What's the Word on Your Grapevine?

I am fascinated by word of mouth. What I tell my friends about products and services and what I hear back from them is a potent factor in my future purchasing activities. And we know that loyal customers are more inclined to refer others to the products and companies to which they're loyal. Yet as marketing professionals, we know so little about word of mouth! Some even dismiss its effect. Confounding the issue is that -- despite our materialistic world -- word of mouth is, surprisingly, free, which no doubt fuels much of the skepticism about its value. Being free denies the easy manipulation enjoyed by a paid medium, like advertising. (Want more visibility? Simply buy more advertising.) With payment, control is understood. But how do you manipulate something over which you lack direct control? And, if you're not controlling it, should you bother monitoring it?

Despite the skeptics, many executives accept that beyond the controllable elements of their marketing mix runs an undercurrent of public opinion concerning their companies and their products; the proverbial `grapevine.' This public opinion is composed of a variety of points of view: from the fans, who are advocates of an organization and its products and are willing to recommend it, to the detractors. Detractors or saboteurs aim to damage an organization and its products by spreading negative information, generally out of vengeance. Word of mouth from both types of individuals constantly bombards other customers and the public at large (the source of potential customers). These communications enhance, amplify, and distort the public's perception of companies, products, and brands.

The positive effects of word of mouth Scientific studies validate word of mouth's influence on us. In 2002, Business Week reported that of consumers interviewed, not surprisingly, 69% admitted to using a referral to help them make a decision regarding choice of a restaurant at least once over the course of a year. The study also noted that 36% reported using referrals to make computer hardware and software buying decisions, while 24% used advice from friends and associates to select consumer electronics, 22% for travel decisions, 18% for automotive, and 9% for financial decisions. A study by General Electric similarly showed that 61% of the population considers the opinions of friends as `useful' in pre-purchase situations.

The negative effects of word of mouth Positive referrals, however, are far from the full story on word of mouth. While positive word of mouth may not assure a sale, negative word of mouth will likely nix one. This raises the question: how much word of mouth is positive and how much is negative? When a customer suffers dissatisfaction and is not consoled by the offending organization, he or she may be motivated to initiate negative word of mouth as a form of retribution, while an opposite, pleasant experience is enjoyable on its own and probably doesn't prompt the same level of activity. Thus, we can logically conclude that there is more negative word of mouth than positive.

Word of mouth that is neither positive nor negative but simply reiterates a fact is probably also important. It can broaden consumers' knowledge base about a brand or company, and it may increase the salience of the company to the consumer.

There is also the issue of the `multiplier effect,' such as a friend telling a friend. How many other people are engaged in disseminating word of mouth about your products and services? Study after study has confirmed that more people are subjected to negative word of mouth than positive. How many? Well, public opinion folklore says a satisfied consumer typically discusses a pleasing event with three to five people, while a dissatisfied consumer may replay a displeasing event to five, seven, ten, or more people. A 1986 study by the Ford Motor Company suggested that when a customer purchases a car and he or she is dissatisfied, he or she will tell an average of 22 people!

This multiplier effect is certainly influenced by Internet-enabled communication. Electronic communications facilitate a far greater reach for word of mouth. The Internet offers customers an explosive outlet, particularly for venting frustration. The growing popularity of Internet forums, user group bulletin boards, and the emergence of Internet `suck sites' suggest that negative opinions will be spread faster and further through word of mouse. These electronic platforms can escalate word-of-mouth reach from ten potentially influenced customers to tens of thousands.

What Should You Do? One of the main reasons loyal customers are valued is the positive word of mouth they provide. Loyal customers can act as additional (and very effective) members of an organization's `sales force.' But if an organization doesn't understand the volume and nature of the word of mouth being disseminated, it becomes a helpless victim of the information. The real challenge for businesses is to actively monitor their grapevine and attempt to positively influence and exploit it.