Wednesday, July 23, 2014

Blog Assignment: Word-of-Mouth Marketing


As consumers, we value the opinion of another consumer rather than some form of marketing campaign from a multi-million dollar company. Receiving reviews directly, especially from a respected person, cuts out the noise quickly and effectively. A study by Nielson indicates that 84% of people around the world prefer word-of-mouth (WOM) recommendations from friends and family, which they find the most trust-worthy. Also it shows that word-of-mouth was the primary factor for 20-50% of all purchasing decisions. Therefore it is important for companies to understand the value of a customer in terms of marketing, and to identify and target these influential people in order to improve brand equity and sales.

Having unlimited resources, time and access to information, it would be beneficial from a company stand point to understand the impact of WOM marketing and to find out which consumers are the most effective. With this information companies could specifically target these consumers to increase sales and increase the return on marketing.

I believe the data and information needed to analysis the social network of WOM would be complex. Due to the shrinkage in degrees of separation and the increase of online communities, it is getting more complicated in understanding the influence of WOM marketing. Taking a restaurant recommendation for example, we would have to find out who the message is from (a close friend, or an online community member), who the receiver is, the relationship between the two, the content of the message, the source of the message (own experience or review-based), previous amount of recommendations (followed or not-followed), the environment of where the recommendation was mentioned, the level of trust between two parties, the different behaviors and values of each, and the impact of the decision. The list of data needed is extensive, and would be very difficult to collect for a particular company. 

Overall, as consumer’s decision habits are shifting, companies could gain a sustainable competitive advantage if they can identify which consumers have the most effective WOM impact to their business.

1 comment:

Christopher Tunnard said...

Indeed, all true. I had hoped to see something more like an application of SNA that demonstrates your understanding of how it works and what it can be used for.