Word of Mouth Marketing: Why it Matters and How to Measure Success

We are a society in which more is better. As marketers, we have subscribed to that school of thought wholeheartedly. This is why we have relied on email and paid ads more than we have word of mouth marketing, and it is a reason we may find ourselves struggling now.

It turns out people might not love getting two or three or more emails a day from us, extolling the virtues of our brand, alerting them to special sales, or offering secret discounts. If you haven’t heard, the consumer is king these days, and that means the consumer makes the rules.

That is a reason why shoppers are more hesitant than ever to part with their email addresses: as marketers, we have become exceptionally good at using that data as a weapon. To thrive now and in the future, businesses large and small must turn attention to word of mouth marketing.

What is Word of Mouth (WoM) Marketing?

Unlike some things we talk about, word of mouth marketing is pretty self-explanatory. Someone buys your product or service, sees a video or post you have created, and tells others to check it out. It might come in the form of a share, and email, a message, or an old-fashioned conversation. In any shape, it is a pinnacle of sorts; suddenly you have people doing your advertising for you!

We can break it down into smaller pieces still by identifying two types: organic and assisted. Again, these are pretty easy to understand. Organic WoM is something of an accident. Something you offered touched someone, and he or she decided to share it with others. Assisted WoM gets the same result, but you have deliberately placed what you think is a share-worthy lure in the water, hoping someone will bite. Either way, you will be pleased if people start talking about it.

Word of Mouth Marketing Can Be Big for Your Small Business

More than ever people rely on those around them for buying advice. Once upon a time this was limited to a group of friends, family, and others in a consumer’s circle. Now, well, how often do you buy something on Amazon without reading the reviews? They might have been written by complete morons with whom you have nothing in common. You almost certainly do not know the authors. But you read them, trust them, and put faith in them just the same. Heck, Trip Advisor was built on the concept.

Brand Loyalty is Big

If you have been a small business owner for any length of time, you know it costs more to gain a new customer than it does to develop a repeat customer. A lot more. How you get new customers is an important factor in how likely you are to retain them.

When word of mouth prospects become customers they are special in their loyalty. Their lifetime customer value is high because they feel like they “know” you. And, such customers are likely to continue the process, ready and willing to tell still more people about your product. If you are really lucky, you will find you have gone viral in a manner of speaking.

Consumer Trust is More Important than Ever

If you haven’t realized it, paid ads are less effective than they were not long ago. There may be lots of reasons for this trend, but to me it comes down to the idea that consumers have been inundated, much as they are with marketing email. The simple truth is, people do not trust paid ads like they used to.

On the other hand, people do trust referrals. HubSpot says people trust the recommendations of family and friends at a rate of 90%. Even reviews from strangers can garner trust in up to 70% of consumers. Try paying for an ad that gets that kind of trust. And if it works, by all means let me know!

You Need a WoM Marketing Strategy

It may be easy to let word of mouth marketing slip through the cracks. It takes time, it can be unpredictable, and you are unlikely to experience the instant gratification we seem to expect these days. But if you want to build a successful, sustainable business, ignore WoM at your peril. Besides, building a successful marketing strategy is not as hard as you might think. Here are some steps to consider:

Believe in Your Product or Service

If you are selling something that is not sound your customer will notice, and this can lead to exactly the wrong type of referral. In the world of web design and development there is a concept known as having two sets of eyes on a project. It is useful, because often a lead developer can get so immersed he or she will miss little, rather obvious bugs. 

The same is true of your products and services. Before you open the flood gates, take time to share it with family and friends. More often than not they will be happy to help, and can test drive to see how it works. You might be surprised at what a second set of eyes can see.

Create a Pleasing User Experience

Mere seconds. That’s how long you have to impress a new visitor, to make that person choose to stay. Your landing page and website should be easy to follow. A good way to analyze this is to show your homepage to a few acquaintances, and ask them if they can tell you in ten seconds what it is your company does. If they can't, other visitors won’t be able to either, and you will lose them.

Navigation should be simple and easy too. Can users get where they want to go? Can they find what they are looking for? If doing so requires effort, it’s probably time to think about your user experience.

Make Checkout Easy

Whether you sell products or services online, in store, or some combination, don’t celebrate just yet. At this point in the buying process you have successfully presented your item as a favorable option to meet his or her need, research has been done, and a decision has been made. And, your prospect has navigated your shop.

Don’t overcomplicate the checkout process. Your customer should feel at ease, online and in-store. There are lots of ways you can accomplish this. Comprehensive employee training is key for brick and mortar stores, and no matter where you do business your software should be an asset, not a hindrance. Think about how you accept payments: are you offering Apple Pay, Amazon checkout, PayPal, and more? Now is a good time to act like a customer yourself, and go through the entire shopping and checkout experience step by step.

Follow Up, More than Once

Probably you have an automated email that gets sent to a new customer when checkout is complete. If you’re really doing well, you subscribe to an email marketing service. And, if you’re a natural leader, you’re using it effectively. 

These days that confirmation email is not enough. You already know the importance of confirming not just the purchase, but the decision itself. The window of time you have after a sale is full of opportunity, and to build on your new relationship you must take advantage. Rather than asking for something, why not ask your customers how they are doing? This can be through a personalized email, a brief survey, or an invitation to make suggestions on things your business might do better.

People appreciate being asked for help, just as they appreciate someone genuinely interested in their opinions.

Ask for Feedback, and Listen to the Answers

Once you have followed up and made right anything the customer thinks was missed, you have the opportunity to ask for feedback directly. Find the right formula for your business. This might include offering a percentage discount on future purchases, or you may simply present levels of commitment such as:

1. You can publish my feedback anonymously
2. You can publish my feedback with my first name
3. You can publish my feedback with my name and company or title

Other options include asking for Google or Facebook reviews. Your options are many, but you have to ask.

Offer Incentives for Telling a Friend

Everyone expects something for nothing. That’s the reality of today’s small business and, particularly, the way products and services are marketed. In marketing we call them lead magnates. 

So ask yourself, if I am willing to give away something of value to a complete stranger, what am I willing to give a happy customer for sharing my business with her friends? The answer should be something in the neighborhood of “a lot.” Fortunately, that’s rarely necessary. Be generous and sincere; your customer’s word may be more valuable than your own.

How to Measure Your Word of Mouth Marketing Results

Once you have a word of mouth marketing strategy in place, you must measure and track results. Missing this step makes the work you’ve done less meaningful and you may find yourself wondering if your effort is worth it. It is, and you can monitor your progress with analytics.

Define Your Goals

As with any marketing campaign, it’s important to understand what your goals are before you start spending. Even as word of mouth marketing can be hard to quantify, you should write down specific goals that include how much money is allocated and what outcomes you desire. You may wish to improve or shorten the customer journey, for example, or perhaps you want to increase awareness or boost attitudes associated with your business, products, and services. 

Write these down somewhere, and be specific. Can WoM marketing decrease your consumer buying process by ten percent? Twenty? What will that mean to your bottom line?

Build experiments

In a world where A/B testing is the norm, consider ways you can achieve the same sort of information for this campaign. You might try constructing slightly different messages and distributing them by zip code, on different social platforms, or through email. Then, look closely at the results and begin narrowing your message based on the responses you see. 

Set Your KPIs

Getting to a completely accurate cost per word of mouth acquisition is not easy, but in recent years data analysts have recognized WoM value and so begun to find ways it can be quantified. Before it was acquired by ANA in 2018, the Word of Mouth Marketing Association came out with some interesting ways to measure credibility in WoM marketing including:

1. Credibility effect: Does information provided by word of mouth make something more or less believable?
2. Thinking change: Did the conversation change the thoughts or ideas the receiver had about the product?
3. Inquiries: Is that person now more likely to perform additional research?
4. Purchase likelihood and behavior: Is that person now more likely to make a purchase?
5. Pass-along likelihood and behavior: Will the information received be moved forward again by WoM?
6. Relationship consequences: Has the information changed the way the receiver engages others he or she knows when talking about the subject?

Adapted from VisionEdge Marketing (2021).

To accurately track your campaign, the Association defined five possible outcomes:

1. Consumption: Word of mouth transfer happened, but the receiver did not take action.
2. Inquiry: The receiver chose to take on additional research, an indication he or she is in the buying process.
3. Conversion: Thanks to your word of mouth marketing campaign, you have a new customer!
4. Relay: The receiver takes the information and shares it with others (be careful, you may go viral!).
5. Recreation: The receiver creates a new version and begins to share it. At this point, your message is out of your hands and that’s a great place for it to be.

Getting Your Campaign Results

At least to some degree a digital analyst can capture results in traditional ways. Two of these which offer insight in WoM marketing are Average Engagement Rate and Amplification Rate. Average Engagement Rate is calculated simply by taking the total number of engagements your post receives - likes, shares, comments, etc. - and dividing it by how many followers you have.

Your Amplification Rate is a great metric to use when determining how successful your word of mouth marketing efforts are on social media. People who share your posts are indicating they are proud or happy to be associated with your brand. To calculate your Amplification Rate, simply divide the number of post shares by your total followers.

Illustrations adapted from Olafson, 2021.

Ask Your Customers ... and Others

Above we talked about the value in asking for feedback from your customers. Now is the time to do that. Let them know how much you appreciate them and how important their input is to the success of your business. Then ask them about their conversations, or about reasons they may not have had conversations about your product. This information will be measurable - think about the number of people you asked versus the number of those that talked about your product or ad, or even shared it. It will also give you the chance to evaluate what you might do differently next time to encourage even more word of mouth occurrences. Your ability to gather this information and apply it as knowledge will make your business better.

Next, don’t stop at your customers. Sometimes the best feedback comes from people who chose not to buy your product or engage your services. Wouldn’t you prefer to know their reasoning? It may lead you to future improvements, but you have to be willing to ask.

Conclusions

Word of mouth marketing is not new, but it is becoming more important and valuable. People care what their friends, family, and even strangers think about a product and the experiences they’ve had with a company. The trend is growing as younger generations increasingly look to others, including social media, as they engage in their own research. Getting your head around it and incorporating it into your marketing strategy is likely to pay for itself many times over.

WoM can be harder than some other methods to measure, and there you have to be willing to accept the notion that how it happens is largely out of your hands. I choose to view that as a good thing; we’ve got plenty to keep up with already.