Importance of Word of Mouth in Business and its Implications for Management

This document discusses the importance of word of mouth in business, its pros and cons, and examples of companies affected by it. It also explains the implications for management in those situations.

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Table of Contents
Definition of Word of Mouth.....................................................................................................1
Importance of Word of Mouth in Business, Pros and Cons.......................................................1
Examples of Other Companies Affected by the Word of Mouth...............................................2
Implications of the Management or Managers in those Situations............................................3

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Definition of Word of Mouth
The word of mouth commonly known as the viva voce refers to the passing down of
information from one person to another through means of oral communication that might be
as simple as telling story to the others regarding the real event or certain things install made
up (Berger 2014). Story telling is however the most common forms of the word of mouth. In
this case, one of the people tells a story to the others. Oral tradition refers to the cultural
means and tradition transmitted by the word of the mouth through successive generation.
Importance of Word of Mouth in Business, Pros and Cons
The Word of mouth represents a non paid form of promotion or advertising shared by
the satisfied consumers and mentioned by the entrepreneur. It is triggered by the experiences
of the customers (King, Racherla and Bush 2014). In other words, Word of Mouth is
important in business as it can substantially influence the purchase decision of the consumer.
It also has an impact of various other factors of the business which includes switching of
services, perception regarding a product/service along with the facilitation of brand choice for
consumers. It is in fact more effective compared to the traditional tools of marketing like the
personal selling and the various types of the advertisements. Thus in other words, Word of
Mouth is effective since it is considered a credible form of advertising. Besides, it also helps
in building loyalty for a brand and helps in generating a buzz for the business.
Pros
No Cost: Word of Mouth takes place at without incurring any cost to the business
(Hajli et al. 2014). For instance, if a particular customer remains highly satisfied then he
conveys the messages to the family and friends. This leads to additional sales in the long run

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Enhanced Level of Trust: Marketing via Word of Mouth is efficient at driving newer
customers in trying newer services and products as people mostly trust their family members
and friends more compared to the business
Cons
Little Control: One of the drawback of word of mouth remains in the fact that they
have very little control over the how and when things occurs.
Set Expectations: Marketing via Word of mouth and recommendation from a friend
persuades the consumers in trying the product. Disappointment occurs if the products do not
meet the expectations of the customers. ‘
Examples of Other Companies Affected by the Word of Mouth
One of the examples has been that of Coca Cola that have gone through various
upheavals and still managed to remain at top. The company is quite good at surprising people
and spreading news of multiculturalism and goodwill through word of mouth. In the year
2012, the company underwent installation of the ‘Happiness Machines’ across the world.
Customers in search for cold beverage could receive free coke in the exchange of hugging the
machine, performing other antics or dancing. In a similar happiness campaign the company
installed phone booths in Dubai that allowed the workers in making a call to their families
using caps of bottles instead of money. Recently, the company put across ‘Share a coke’
campaign for reviving the sales across the 70 countries. The bottles were printed with
common names so as to inspire people in buying the bottles from a relative or a friend. The
company however went a step ahead in creating hashtag. The element of the social media
provided people with the additional impetus in purchasing personalized coke and sharing
online photos (Lovett, Peres and Shachar 2013).

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Another example of Word of Mouth has been that of Pinterest that thrived on the user
generated content. The company depended on the users for creating its vision boards and
actively recruiting increasing numbers of ‘pinners’. The question however lies in how the
company created over 200 million followers from simply 2000 followers in a matter of
simply eight years. In order to ensure this, the founder Ben Silberman turned towards the
passionate audience for planning the growth campaign. The loyal group of users of the group
liked the product and meetings were organized with them for getting feedbacks. Connecting
the showed users one by one portrayed the seriousness of the Pinterest team in building better
site in the bigger community. This gateway was used by the company for its referral
programs. The ‘Pin in Forward’ campaign motivated the users to create pin boards and invite
friends to do the same (Liu and Lopez 2016).
Implications of the Management or Managers in those Situations
Word-of-mouth acts as opportunities for all business in going beyond the obvious that
has been limited by the imagination (Romani, Grappi and Bagozzi 2013). Brand advocacy
seems to be the underused drivers and the most common results of the word of mouth. The
managers should therefore try and build a stronger foundation of word of mouth through
exceptional levels of the customer satisfaction, ensure commitment and trust with the
consumer and create a business in terms of quality, service and ambience that generates
conversation.

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References:
Berger, J., 2014. Word of mouth and interpersonal communication: A review and directions
for future research. Journal of Consumer Psychology, 24(4), pp.586-607.
Hajli, N., Lin, X., Featherman, M. and Wang, Y., 2014. Social word of mouth: How trust
develops in the market. International Journal of Market Research, 56(5), pp.673-689.
King, R.A., Racherla, P. and Bush, V.D., 2014. What we know and don't know about online
word-of-mouth: A review and synthesis of the literature. Journal of interactive
marketing, 28(3), pp.167-183.
Liu, Y. and Lopez, R.A., 2016. The impact of social media conversations on consumer brand
choices. Marketing Letters, 27(1), pp.1-13.
Lovett, M.J., Peres, R. and Shachar, R., 2013. On brands and word of mouth. Journal of
marketing research, 50(4), pp.427-444.
Romani, S., Grappi, S. and Bagozzi, R.P., 2013. Explaining consumer reactions to corporate
social responsibility: The role of gratitude and altruistic values. Journal of Business
Ethics, 114(2), pp.193-206.

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https://www.freelogoservices.com/blog/2018/04/05/5-brilliant-examples-of-word-of-mouth-
marketing/
Implication for Management for managers in those situations