Why Should Companies' Service Managers Control the Word of Mouth - Term Paper Example

Introduction A strong correlation exists between the growth rate of a company and the percentage of customers who are also promoters of the services offered by such a company. One of the important tools used by many customers in spreading the good or the bad image of the company depending on how satisfied they felt when they were served in the same company or organization is the word of mouth. The Word Of Mouth Word of mouth refers to the passing of information through verbal means especially recommendations. This is done through informal person to person form of communication. Jackson (1985) observes that, it is typically considered to be a face to face type of communication. Text messages via SMS, web dialog such as online profiles, message board threads, blog posts, emails and instant messages are also included in this category. It is commonly used in describing positive information spread rather than negative as is the case with gossips, innuendo, hearsay and rumors. Word of mouth marketing is also called ‘buzz marketing’ or ‘viral marketing’. It is highly valued by marketers because of its personal nature of communications between different individuals. Though neglected and ignored by many marketing managers of service companies or organizations, a word of mouth can either accelerate the growth rate of the company or become a stumbling block. Research has pointed to individuals as being more likely to incline to believe the word of mouth than any other form of communication. (Charlett et al 1995) According to Kother (1999), the receiver of the word spoken by mouth believes that the person giving the information does so honestly. The receiver believes that he or she does not harbor any ulterior motives because there is no incentive for their referrals. With the web 2.0 emergence many web start ups like youtube, facebook, digg and myspace have utilized ‘buzz marketing’ through merging it with social networks that have been developed by them. The increased use of internet as a communication platform and as research tool, word of mouth has therefore become a useful source of information to both marketers and consumers. The online buzz tracking has led to the increase of a range of tools and components of online public relations. Buzz monitoring is used in social media marketing and public relations in order to track relevant conversations via internet. A successful example to prove the power underlying the word of mouth in service companies is the Gmail-Google marketing. There was no money that was spent in marketing it. Scarcity was created through allowing only a handful of power users. Other people who wanted to be like the power users desired to have the Gmail account and this manifested itself in their Gmail invites on eBay. The cachet to have a Gmail account resulted into word of mouth rather than any other marketing activity being carried out by Google. Most of the service companies adopt the ‘net promoter’ score. This is used by the management in order to gauge the company’s customer relationship. This tool is an alternative to traditional satisfaction research that is carried on various customers of a given company (Merak, 2007). According to Mittal and Kamakura (2001), a company gets its ‘net promoter’ score by asking its customers simple questions such as “How likely are you that you can recommend our services to your friends or colleagues?”. Promoters are viewed by most companies and organizations as valuable assets. They obviously drive the profitability growth because of increased or repeated purchases of the services, referrals and longevity in the same company. As a result most service companies categorize their customers into three groups namely promoters, detractors and passives. A detractor is seen as a liability to the company as he/she destroys the profitability of the company. This is due to his or her complaints, negative word of mouth and reduced purchases which results into defection. Most companies then calculate their ‘net promoter’ score by checking at the percentage of promoters and the percentage of detractors and then subtracting the two values. The results from such a research are used by the company in becoming more focused on improving their services or products for its customers. (Rehmeyer, 2007) As observed by Uchanan (1990), word of mouth is found to offer a prediction in the sales growth of the company. This is true for car manufacturers, retail banks, mobile phone networks and even supermarkets all over the world. For example, a survey carried out on telephone networks on a random sample of 1300 adult users in the United Kingdom. It established that both the word of mouth advocacy measured by the score on net promoters was significant statistically in prediction of the annual sales growth of 2003-2004 periods. According to Reich (2006) held, those companies that enjoyed high levels of word of mouth were found to be doing better and grew faster than their competitors who scored poorly in the ‘net promoter’ score. It was established that the word of mouth had a strong relationship with the cash growth. One point rise in the word of mouth advocacy translated into increase of sales amounting to 8.82 million pounds. This advocacy tool is useful not only in predicting the sales growth of a company but also in prediction of employee productivity and share performance (Rely 1983). Three simple questions are very important in trying to predict the overall business performance. Firstly, the likelihood that a customer will easily recommend a brand or a company to their friends or colleagues. The ‘net promoter’ score from such a question is used to predict sales growth. Secondly, the likelihood that investors will easily recommend their friends or colleagues to invest in that company. The ‘net promoter’ score is used to predict share performance. Thirdly, the likelihood that employees would recommend their working for the company to their colleague or even to their friends. The ‘net promoter’ score from this is used to predict productivity. It is true to say that the word of mouth value to the buyer is undisputable. Word of mouth rates above all other forms of communication to a buyer when he or she makes decisions as to what to buy (Hughes 1998). The word of mouth is said to reduce the buyer’s risks. This is because it is borrowed free, and perceived by many buyers as trust worthy and unlike advertising it has nothing to sell but itself. This important tool plays a key role in decision making especially when a customer want to choose a bank to invest in or even a suitable supermarket where he or she can do shopping of the best olive oil. Managing the Word Of Mouth on the Internet To manage the word of mouth communication on the internet, marketing managers of different service companies use different techniques, for example, publicity and the ‘viral marketing’ methods. Influencer marketing is also used to improve word of mouth by targeting individuals who have authority and those who have a high number of personal connections. According to Bone (1995), marketing managers place a significant value on a word of mouth that is positive in order to achieve the desired behavioral response. Publicity techniques Publicity techniques are deliberate steps taken by marketing managers of various service companies to manage the perception of a service offered by their companies to the public. Marketing managers use subjects of publicity such as performing artists and politicians. This is done in order to add value on their products and increase the customer’s perception of the same product via the internet. An artist composes a song or a poem about the positive aspect of a certain service being offered by that company then posts it in the company's website. When a customer visits that website he/she gets the positive image about that company and its products. (Deutsch and Gerrard, 1955) Politicians are also used to spread positive words about a certain service offered by the same company then post it in the company's website thus also creating a positive image about that company. Since artists and politicians are influential in one way or the other their sentiments are taken to be true thus attracting more customers to that particular company. Hence, the marketing managers manage to maintain positive picture of their company via the internet which is an example of a channel where the word of mouth is used. According to Carl (2006), this is mostly done by banks especially when they want to inform the public about a new service they have introduced in the market. The advertisement aims at informing the customers that the service is superior to that of any other bank. Viral marketing Viral marketing is a phenomenon that encourages and facilitates the passage of a marketing message voluntarily from one person to the other. It can be word of mouth enhanced or delivered by the networks effects of the internet. A satisfied customer towards a service offered to him or her is claimed that he or she can tell at least three people about that service. This is because he or she liked it and can tell up to eleven people about the same service if he or she does not like it (Sohn, 2006). Marketing managers can use this natural human behavior to manage the challenge of word of mouth on the internet. This managers need to pick on their satisfied customers and then request them to send messages to other customers who may desire to have a service from that company. In so doing they will manage to send positive image of the services that they offer to many other potential customers who may get interested in getting the same services. As a result they manage to face out any negative picture the customers may hold about that company (Callis, 1996). According to Mencken (1991), viral promotions that should be adopted by the marketing managers should be in the form of video clips, advergames, interactive flash games, brand able software and e-books. The goal of marketing managers who are interested in creating viral marketing programs that are successful is, identifying individuals who have high social networking potential (SNP). This creates viral messages that appeal to that population segment and have high chances of being passed along from one person to another. This creates a chain of individuals who gets information about a service offered by that company. According to Brown and Reingen (1987), notable example on the use of the viral marketing strategy is the Gorilla advert. It was used by Cadburys dairy milk in 2007 and it heavily popularized the company via face book and youtube. In 2007 the world wrestling federation used the viral marketing campaign to promote the return of Chris Jericho and the campaign carried out by the marketing manager was done via the internet. Conclusion Word of mouth is still one of the most efficient ways through which information is passed from one customer to the other. It is therefore important that service managers of various companies put more effort in managing it because it can be used to either propel the growth of the company or in some cases be a hindrance in the company's growth. Since word of mouth has more weight to the receiver it is highly important that the service managers control it in order to achieve the desired goals. References Bone, P. F. (1995), “Word of mouth effects on short-term and long-term product judgements”, Journal of Business Research, Vol. 32, No. 3, pp213-223 Brown, J.J. and Reingen, P.H. (1987), “Social ties and word of mouth referral behavior”, Journal of Consumer Research, Vol.2, (3) December, pp 206-215. Callis, M. (1996), Rise of internet marketing in society, (Cambridge: Cambridge University Press) Carl, W. (2006), “What’s all the buzz about? Every day communications and the relational basis of word-of-mouth and buzz marketing practices. Management Communication Quarterly, Vol. 19, No. 4, pp601-634 Charlett, D., Garland, R. and Marr, N. (1995), “How damaging is negative word of mouth?”, Marketing Bulletin, Vol. 6, pp42-50 Deutsch, M. and Gerrard, H. B. (1955), “A study of normative and informational social influences upon individual judgement”, Journal of Abnormal Social Psychology, Vol. 51, pp 629-636 Hughes, A. (1998), 'Measuring the loyalty effect', direct magazine Issue, Vol.10 No.7 pp 13-26 Jackson, B. (1985), 'Build customer relationship', Business magazine Issue, Vol.4 No.6 pp 12-16 Kother, P. (1999), 'Word of mouth marketing principles', word of mouth principle journal,Vol.4.No.7 pp 14-43 Mencken, R. (1991), 'Word of mouth marketing is everything', Harvard Business Review, Vol. 3. No.6 pp 67-89 Merak, S. (2007), on the hot seat, (Harvard: Harvard University Press) Mittal, V. and Kamakura, W (2001), “Satisfaction, repurchases intent, and repurchases behavior: investigating the moderating effect of customer characteristics”. Journal of Marketing Research, Vol. 38, No.1, pp131-142 Rehmeyer, J. (2007), internet spreads information,(Cambridge: Cambridge University Press) Reich held, F.(2006) Driving good profits and true growth, Harvard: (Harvard University Press) Rely, L. (1983), Word of mouth marketing, (Chicago: Chicago Press release) Sohn, E. (2006), Internet generates markets, (New York: New York press) Uchanan, R. (1990), 'Value managed marketing', European manage journal, Vol.9 No.4 pp 23-65 Bibliography Andrew, W. 2007, Advocacy drives growth,( Journal of word of mouth and sales growth) 17 February, Viewed 17 February 2008. Bansal, H. and Voyer, P. (2000). “Word of mouth processes within a services purchase decision context”, Journal of Service Research, Vol.3, No.2, pp 166-177 Bickart, B. and Schindler, R. (2001). “Internet forum as influential sources of consumer information”, Journal of International Marketing, Vol. 15 No.3, pp 31-40 Carrol, P. (1992). 'The fallacy of customer retention', Journal of retail banking, Vol.15 No 2.pp 25-34 Dawkins, P. (1990). 'Weapon of word of mouth', Directors and Boards magazine, Vol. 7 No.5 pp 16-22 Gordon, L. (1999). 'Techniques and Technologies of word of mouth', Technology and business journal, Vol. 2.No.5 13-17 Kelman, H. (1961). “Processes of opinion Changes”, Public Opinion Quarterly, Vol. 25, Spring, pp 57-78 Levitt, T. (1983). 'Word of mouth and sales', Harvard business journal, Vol. 6 No.3 pp 16-23 Murray, K.(1991), 'A test of services marketing theory, consumer information acquisition activities', Journal of Marketing, Vol. 55, January, pp10-25 Lindy, A.,(2008). Net promoter scores (Net promoter score journal, Viewed 17th February 2008. Timothy, L. et al (2007). 'Net promoter score and firm revenue growth', Journal of marketing Vol.23 No.3 pp 26-28 McGraw, H. (2000). Would you recommend us (Business week journal ),Viewed 17th February 2008 Read More