# Understanding Word-of-Mouth Marketing: Strategies and Benefits for Businesses

![Word-of-Mouth Marketing: When a consumer's interest in a company's product or service is reflected in their daily dialogues.](https://www.investopedia.com/thmb/utB1A2h1m58kFgAVhqb9uTGPXNY=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/word-of-mouth-marketing.asp-final-92ae282ddc074b1a94ce139a8ceb3176.png)

*— Investopedia / Julie Bang*

> **Definition**
>
> Word-of-mouth marketing (WOM marketing) is a promotional strategy where consumers share their experiences about a company's products or services with others.

## What Is Word-of-Mouth Marketing?

Word-of-mouth marketing (WOM marketing) occurs when customers discuss a company's product or service in their daily conversations. It's essentially free advertising stemming from great customer experiences that often exceed expectations.

Companies can encourage word-of-mouth [marketing](https://www.investopedia.com/terms/m/marketing.asp) through publicity activities or by fostering consumer-to-consumer and consumer-to-marketer interactions. Also referred to as "word-of-mouth advertising," WOM marketing includes buzz, viral, blog, emotional, and [social media marketing](https://www.investopedia.com/terms/s/social-media-marketing-smm.asp). While many companies seek to reap the benefits of word-of-mouth marketing, advertisers can risk alienating consumers if they fail to disclose a paid relationship to the public.

### Key Takeaways

*   Word-of-mouth marketing is driven by customers sharing their positive experiences with products or services in daily conversations.  
    
*   WOM marketing is highly effective as 88% of consumers trust friend recommendations over traditional media.  
    
*   Companies can boost WOM marketing by exceeding customer expectations and offering excellent customer service.  
    
*   Digital WOM marketing uses platforms like social media and review sites to influence consumer decisions.  
    
*   Honest and credible WOM marketing strategies are crucial to maintaining consumer trust and loyalty.

## How Word-of-Mouth Marketing Works

Word-of-mouth marketing differs from natural word-of-mouth references by being the result of company-driven promotions or encouragement, also known as "seeding."

When a diner has a wonderful time at a restaurant because their expectations were exceeded and later tweets about it, or when someone had a great experience using a product in a new way and tells everyone they know about it, those are examples of word-of-mouth marketing. Also, word-of-mouth marketing does not stop at the first interaction; it tends to lead to a cascade of follow-on interactions.

Company encouragement can take [many forms](https://www.investopedia.com/terms/m/marketing-plan.asp), such as exceeding expectations or offering insider information about a product to spark conversations.

Other strategies include offering consumers new ways to share information about a company's products and services, and engaging and interacting with the consumer, such as through exemplary customer service. This is especially valuable with social media-based [customer service](https://www.investopedia.com/terms/c/customer-service.asp), which provides for seamless sharing and promotion.

## Advantages of Using Word-of-Mouth Marketing

Eighty-eight percent of people around the world said they trust recommendations from people they know (earned media) above all other forms of [advertising](https://www.investopedia.com/terms/f/four-ps.asp), according to a 2021 Nielsen study. This shows just how effective word-of-mouth marketing can be.

Consumers form [stronger bonds](https://www.investopedia.com/terms/b/brand-loyalty.asp) with companies when they feel heard. To foster this, many companies have sales representatives talk directly to consumers or gather feedback through phone lines. This kind of interaction, as well as promotional events, can stimulate conversations about a company's product.

To counter the temptation to fabricate word-of-mouth marketing, the Word of Mouth Marketing Association (WOMMA) created a code of ethics. It stresses that the best strategies are credible, social, measurable, and respectful, with no room for dishonesty.

WOM marketing expert Andy Sernovitz has boiled down WOMMA's code of ethics into three key rules to avoid issues:

*   Say who you are representing (always disclose a relationship)
*   Say only what you believe (be honest with an opinion)
*   Never lie about who you are (be honest about your identity)

## What Are Some Examples of Word-of-Mouth Marketing?

Word-of-mouth marketing includes the marketing tactics companies use to prompt their consumers to talk about their levels of satisfaction with the company's service or product. These strategies include brand loyalty programs, which reward customers for repeated business and provide them platforms for user feedback; giveaways, contests, and sponsored influencers.

## What Is the Digital Version of Word-of-Mouth Marketing?

Digital word-of-mouth marketing employs technology, particularly the internet, to facilitate word-of-mouth exchanges. Review boards, social media sites, and blogs are popular digital platforms consumers use to share their experiences, good and bad, and these shared testimonials significantly influence consumer purchase decisions.

## Why Is Word-of-Mouth Marketing So Important?

Word-of-mouth marketing is important as it is an effective way to increase sales, promote products and services, increase brand recognition, and build customer loyalty. Many companies employ strategies that prompt customers to recommend their services and/or products and share positive experiences. Essentially, companies create the spark that causes the firestorm of chatter among consumers, and since studies show that most people trust the advice of family and friends, focusing on word-of-mouth marketing can be more beneficial and cost-effective than other forms of marketing.

## Key Insights on Word-of-Mouth Marketing

Word-of-mouth (WOM) marketing is when a consumer shares a positive experience about a good or service. WOM marketing is great for businesses as it generates business without incurring additional marketing costs. Eighty-eight percent of consumers say that they trust recommendations from people they know, making word-of-mouth a strong source of growth for some companies.

However, it's difficult to fabricate WOM growth. Businesses can facilitate word-of-mouth marketing by exceeding customer expectations and engaging with the public through social media. It is important to maintain honesty and transparency in these communications, as any appearance of fabricating engagement can risk alienating customers.

> **Article Sources**
>
> 1.  Nielsen. "[Nielsen 2021 Trust in Advertising Study](https://www.nielsen.com/wp-content/uploads/sites/2/2021/11/2021-Nielsen-Trust-In-Advertising-Sell-Sheet.pdf)."
>     
> 2.  Federal Trade Commission. “[Endorsement Guides Review, Project No. P034520: Comments on Behalf of the Word of Mouth Marketing Association](https://www.ftc.gov/sites/default/files/documents/public_comments/guides-concerning-use-endorsements-and-testimonials-advertising-539124-00009/539124-00009.pdf).” Pages 1-2, 12-16.
>     
> 3.  Word of Mouth Book. "[Word of Mouth Ethics Checklist](http://wordofmouthbook.com/download/ethics-checklist.pdf)."