How much does word of mouth drive sales?
According to a study organized by the Word of Mouth Marketing Association (WOMMA), online and offline consumer conversations and recommendations account for 13 percent of consumer sales, on average, which represents $6 trillion in annual consumer spending. In higher price point categories, word of mouth’s impact is almost 20 percent of sales.
Measuring the impact of "consumer word of mouth" in six diverse categories, the study was based on sophisticated econometric modeling of sales and marketing data provided by participating brands on a confidential basis. These include AT&T, Discovery Communications, Intuit, PepsiCo and Weight Watchers, all WOMMA sponsors who helped pay for the study. Analysis was conducted by Analytic Partners, an independent analytics consultancy.
The results offered a positive view for both paid and earned marketing. About one-third of the sales impact is attributable to word of mouth acting as an "amplifier" to paid media, such as television, with consumers spreading advertised messages. But most of the impact of word of mouth works independently of advertising, whether stimulated by product or customer service experiences, public relations, owned and earned digital content, referral marketing, and so on.
Other key findings include:
- Offline and online word of mouth are both strong purchase drivers, with offline accounting for two-thirds of sales and online accounting for one-third.
- Researchers found that an offline word-of-mouth impression drives at least five times more sales than a paid advertising impression, and much more (as much as 100 times more) for higher-consideration categories. A similar finding for online word of mouth requires more comprehensive data, which are not yet publicly available.
- Word of mouth’s impact happens closer to the time of purchase than traditional media — often within two weeks.
On his blog, Joel Rubinson, president, Rubinson Partners, Inc., noted that the findings come on top of an academic paper from the University of Maryland that showed a favorable correlation between social media listening data and brand equity metrics. Both studies, he asserts, show that social media data is "truly DATA … with predictive value," creating a new urgency for researchers to create new brand metrics from social media data.
Said Mr. Rubinson, "We need to stop treating social media listening as a hobby and find its mainstream roles alongside surveys and other important data streams such as clickstream and transaction data."
- Landmark Study Shows Word of Mouth Drives 13 percent of Consumer Sales – Analytic Partners/WOMMA/MarketWatch
- Conclusive proof that social media data predict sales…now what – Joel Rubinson on Marketing Research Consulting
- Listening In on Social Media: A Joint Model of Sentiment and Venue Format Choice – America Marketing Association
In what ways can retailers capitalize on the strong influence of word-of-mouth, whether it’s offline or online? What are the study’s implications for other forms of social media outreach?