Advocacy Marketing

The Data Behind Word of Mouth Marketing

October 20, 2020

According to a variety of studies, more and more companies are using word-of-mouth marketing to promote products and services.

Word-of-mouth is as old as words themselves. Ironically, as the world moves away from traditional advertising and becomes increasingly digital, word-of-mouth marketing is making a huge comeback.

Despite word of mouth marketing (WOMM) being the primary factor behind 20% to 50% of all purchasing decisions according to McKinsey & Company, consumer brands ignore the channel.

WOMM is an untapped strategy in most marketing mixes. This is mainly because many marketers do not fully understand its impact or how to evaluate it properly.

The data is in and the results are clear. Word of mouth marketing is both compelling and powerful.

This article will be an on going compilations of the latest research and findings about WOMM.

People Trust People

Who do we believe? A brand ad or a friend who tells us about the same brand?

People trust people! That’s why they’re turning to each other for product recommendations. Research conducted from numerous sources and over a span of many years supports the growing behavior of word of mouth marketing.

  • WOMMA reports that every day in the United States, there are approximately 2.4 billion brand-related conversations.
  • Nielsen report that 92% of consumers believe suggestions from friends and family more than advertising.
  • Millennials ranked word of mouth as the #1 influencer in their purchasing decisions (Radius Global)
  • Beyond friends and family, 88% of people trust online reviews written by other consumers as much as they trust recommendations from personal contacts.
  • HubSpot reports that 75% of people don’t believe adverts, yet 90% trust suggestions from family and friends and 70% trust consumer reviews.
  • According to Syncapse, 85% of fans of brands on Facebook recommend brands to others.
  • 49% of U.S. consumers say friends and family are their top sources of brand awareness.
  • 55% of consumers share their purchases socially on Facebook, Twitter, Pinterest and other social sites.
  • According to SDL, on social media, 58% of consumers share their positive experiences with a company, and ask family, colleagues, and friends for their opinions about brands.
  • 84% of consumers say they either completely or somewhat trust recommendations from family, colleagues, and friends about products – making these recommendations the information source ranked highest for trustworthiness. – Nielsen
  • Consumers rely on word-of-mouth 2x to 10x more than paid media. – Boston Consulting Group
  • And 74% of consumers identify word of mouth as a key influencer in their purchasing decisions.
  • Americans are more likely to post about good experiences (53%) than poor experiences (35%) on social media. - American Express 2017 Customer Service Barometer
Group of happy three friends in casual wear standing and laughing

Word of Mouth Drives Sales

Customers rely on each other for advice on what to buy. And what’s more – they buy based on the advice of their friends, family, and people they already know and trust. According to recent studies, word of mouth just may be the most efficient form of sales driving marketing tactics.

  • Word of mouth is the primary factor behind 20% to 50% of all purchasing decisions. – McKinsey
  • People are 4 times more likely to buy when referred by a friend – Nielsen
  • 77% of consumers are more likely to buy a new product when learning about it from friends or family. – Nielsen
  • 81% of U.S. online consumers’ purchase decisions are influenced by their friends’ social media posts versus 78% who are influenced by the posts of the brands they follow on social media. – Market Force
  • 74% of consumers identify word-of-mouth as a key influencer in their purchasing decision. – Ogilvy/Google/TNS
  • 43% of consumers are more likely to buy a new product when learning about it from friends on social media. – Nielsen
  • 1 offline word of mouth impression drives sales at least 5x more than 1 paid, and much more (as much as 100 times more) for higher-consideration categories. – WOMMA
  • 71% of consumers are more likely to make a purchase based on social media referrals.
happy young girls in  shopping mall, friends having fun together

The Impact of WOMM is Far Reaching

Word of mouth marketing enhances the entire customer journey, including post-purchase metrics like retention and loyalty.

  • The lifetime value of a new referral customer is 16% higher than your average customer. –  Wharton School of Business
  • Word-of-mouth has been shown to improve marketing effectiveness by up to 54%. –  MarketShare
  • The lifetime value of the referred customer is 25% higher than that of other customers – Wharton School of Business
  • A referred customer is 18% more loyal than a customer acquired by other means.
  • Referred customers are 4 times more likely to refer more customers to your brand.
  • Customers referred by other customers have a 37% higher customer retention rate.
  • Customer acquisitions through referrals spend 200% more than the average customer.
  • Robust advocacy-marketing programs are achieving significant revenue gains—10 to 20 percent for established products and up to 100 percent for new products.
  • According to the National Law Review, it can cost five times more to acquire a new customer than keep a current one.
  • Bain & Co estimate that a 5% increase in customer retention can boost a company’s profitability by 75%. In other words: People trust friends, family (and even strangers) more than they do ads.
Group of female shoppers looking very excited with their purhcases

The Best Brands Leverage WOMM

Brands like Salomon, Arc’Teryx, Wilson, Young Living, Stance, Purple, 1800 CONTACTS, LIttle Giant Ladders, Nixon, BlendTec, Suunto, and Hydro Flask are working with Wooly to scale effective word of mouth marketing strategies. Through the Wooly platform these brands are able to identify their most influential customers, manage global WOMM campaigns, and measure full funnel impact.

Learn how to leverage the power of word of mouth marketing. Get in touch with our team.

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