Ideas for Leaders #190

Word-of-Mouth and On/Off Line Marketing

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Key Concept

Increases in online communities have led to behaviours that influence online activities, such as shopping, becoming more and more important for executives to understand if they want their businesses to flourish. One of these behaviours is word-of-mouth communication (WOM). In this Idea, the impact of WOM on consumption is analysed, with a discussion of those strategies that work and those that do not.

Idea Summary

Word of mouth (WOM) behaviour has attracted a lot of attention from marketing executives in recent years, particularly in light of the increase in size, number and character of online communities. According to a 2012 Marketing Week article, WOM has moved on from the simple message passed on when someone sees a friend face-to-face and recommends a new shop, service or product; the development of digital technology and the rise in smart-phone ownership have ignited the use and value of WOM from social shoppers.

These developments prompted faculty from Brazilian business school Insper to study WOM behaviour and analyze the impact of on/off line communication and consumption. Acknowledging that online WOM customer reviews are an important source of information about product quality to interested consumers, they set out to look into how consumers react and influence the online environment.

Using survey data from just under 250 respondents, Priscila Claro and Silvio Abrahao Laban Neto found overall support for the impact of WOM behaviour on online activity, but not a significant one on consumption directly. Indirectly, offline communication, such as company support for cultural/sporting activities — can impact positive online behaviour, and in turn positive WOM activity. This suggests it is better to use WOM to influence behaviour rather than consumption directly.

In addition, one of their hypotheses was proved wrong; they found that communication strategies that employ online and offline media (such as press and customer evaluations, phone applications, etc.) actually have a negative impact on online consumption. According to Claro and Neto, perhaps consumers view traditional company-driven communication with suspicion, in part because of the extremely high volume of information available today.  They prefer to make purchasing decisions independent of what companies tell them about their products.

Business Application

The researchers suggest that the widespread belief of managers that their company’s website must provide community content to build brand loyalty and achieve high sales is misleading. In fact, doing so presents enormous challenges and instead, they should focus on effective WOM strategies.

Though companies cannot control what consumers tell others, marketing executives can try to understand how WOM behaviour works, and make efforts to stimulate and generate positive WOM about their products. 

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Authors

Institutions

Source

Idea conceived

  • December 2011

Idea posted

  • August 2013

DOI number

10.13007/190

Subject

Real Time Analytics