The Definitive Guide to Word of Mouth Marketing in 2023

Word of mouth (WOM) is the holy grail of marketing. It‘s authentic, trusted, scalable, and cost-effective. In a world where consumers are bombarded with thousands of ads per day and trust in brands is eroding, WOM cuts through the noise.

A study by Kantar found that 93% of consumers trust recommendations from friends and family more than any other type of advertising. WOM is 2-10x more effective than paid media across all product categories (BCG). And it influences every stage of the buyer‘s journey, from awareness to consideration to purchase.

As an AI and SEO marketing expert, I‘ve seen firsthand the massive impact of WOM. It has the power to take a brand from complete obscurity to a household name almost overnight (think: Allbirds, Glossier, Instant Pot). On the flip side, negative WOM can crater a company‘s reputation and sales just as quickly (think: Fyre Festival, Chipotle e. coli outbreaks).

In this definitive guide, we‘ll share everything you need to know to harness the power of WOM. We‘ll dive into the psychology behind why it works, the different types and tactics, real-world examples, measurement strategies, and much more. Whether you‘re a scrappy startup or an enterprise brand, you‘ll walk away with actionable insights to drive growth with WOM.

The Science Behind Why WOM Works

Why is WOM so much more impactful than traditional marketing? The answer lies in basic human psychology. We‘re wired to trust and follow the recommendations of our peers.

There are a few key psychological principles at play:

  1. Social proof: We look to the actions of others to guide our own behavior, especially in ambiguous situations. If everyone‘s raving about a product, we assume it must be good.

  2. Liking: We‘re more influenced by people we like and perceive as similar to us. Recommendations from friends and family carry extra weight.

  3. Authority: We tend to trust experts and authority figures. If an influencer we admire endorses a brand, we‘re more likely to check it out.

  4. Scarcity: We place more value on things that are rare or hard to get. Exclusive invites and insider knowledge make us feel special and spur us to act.

Psychology of WOM
The key psychological drivers behind the effectiveness of WOM.

WOM taps into these powerful instincts and mental shortcuts. It feels more authentic and trustworthy than a brand tooting its own horn. When a recommendation comes from someone we know and trust, it lowers our perception of risk and skepticism. We‘re more open to considering and acting on the advice.

The Different Flavors of WOM

WOM comes in many varieties, from casual conversations to formal referral programs. Each type has its own nuances and best practices. Here‘s a breakdown of the main categories:

Type Description Example
Organic WOM Natural conversations and mentions that occur without any prompting from the brand A friend raving about a new restaurant they tried
Amplified WOM Intentional efforts by the brand to encourage and spread WOM, often through campaigns or incentives A contest rewarding customers for posting on social media with a branded hashtag
Experiential WOM In-person brand experiences that get people talking, like events, stunts, or pop-up shops Red Bull‘s infamous Stratos space jump stunt
Influencer WOM Partnering with influential figures in your niche to expose your brand to their followers An Instagram celebrity posting about their favorite skincare products
Referral Programs Incentivizing current customers to refer their friends and family, often with rewards for both parties Uber‘s "give $20, get $20" rider referral program
Reputation Management Monitoring and responding to online reviews and feedback to shape your digital word of mouth Responding to a negative Yelp review with an apology and offer to make it right

The most successful brands often employ a mix of different WOM types to reach customers across touchpoints. The key is to match the WOM tactic to your audience and goals.

For example, Morning Brew, a popular business newsletter, grew to over 1.5 million subscribers in a few years largely through organic WOM. They made the content so valuable and entertaining that readers couldn‘t help but share it. But they also used amplified WOM with referral rewards like exclusive content and swag.

Measuring the ROI of WOM

One of the biggest challenges with WOM is attribution. How do you know if your efforts are paying off? What metrics should you track? How do you quantify the impact on your bottom line?

The simplest way to measure WOM is through referral tracking. This could be a custom referral link, a unique discount code, or simply asking new customers how they heard about you. Platforms like Ambassador and Referral Rock make it easy to create and track referral campaigns.

For organic WOM, social listening tools like Hootsuite, Sprout Social, and Mention can help you track mentions, sentiment, and share of voice across social media and the web. Look for changes in key metrics like:

  • Volume of brand mentions
  • Sentiment (positive/negative/neutral)
  • Engagement rate (likes, comments, shares)
  • Reach and impressions
  • Share of voice vs. competitors
  • Inbound links and domain authority

Social Listening Dashboard
A social media monitoring dashboard measuring key WOM metrics.

Beyond the vanity metrics, try to tie WOM to revenue and customer lifetime value (CLV). Compare the spending patterns and retention rates of customers acquired through WOM to those from other channels. WOM-referred customers typically have higher conversion rates, order values, and loyalty.

In a HBR study of 10,000 customers in Germany, customers acquired through WOM had 16-25% higher CLV than those acquired through paid media. They spent more over time and churned at lower rates.

Ultimately, the key to measuring WOM is having the right tracking in place across all channels, online and offline. Connect the dots between WOM touchpoints and key bottom-line metrics.

AI and the Future of WOM

Artificial intelligence is transforming every facet of marketing, and WOM is no exception. Forward-thinking brands are using AI to supercharge their WOM efforts in innovative ways:

  • Chatbots: AI-powered chatbots can engage customers, answer questions, and collect feedback at scale. Brands like Sephora and H&M use them to provide personalized recommendations and drive WOM.

  • Predictive analytics: Machine learning algorithms can analyze massive datasets to identify patterns and predict future WOM behavior. Factors like customer sentiment, past activity, and social influence help forecast who‘s most likely to refer others.

  • Voice search: With the rise of Alexa and Siri, voice search is becoming a key driver of WOM. Optimizing your content for featured snippets and conversational queries helps you capture this emerging source of discovery.

  • Influencer matching: AI platforms like HypeAuditor and Dovetale use computer vision and natural language processing to match brands with relevant influencers based on factors like audience demographics, brand affinity, and content performance.

  • Social listening: Advanced sentiment analysis tools go beyond positive/negative to identify emotions, slang, sarcasm, and other linguistic nuances that reveal richer WOM insights.

The many applications of AI in word of mouth marketing.

As AI continues to advance, we‘ll see even more ways to target, personalize, and optimize WOM at scale. The key for brands is to stay on top of the latest trends and experiment with new technologies to stay ahead of the curve.

Ethical Considerations with WOM

As with any form of marketing, there are ethical and legal considerations to keep in mind with WOM. Here are a few key ones:

  • Disclosure: If you‘re incentivizing WOM, like through an affiliate program or sponsored content, you must clearly disclose the relationship. Failure to do so can result in hefty fines from regulatory bodies like the FTC.

  • Fake reviews: Buying fake reviews or selectively cherry-picking positive ones is a major no-no. It erodes trust, invites legal scrutiny, and can get you banned from platforms like Amazon and Yelp.

  • Astroturfing: Covertly paying people to post positive comments and reviews is known as astroturfing (fake grassroots). It‘s unethical and often backfires when exposed.

  • Privacy: Collecting and using customer data for WOM targeting must be done transparently and with proper consent. Respect people‘s privacy and give them control over their info.

  • Endorsements: Celebrity endorsements and influencer posts must reflect their honest opinions and experience with the product. Deceptive claims can lead to liability for both the brand and the endorser.

The golden rule with WOM is to always prioritize authenticity and transparency. Don‘t try to manipulate or deceive people into saying good things about you. Empower genuine advocacy by delivering amazing customer experiences and value.

Real-World WOM Examples to Learn From

Need some inspiration for your own WOM efforts? Here are a few standout examples across industries:

  • Tesla: Tesla spends $0 on advertising. They let the product, customer experience, and passionate fans drive WOM. 77% of Model 3 sales come from customer referrals.

  • Naked Wines: This online wine retailer attributes 40% of new sales to friend referrals. Their best-in-class referral program includes perks like free wine credits and insider access.

  • Trader Joe‘s: Trader Joe‘s built a cult following through friendly service, unique products, and a treasure hunt shopping experience. Fans rave about the brand everywhere from social media to podcasts.

  • Airbnb: Airbnb harnessed WOM in its early days by sponsoring unique stays and experiences, like a floating house on the Thames River, that got people talking. Now they have over 150M users worldwide.

  • Cards Against Humanity: This cheeky card game sold out its first print run in 3 days purely through WOM on Reddit and board game forums. They continue to fuel buzz with quirky PR stunts like digging a "Holiday Hole."

The common thread among these brands is that they create remarkable products and experiences that get people talking. They‘re not afraid to be bold, quirky, and unconventional in their approach. Find your own unique angle and voice.

WOM for Every Stage of the Funnel

WOM isn‘t just for driving initial awareness and acquisition. It can impact every stage of the customer journey, from consideration to purchase to loyalty.

Here‘s how to map your WOM tactics to each stage:

Funnel Stage WOM Tactics Key Metrics
Awareness Publicity stunts, viral content, influencer partnerships Impressions, video views, social mentions
Consideration Product reviews, social proof, forums/groups Clicks to website, time on site, email signups
Purchase Referral incentives, affiliate programs, product samples Conversion rate, average order value, sales lift
Retention Loyalty/rewards programs, community building, soliciting feedback Repeat purchases, customer lifetime value, NPS
Advocacy Referral/affiliate programs, case studies, featuring UGC Referrals, social mentions, reviews/testimonials

WOM Funnel
Mapping WOM tactics and metrics to each stage of the funnel.

The key is to provide the right motivation and experience at each touchpoint. Someone just learning about your brand will respond differently than a long-time loyal customer. Tailor your approach accordingly.

Putting it All Together

We‘ve covered a lot of ground in this guide. Here are the key takeaways to keep in mind as you build and optimize your own WOM strategy:

  1. WOM is the most trusted and impactful form of marketing. Prioritize it as a key growth channel.

  2. Understand the psychological principles behind WOM, like social proof and liking. Tap into those levers.

  3. Choose the right mix of WOM tactics for your brand and audience, from organic to amplified to experiential.

  4. Measure the full-funnel impact of WOM with referral tracking, social listening, and customer lifetime value.

  5. Use AI technologies to supercharge your targeting, personalization, and optimization of WOM at scale.

  6. Stay compliant and ethical with proper disclosures, endorsement rules, and privacy best practices.

  7. Learn from the WOM masters and adapt their playbooks to your own needs and resources.

  8. Match your WOM approach to each stage of the customer journey to guide people through the funnel.

There‘s no one-size-fits-all playbook for WOM. What works for one brand may not work for another. It takes a lot of experimentation, iteration, and customer obsession. But when you get it right, the results are unparalleled.

So tap into the power of WOM to fuel your growth. Your customers and your bottom line will thank you. If you have any other WOM tips or examples, I‘d love to hear them! Drop a comment below.

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