7 Reasons Word-Of-Mouth Is Crucial To Growing Your Business

Desmond Chua
Desmond Chua
November 18, 2014
2 min read
7 Reasons Word-Of-Mouth Is Crucial To Growing Your Business

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Word-of-mouth isn't flashy, but it's everywhere around us, and it's far more powerful and influential than it might seem. Here are 7 reasons why, as outlined in a McKinsey study:

7 Reasons Why Word-Of-Mouth is Crucial in Growing Your Business [Infographic]

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7 Reasons why word-of-mouth is crucial to growing your business

Word-of-mouth sharing is absolutely fundamental to who we are as human beings. We can't help but do it. What does this mean for retailers, entrepreneurs and marketers then? And why should we care about word-of-mouth?

7 reasons:

1: Consumers trust word-of-mouth from friends more than any other sources. If you're not getting word-of-mouth recommendations for your business, you're missing out on the single most effective and trusted means of getting new customers.

2: Word-of-mouth is the primary factor behind 20% to 50% of all purchasing decisions. This might sound hard to believe at first. But if you make a list of all the things that you've bought, and you evaluate your reasons for buying them, you'll find that many of them were influenced by the opinions and input of others.

3: Word-of-mouth generates more than 2x the sales of paid advertising. Marketing-induced consumer-to-consumer word-of-mouth generates more than twice the sales of paid advertising in categories as diverse as skincare and mobile phones.

4: Word-of-mouth influences every single stage of the consumer's journey.

"While word-of-mouth has different degrees of influence on consumers at each stage of the consumer journey, it's the only factor that ranks among the three biggest consumer influencers at every step." – McKinsey

The strongest implication here is that word-of-mouth can be used to tear consumers away from their pre-existing patterns. We're all interested to hear other people's experiences about products and services that we're thinking of buying.

5: Word-of-mouth is the most disruptive to consumer decisions.

"Word of mouth can prompt a consumer to consider a brnad or product in a way that incremental ad spend simply cannot." – McKinsey

A person can do a tremendous amount of research on their own, and have all sorts of ideas about what to buy, where to buy it, and so on – but if a trusted friend tells them a horror story about a bad experience, he would dramatically reconsider his options.

6: Word-of-mouth has far-reaching momentum effects.

"In the mobile-phone market, for example, we have observed that the poss-on rates for key positive and negative messages can increase a company's market share by as much as 10% or reduce it by 20% over a 2 year period, all other things being equal."

This actually suggests that having an edge in word-of-mouth can, over time, allow a business to climb up and over its competitors.

Earning quality word-of-mouth is hard work. You'll have to delight your customers and exceed their expectations. But if you do that, you'll then get the edge you need to sell more of your product, earn more revenue, hire better people, invest in more R&D.

7: Word-of-mouth has highly variable effects (up to 50x!)

Research shows that a high-impact recommendation – from a trusted friend conveying a relevant message, for example – is up to 50 times more likely to trigger a consumer's purchase of a product than a low-impact recommendation from a stranger.

Positive word-of-mouth for your business is not only a powerful force of nature that deeply influences consumer decisions, it's also an incredibly useful indicator that you're doing something right.

"Maerketers may spend millions of dollars on elaborately conceived advertising campaigns, yet often what really makes up a consumer's mind is not only simple but also free: a word-of-mouth recommendation from a trusted source." – McKinsey

Desmond Chua
Desmond Chua

Desmond is the co-founder of Statement.sg, a fashion ecommerce brand selling witty t-shirts. He strives to design the best ReferralCandy experience to help you acquire more customers. He also practises parkour with MOVE Academy Singapore in his free time.

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