The value of word-of-mouth marketing

Word of mouth Everyone that has used word-of-mouth marketing (WOM) knows that it can be a powerful marketing instrument, if prepared and executed well.

Companies love customers who recommend them to friends, family, colleagues etc.

In these times of influencer marketing having loyal customers isn’t good enough, we need brand advocates.

How do we identify such people, and accurately calculate their financial impact?

The answer is more complicated than it might seem.

Although we know much more on brand advocacy, influencer marketing, word-of-mouth and recommendations than before, it seems that many companies still struggle identifying ‘influencers’.

But, more important, most companies still have no clue how to calculate how valuable word of mouth is. We know it is worth a lot but how much exactly? Can you explain it in a few words?

And besides: do people that are referred to our companies really become customers? And if they do: do they become ‘good’ customers?

It seems that customer-satisfaction surveys are wildly inaccurate: few of the respondents who say they would recommend any given product to another consumer actually do—even if they think they will.

All this reminds me of research that was published in the Harvard Business Review, some two years ago.

It found that only 12-14% of those who were referred to a vendor actually bought anything; and a mere 9-11% of these became profitable customers.

Also, some of those referrals might have become customers anyway—so the added value lies only in the marketing costs saved, not the purchases.

Affluents are not not necessarily brand advocates

The most important insight is to demonstrate that big spenders (“affluents”) are not necessarily big referrers (“advocates”) and vice versa, which raises the question as to where best to focus marketing efforts.

The authors suggested “segmenting” marketing campaigns—in other words, persuading affluents to spread the word; seducing advocates into spending more; and prompting “misers” (who do neither) to do at least one or the other.

Within this exercise, the authors found 4-5% in each group shifted into a higher-value category.

Do you know what word of mouth in the end means for your company’s bottom-line?

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2 thoughts on “The value of word-of-mouth marketing”

  1. From the post: “In these times of influencer marketing, having loyal customers isn’t good enough, we need brand advocates”
    It cost 5 times the amount of $ to obtain a new customer than it does to keep a current one.
    The problem is that most companies are so focused on the prospective customer (the two in the bush), that they neglect their strongest marketing asset (the one in hand) . . . their customers.
    Imagine if you flip the traditional approach which focuses 80% on the purchase funnel (ie. prospects). What if you invested that 80% into your current customers. What if instead of meeting expectations, you went above and beyond to provide that little signature something extra. It’s what I call a ‘Purple Goldfish’ and it the practice of marketing lagniappe. Here are some examples:
    It might be the free peanuts or extra fries at ‘Five Guys Burgers & Fries’ or that fact that ‘bags fly free’ on Southwest. It could be the ‘free penny arcade’ change machine and weekend hours at TD Bank or the chocolate chip cookie when you check in at the Doubletree.
    I’m on a quest to find 1,001 purple goldfish for charity in support of my upcoming book, ‘In Search of Your Purple Goldfish. We’re currently at 162 and I’m looking for help. Fisherman wanted.
    For more information or to find out how you can leverage the original WOM stimulant to increase retention, generate loyalty and create evangelists, check out

  2. Hi, thanks for your comment. But I think you misunderstood. It’s a well-known fact that customer acquisition if expensive and that increasing customer loyalty and focussing on existing customers. The sentence ‘we need brand advocates’ was an ironic way of saying that we want loyal customers to be more than loyal. In WOM companies are looking to turn loyal customers into brand advocates. So I don’t see the disagreement?

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