Stats And Studies About The Effectiveness Of Word-Of-Mouth

You've surely heard about how Word-Of-Mouth is a big deal.

• "Right from the first time we went to America in 1968, Led Zeppelin was a word-of-mouth thing." – Jimmy Page, Musician [source]
• "One customer, well taken care of, could be more valuable than $10,000 worth of advertising."  – Jim Rohn, Motivational Speaker [source]
• "In sales, a referral is a key to the door of resistance." –  Bo Bennett, Author of Year To Success [source]

It's a bigger deal than you might realize. According to a study by McKinsey Institute...

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1: Word-of-mouth is very influential

"Word-of-mouth is the primary factor behind 20 to 50 percent of all purchasing decisions."

2: Word-of-mouth kicks paid advertising's butt

“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.”

3: Word-of-mouth influences every step of the consumer's journey

"While word-of-mouth has different degrees of influence on consumers at each stage of the consumer journey (Initial Consideration, Active Evaluation, Moment of Purchase), it’s the only factor that ranks among the three biggest consumer influencers at every step."

4: Word-of-mouth is most disruptive to consumer decisions

"Word-of-mouth can prompt a consumer to consider a brand or product in a way that incremental advertising spending simply cannot."

5: Word-of-mouth has far-reaching momentum effects

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

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

"A consumer is significantly more likely to buy a product as a result of a recommendation made by a family member than by a stranger... In fact, our 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 purchase than is a low-impact recommendation."

Read the full paper yourself here:  A new way to measure word-of-mouth marketing, by Jacques Bughin, Jonathan Doogan, and Ole Jørgen Vetvik of McKinsey Institute.

Boston Consulting Group tells the same story:

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1: Consumers rely on word-of-mouth 2x to 10x more than paid media:

"The results of a 2013 BCG survey of more than 32,000 consumers in Europe and the U.S. show that 66 percent of the respondents consult friends and family and 50 percent consult consumer opinions online before purchasing—two to ten times more often than they consult the media, for instance, and more than they refer even to company websites."

2: Consumers increasingly trust word-of-mouth overpaid media:

"And the trend toward word-of-mouth has been accelerating. According to Nielsen, the number of consumers who trust purchase recommendations from friends and family and online consumer opinions has grown rapidly since 2009, surpassing the number of those who trust TV and print media, which has plummeted."

3: Incentivizing word-of-mouth referrals pay off:

"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 BCG’s research."

Read the full papers from BCG at Fueling Growth Through Word-Of-Mouth and Harnessing the Power of Advocacy Marketing.

Still not convinced? Well, according to a range of other studies...

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1: Word-of-mouth remains the most relevant touchpoint in sales:

"We found that in telecom 41% comment and converse about brands with the main intent of receiving information and feedback from others to help them with purchase decisions. This underscores that word-of-mouth remains the most relevant touchpoint to sales, especially in telecom with 47% of the telecom category purchases we analyzed relying on brand conversations." McKinsey Institute, Evolve Or Perish: Digital Darwinism for Telecom Companies (PDF)

2: Word-of-mouth is more effective than radio, salesmen, and print:

"WOM two times more effective than radio advertisements, four times more than personal selling, seven times more than print advertisements." – Katz and Lazarsfeld, 1955 [source] (PDF)

3: Customers acquired through word-of-mouth spend 2x more and make 2x as many referrals themselves

"Customers acquired through WOM add two times the lifetime value of customers acquired through traditional marketing. Customers acquired through WOM spread more WOM and bring in twice as many new customers."  – Villanueva, Yoo, and Hanssens, 2008 [source] (PDF)

4: Word-of-mouth dominates marketing events and media appearances with regards to customer acquisition:

"We find that WOM referrals have a strong impact on customer acquisition. The long-term elasticity with respect to WOM is estimated to be 0.53 (substantially larger than the average advertising elasticities reported in other literature). The elasticity for WOM is approximately 20 times higher than that for marketing events and 30 times that of media appearances." – Michael Trusov, Randolph E. Bucklin, & Koen Pauwels [source]

Here are some quotes from CEOs, marketing executives, and others who have worked directly with the Word-of-Mouth phenomenon:

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1. Facebook: “People influence people. Nothing influences people more than a recommendation from a trusted friend. A trusted referral influences people more than the best broadcast message. A trusted referral is the Holy Grail of advertising." – Mark Zuckerberg, Facebook CEO [source]
2. Amazon.com:  “If you do build a great experience, customers tell each other about that. Word-of-mouth is very powerful.” – Jeff Bezos of Amazon.com [source]
3. Zappos: "We take most of the money that we could have spent on paid advertising and instead put it back into the customer experience. Then we let the customers be our marketing. Historically, our number-one growth driver has been from repeat customers and word-of-mouth." –  Tony Hsieh, Zappos CEO [source]
4. Threadless: "With our company, it's all about trust and honesty and we just don't like the idea of pushing our brand on people who otherwise wouldn't hear about it. We like the idea of it spreading via word-of-mouth, organically, naturally. It's not that we don't market, we just don't advertise. I'd rather somebody hears about Threadless through an article in a magazine than an advertisement in a magazine." – Jake Nickell, Threadless CEO [source]
5. Weeby: "Word-of-mouth marketing is a crucial component of organic growth for startups and one of the primary ways that Weebly has grown to over 15 million customers." – David Rusenko, Weebly CEO [source]
6. Dell: "In our survey, 25% of new customers said the primary reason they chose Dell was a referral. So 1 million of the 4 million new customers Dell acquired in 2003 came from positive word-of-mouth." – Bain [source]
7. Microsoft: “Word of mouth is the primary thing in our business. And advertising is there to spur word-of-mouth, to get people really talking about ‘the latest thing.’” – Bill Gates [source]

Word-of-Mouth can't be simply bought; it has to be earned.

1. "Merely satisfying customers will not be enough to earn their loyalty. Instead, they must experience exceptional service worthy of their repeat business and referral." – Rick Tate, Author of The Customer Revolution [source]
2. "Word-of-mouth referrals stem naturally from an unparalleled customer experience that fosters clients’ identification with your brand. – Shawn P. O’Connor, Stratus Prep [source]
3. "Brands realize that consumers are willing to engage with them in conversation, and they realize that they have no choice but to participate if they want to be a part of the consumer decision-making process." Ed Keller, CEO of Keller Fay Group [source]

But it's so, so worth it:

"There is only one thing in the world worse than being talked about, and that is not being talked about." — Lord Henry, The Picture Of Dorian Grey

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Read next: 6 Entrepreneurs Weigh In: The #1 Way To Accelerate Word-of-Mouth Marketing