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Word of mouth has greater impact than ads according to WARC

Posted on 28th July 2010 in Insight
Written by: Fiona Rickard

Marketing campaigns that encourage considerable word of mouth among consumers have a greater impact on sales than more traditional forms of advertising, according to McKinsey.

The consultancy argued that word of mouth is the “primary factor” behind between 20% and 50% of purchases, with a particular relevance in relation to expensive products and first-time acquisitions.

It added that an advertising “overload”, growing mistrust of marketing and the social media-driven shift in control away from companies and towards consumers have all encouraged this trend.

More specifically, an individual’s direct experience with a brand was found to generate something in the region of 50% and 80% of all word of mouth.

“Consequential” word of mouth driven by marketing and “intentional” word of mouth based on formal corporate efforts – such as brands hiring celebrity endorsers – made up the majority of the remainder.

When assessing the “equity” of word of mouth, McKinsey said recommendations from a “trusted source” like a friend or family member was 50 times more likely to persuade someone to buy a brand.

Elsewhere, influentials, making up some 9% of the population, produced around three times more word of mouth than the norm, with the 1% of “digital influentials” also boasting “disproportionate power”.

McKinsey cited the example of Apple’s launch of the iPhone in Germany, where it was the subject of just 10% of word of mouth in the category, a third less than the market leader. However, this activity was five times more powerful than that for its rival – and six times more powerful than Apple’s paid-for media – because of the perceived authority of these “influentials”.

Messages passed among consumers that emphasised “important product or service features” were also found to have a more substantial impact than general or emotive comments. Equally, the sharing of information in small, closely-connected groups delivered better returns than interactions in “dispersed communities” due to the stronger levels of trust between participants.

This even applies on social networks like Facebook and Twitter, where individuals can have hundreds of friends, but still typically only value the input of a limited number of their contacts. “(c) and database right World Advertising Research Centre 2010. All rights reserved.”