" (Sernovitz, 2006, p.3). As simply put by Sernovitz (2006, p.3), "it is everything you can do to get people talking." People are more often than not buying a product not in response to the marketing campaigns of the product, but in response to what other people may be talking about the product. Research shows that people gather information from marketing materials and then talk the products over with their friends, family or other close associates. Then they make a decision about buying the product in response to what others say about the product (Silverman, 2001, p.6). Hence marketers have realized that the best way to increase sales of their products is by getting the customers to sell them. Word-of-mouth communication is now the focal point of marketing and the most effective method for sales promotion. Another factor that increases the significance of the word of mouth is that we are now in the information age where we are overwhelmed with more information than we can handle. This, in addition to busy schedules, leaves no time for extensive research, investigation and deliberation. Hence traditional advertising is on the decline and the word of mouth has become a necessary time saver (Silverman, 2001, p.10). Impact of the word of mouth in marketing There are several factors that render the word of mouth very powerful and effective. The most significant factor is that the word-of-mouth communication can be very influential and can persuade a prospective buyer to buy a product. Another factor is that the word of mouth communication is based on personal experience and therefore the possibility of expected result is very high. The independent nature of the word-of-mouth communication makes it more credible. Besides, while word-of-mouth communication is custom-made, relevant and complete, it is self-generating and self-breeding, growing exponentially and sometimes explosively (Silverman, 2001, p.37). It has unlimited speed and scope, and is "very inexpensive to stimulate, amplify and sustain" (Silverman, 2001, p.37). Word-of-mouth communication can happen in two ways. It can be volunteered by the sender of the communication who could be the user of the product or the service as well as it can be provoked by the seller of the product or service. The effect positive word-of-mouth communication can have on the sale of a product has been seen time and again in the marketplace. The Red Tent, a novel that holds up womanhood for its strength, love and wisdom, written by Anita Diamant in 1998 in the setting of Old Testament times, sold only around 10,000 copies after its release (Godes & Mayzlin, 2004, p.1). However, the author and the publisher, Picador Press, introduced an innovative technique whereby they distributed a thousand copies of the book to some influential persons of the community, several of whom were female rabbis. The rabbis were so touched by the subject that they started speaking about it from their pulpits with the effect that the book sold more than two million copies by 2001. The main features of this kind of communication are that the seller of the product initially targets key influencers and then takes efforts to provoke positive conversations about the product. Moreover, this is the primary marketing technique adopted by the seller (Godes & Mayzlin, 2004, p.1). Another example of this kind of marketing technique, also called buzz marketing, is Proctor & Gamble's effort to create buzz about their products among children. In addition to traditional word-of-mouth communication, today the Internet and the information technology provide several opportunities for consumers to express and share their product experiences with other consumers as well as prospective consumers online. This is a very popular method used by online sellers like the Amazon.com to familiarise and popularise their products among prospective customers. Amazon.com offers about 10 million consumer reviews on all its products, which have been considered by the New York Times (2004) as "one of the most popular and successful features of Amazon" (as cited in Chen & Xie, 2008, p.477). BevMo.com, BN.com, cduniverse.com, circuitcity.com, half.com, goodguys.com, wine.com, etc. are several other online sellers who make use of a similar strategy. The technique used by the sellers is to provide consumers with product reviews written by users themselves or by third parties like Epinions.com on the sellers' websites. These reviews make a significant impact on the purchase decisions of prospective buyers. The online book reviews on Amazon.com and BN.com have a remarkable impact on book sales as do the reviews on the Yahoo Movies website on the box office revenue. Hotmail and Burger King are two other companies that have used viral marketing successfully. Hotmail included an advertisement for its services at the bottom of all e-mails sent by its users, which gained Hotmail millions of consumers. The interactive website created by Burger King (www.subservientchicken.com) allowed consumers to "visit and type in commands for the man in the chicken suit to execute" (Eaton, n.d., p.3). The website provided links to communicate about this website to friends, and this has spelt success for the Burger King. Similarly, the consumer auction-based website, Ebay, makes use of the e-referral marketing technique providing customers an "Email to a Friend" link to notify friends on every auction conducted. Word-of-mouth communication plays a vital role in enhancing customer loyalty to different brands of products and services. The customer's ability to exchange personal experiences of products and compare them adds to customer loyalty (Frank, 1997, as cited in Srinivasan, Anderson & Ponnavolu, 2002, p.43). Customers regularly turn to each other for advice regarding products and they willingly exchange information, which helps enhance customer loyalty to certain brands. By facilitating this exchange of information and advice among users through the community, "an e-retailer can further increase e-loyalty among its customers" (Srinivasan, Anderson & Ponnavolu, 2002, p.44). Besides, loyal customers more often than not offer positive word-of-mouth communication, which in turn has a positive impact on the willingness of the customer to pay more. However, word-of-mouth communication is not without drawbacks. Word of mouth communication regarding a product or a service made by an individual who has had personal experience of the product or service can be positive or negative, or a mixture of both. Both positive and negative word of mouth communication "can influence the attitudes and predicted purchase behaviour of consumers" (Charlett, Garland & Marr, 1995, p.6). In a study made by East and Dall 'Olmo Riley (2002) on the impact, context and frequency of positive and negative word-of-mouth communications, they find that the negative word of mouth has more impact than the positive word of mouth (2002, p.1). However, prior commitment to a brand of product can subdue the impact of the negative word of mouth. According to the authors, word of mouth communication occurs when customers or users are neither strongly satisfied nor strongly dissatisfied. In their study of surveys on service users, they found that the penetration of the negative word of mouth was low compared to the positive word of mouth, though the frequencies were more or less the same (East & Dall 'Olmo Riley 2002, p.1). A survey of the users of current bank accounts, credit cards, car insurance and car servicing revealed that recommendation penetrations ranged from 17% for current account to 32% for car servicing over a period of six months (Freeman, 2001, as cited in East & Dall 'Olmo Riley 2002, p.5). The penetration of negative word-of-mouth communication was much lower, the highest being 6% for current account, while it was less than 2% for credit card, car insurance and car servicing. The study indicated that positive word-of-mouth communication had a higher degree of penetration than negative word-of-mouth communication. Negative online consumer responses to products, on the one hand, can help the company identify the shortcomings or drawbacks of the products and take action on improving the product, while on the other there is the risk of the negative responses spreading rapidly to unlimited number of people (Hennig-Thurau & Walsh, 2003, p.66). Besides, in contrast to traditional word-of-mouth communication, online communication remains available at any time. This increases market transparency from the consumer's point of view, but increases risk for the companies, making it difficult for them to establish long-term positive relationships with the customers. Some firms resort to encouraging customers to write positive reviews by offering them incentives and through such other manipulative techniques. Awareness of the use of such techniques reduces the credibility of word-of-mouth communication. Moreover, if the costs of manipulation are high and the honest consumer opinions are still higher in number, such manipulative activities "end up reducing the profits of all competing firms as well as the overall social welfare" (Dellarocas, 2005, p.4). Complete reliance on word-of-mouth restricts the growth of an organisation, especially a small organisation, as recommendations for its products will be limited to its existing small market. Besides, other than delivering the best product or service, there is no other way a firm can influence or control the word of mouth (Stokes & Lomax, 2001, p.3). Furthermore, customers who have extreme experiences of satisfaction or dissatisfaction are more likely to write a review than those with moderate experiences, with more probability being for writing negative reviews (Hu, Pavlou & Zhang, 2006, p.26). Besides, reviews written by consumers depend entirely on their individual perceptions. Predictions made based on these reviews may lead to erroneous marketing decisions. Business promotion requires not only positive comments about its products and services but also neutral comments. This is what corporations hope to achieve through brand building advertisements and promotions in the various media. Through brand building promotions, companies hope to create a buzz about its products and services among its target customers. An example is a programme on oral hygiene organised by a dentist who has opened a new dental clinic in a new neighbourhood, which provokes a lot of buzz among the people of the community. The people may talk about the programme as such, and not about the quality of the clinic or the services offered by it, as the clinic is new and no one has a personal experience of it. However, the buzz created might lead to people making enquiries or even making appointments for treatment. Brand building, in this way, softens potential customers so that "when they are ready to make a purchase, they will remember that specific brand" (Vered, 2007, p.10). Several arguments have been put forth as to why investing in online user reviews should be considered a poor strategy. Firstly, there is no reason why users should take their time off to write reviews for which they are not in any way compensated (Chevalier & Mayzlin, 2003, p.3). Secondly, competitors can free ride on the reviews provided by a company, as consumers can make use of the reviews on one website to make purchases on another. Unfavourable reviews made by biased parties with ulterior motives or those made by genuine reviewers can bring down sales. Positive reviews may lose credibility, as favourable reviews can be proliferated. In reviews of products like books and movies, product bias plays a vital role, as consumers choose products entirely depending on their perception. Such reviews may be disregarded by potential buyers. Besides, both the sales and the reviews can be the result of the publishers' promotional campaigns (Chevalier & Mayzlin, 2003, p.6). The entertainment industry, moreover, has found that with the rapid spread of online word of mouth communication, the life cycles of its products (movies) is also rapidly shrinking. This is "causing the industry to rethink its marketing strategies" (Dellarocas & Narayan, 2006, p.2). Unfortunately, the motive behind word-of-mouth marketing being mainly profits, there have evolved certain unethical practices in this marketing system such as deceiving people about the involvement of marketers in communication (stealth marketing), paying people to promote products without revealing the fact that they are working for the company (shilling), faking identities to promote products on online discussions (infiltration), sending inappropriate, unrelated and irrelevant messages in bulk without clear permission (spam), intentionally spreading wrong information (falsification), etc. (Raghavan, 2006, p.72). Research will have to be undertaken to check such malpractices that misinform and mislead the unsuspecting public. Conclusion Word-of-mouth communication has evolved to become a powerful promotion tool in the business world. Marketers have realized that the best way to increase sales of their products is by getting the customers to sell them. "Word of mouth marketing is a new marketing specialty that is actionable, trackable, and plannable as any other form of marketing" (Sernovitz, 2006, p.1). Word of mouth marketing includes viral marketing, blogs, communities, e-referrals, loyalty programmes and such other techniques that get customers talking about various products and services. Word-of-mouth communication plays a vital role in enhancing customer loyalty to different brands of products and services. The effects of the word of mouth can be positive, negative, both or neutral. Word-of-mouth marketing should be about honest reviews and never about deception that mislead the public to influence their buying decisions. Bibliography Charlett, D., Garland, R. & Marr, N. (1995). How damaging is negative word of mouth Marketing Bulletin 6, 42-50. Retrieved March 13, 2009, from http://marketing-bulletin.massey.ac.nz/V6/MB_V6_N1_Charlett.pdf Chen, Y. & Xie, J. (2008). Online consumer review: Word-of-mouth as a new element of marketing communication mix. Management Science 54(3), 477-491. Retrieved March 13, 2009, from http://www.u.arizona.edu/yubochen/Consumer%20Review.pdf Chevalier, J. & Mayzlin, D. (2003). The Effect of Word of Mouth on Sales: Online Book Reviews. Retrieved March 14, 2009, from http://www.weberbooks.com/reviews.pdf Dellarocas, C. (2005). Strategic Manipulation of Internet Opinion Forums: Implications for Consumers and Firms. Retrieved March 14, 2009, from http://gdrtics.u-paris10.fr/pdf/ws/2005-06_2/Dellarocas.pdf Dellarocas, C. & Narayan, R. (2006). A statistical measure of a population's propensity to engage in post-purchase online word-of-mouth. Statistical Science 21(2), 277-285. Retrieved March 14, 2009, from http://arxiv.org/PS_cache/math/pdf/0609/0609228v1.pdf East, R. & Dall 'Olmo Riley, F. (2002). Positive and Negative Word-of-Mouth Influence. Retrieved March 13, 2009, from http://72.14.235.132/searchq=cache:W2CWBnsigowJ:smib.vuw.ac.nz:8081/WWW/ANZMAC2002/papers/pdfs/p077_east.pdf+word+of+mouth+communication+positive+negative&hl=en&ct=clnk&cd=8&gl=in Eaton, J. (n.d.). e-Word-of-Mouth Marketing. Retrieved March 14, 2009, from http://4ltrpress.cengage.com/mktg/0618782508_VACM_eWord_of_Mouth_WM.pdf Godes, D. & Mayzlin, D. (2004). Firm-Created Word-of-Mouth Communication: A Field-Based Quasi-Experiment. Retrieved March 13, 2009, from http://www.som.yale.edu/faculty/dm324/firmcreatedwommktgsci.pdf Hennig-Thurau, T. & Walsh, G. (2003). Electronic word-of-mouth: Motives for and consequences of reading customer articulations on the Internet. International Journal of Electronic Commerce 8(2), 51-74. Retrieved March 13, 2009, from http://www.uni-weimar.de/medien/marketing/l/filebrowser/files/03_hennig-thurau.pdf Hu, N., Pavlou, P. A. & Zhang, J. (2006). Can Online Word-of-Mouth Communication Reveal True Product Quality Experimental Insights, Econometric Results, and Analytical Modeling. Retrieved March 14, 2009, from http://sloan.ucr.edu/blog/uploads/papers/ISR_HU_PAVLOU_ZHANG_SUBMITTED.pdf Raghavan, S. (2006). Word-of-mouth marketing: The buzz in the marketers' hive. In N. M. Shanthi & M. Thirulogchander (Eds.), Effective Promotions: Concepts and Cases. Hyderabad, India: The ICFAI University Press. Sernovitz, A. (2006). Word of Mouth Marketing: How Smart Companies Get People Talking. Kaplan Publishing. Sernovitz, A. (2006). Word of Mouth Marketing in Five Easy Steps. Retrieved March 14, 2009, from http://www.marketingprofs.com/6/sernovitz1.asp Silverman, G. (2001). The Secrets of Word-of-mouth Marketing: How to Trigger Exponential Sales Through Runaway Word of Mouth. AMACOM Div American Mgmt Assn. Retrieved March 12, 2009, from http://books.google.co.in/bookshl=en&lr=&id=-J6Y6Ca_pEAC&oi=fnd&pg=PR9&dq=word+of+mouth+communication+marketing&ots=7ZFeX35tAz&sig=5Bv9aTI1IfmafYJ3EH7nvUHpiD8#PPA10,M1 Srinivasan, S. S., Anderson, R. & Ponnavolu, K. (2002). Customer loyalty in e-commerce: an exploration of its antecedents and consequences. Journal of Retailing 78, 41-50. Retrieved March 13, 2009, from http://faculty.lebow.drexel.edu/SuriR/Marketing%20Faculty%20Journal%20%20Pdf%20Files/paper4.pdf Stokes, D. & Lomax, W. (2001). Taking Control of Word-of-Mouth Marketing: The Case of an Entrepreneurial Hotelier. Retrieved March 13, 2009, from http://bustech2.kingston.ac.uk/files/documents/research/kbspapers/occasional/44wordofmouthmkt.pdf Vered, A. (2007). Tell A Friend - Word of Mouth Marketing: How Small Businesses Can Achieve Big Results. Lulu.com. Retrieved March 13, 2009, from http://books.google.co.in/booksid=LUhjfr4Tk9sC&printsec=frontcover&dq=word+of+mouth+marketing&lr#PPA10,M1 Read More