Word Of Mouth Marketing – The Latest Buzz

Well, to begin with, word-of-mouth marketing, or third unbiased party referral had always been recognized as one of the strongest tools of building brand loyalty or awareness in marketing. However, it was recognized as a tool that was largely beyond the active control of the marketer and was a part of market reaction to marketing action and actual product performance. But, if the latest reports are to be believed, all that might have changed with half of the market remaining unaware. According to a recent report submitted by PQ Media at the Word-of-Mouth Marketing Summit 2007 in Las Vegas, spending on organized word-of-mouth marketing ran up to $981 million in 2006, is expected to cross $1 billion in 2007, and reach $3.7 billion by 2011. That possibly makes word-of-mouth marketing the fastest growing alternative media in the marketing industry today.

I distinctly remember it was 2001, when leafing through the pages of Marketing Communication: Principles and Practice by Richard J. Varey, I found Varey lamenting, "Word-of-mouth remains a much under-exploited marketing communication system. This is a challenge in planning and operating …." (Varey, Pg.67) I am sure somebody else read that line too, and decided to take up the challenge. One of the biggest word-of-mouth marketing companies in U.S.A. today, BzzAgent, was launched the very next year in 2002 by Dave Balter to spread the good word on products and brands via agents. Since then, BzzAgent has campaigned for at least 200 brands and conducted more than 300 word-of-mouth campaigns via the 350, 000 agents it has in the market today.

Before the last decade, and through a major part of it, marketing communications were perceived as two types:

1. Marketing-dominated communication like advertising, and
2. Consumer-dominated communication like word-of-mouth

However, the paradigms have changed. And so has the basis of peer relationships. In a famous guerilla marketing campaign conducted by Sony Ericsson Mobile in 2002 called "Fake Tourist," actors posed as tourists and asked passersby to take their photos, demonstrating the performance of the phone's camera. However, the actors refrained from revealing their relationship with the manufacturers of the mobiles, an action which has been termed deceptive by several consumer groups. Commercial Alert cited the case in 2005 when it petitioned the FTC to consider action against word-of-mouth campaigners for being deceptive. Though word-of-mouth advertising was covered under existent FTC regulations, the FTC issued a staff opinion in 2006 (Washington Post, Tuesday, December 12, 2006) where it noted that such marketing could be considered deceptive if the consumers formed favorable ideas of the marketed product because they believed that the endorser was independent from the marketer.



However, word-of-mouth as a form of product promotional campaign operating through personal recommendations of brands, products, or services has come to stay big time in spite of misgivings. When Annys Shin wrote on the FTC move on word-of-mouth campaigning in Washington Post in 2006 the article mentioned "no accurate figures exist on how much money advertisers spend on such marketing . . . ." However, after the research report submitted to the industry by PQ Media in 2007, that hardly remains the scenario. According to a report published by Lisa van der Pool in the Boston Business Journal, 26 November, 2007, BzzAgent Inc. received $13.8 million in venture capital in 2006, Cymfony Inc. has a revenue of over $ 5 million, Communispace Corp. expects its revenue to go up from $ 12 million to $ 22 million within the year; Hill, Holliday, Connors, Cosmopulos Inc. has billed an amount of $ 1.2 billions; Arnold Worldwide has billed an amount of $ 1.6 billions, and Connelly Partners has billed a similar amount of $ 90 millions to employers of word-of-mouth campaigns.

When brands like Volkswagen, Goodyear, Hasbro, Listerine, and Lumen are using word-of-mouth campaigning, one can scarcely afford to stay away and be left behind in the race for market mindshare.

References:

1. Richard J. Varey, Marketing Communication: Principles and Practice, Routledge, 2001
2. Annys Shin "FTC Moves to Unmask Word-of-Mouth Marketing Endorser Must Disclose Link to Seller" Washington Post, Tuesday, December 12, 2006; Page D01
3. Lisa van der Pool, "Word of mouth marketing takes off" Boston Business Journal, Monday, November 26, 2007
4. "New PQ Media Forecast: Word-of-Mouth Marketing Spending To Break
5. $1 Billion in 2007" Business Wire, retrieved on 24th December 2007 from www.kellerfay.com/pdf/PQMediaFcst2007.pdf