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Word of Mouth Impact on Small Businesses
Terria Sinclair Service Marketing 545 Dr. Ziemnowicz December 8, 2010
small businesses. 2 . I will attempt to measure the impact of word of mouth marketing. surveys. and interviews. motion picture industry.Word of Mouth Marketing Abstract The purpose of this paper is to analyze WOMM and how it can be very influential on many firms. This paper will attempt to show how word of mouth (WOM) can be very beneficial for small businesses such as local hair salons. WOM can have positive and negative impact. Statistics will be calculated using questionnaires. and cosmetic products. Based on personal experiences. Various statistics will be presented in this paper to show the impact of WOM on firms.
I am not going to recommend this product to individuals that don¶t wear extensions. The math 3 . You are able to judge their opinions in the context of what you know about them. For example. Word of mouth increases the firms¶ chances of reaching their ideal target market. ³When we learn about a product or service from a credible peer. The concept of recommendations allows the company to reach better qualified prospects. and making it easier for that conversation to take place´ by the Word of Mouth Marketing Association. A conversation about a good experience and a simple suggestion to a friend is the core process of WOM.Word of Mouth Marketing Word of mouth marketing (WOMM) is a growing phenomenon that has become a very influential source of marketing/advertising.´ Word of mouth only works if people are involved. Word of mouth marketing is simply a recommendation by a customer. if I recently purchased some hair extensions and had a good experience. The use of TV advertising and print media allows companies to reach a large audience but only a small percentage actually may show interest in the product. Word of mouth marketing is defined as ³Giving people a reason to talk about your products and services. As consumers we are willing to talk about our experiences whether good or bad. so people are the main focus of WOM. You also know that they don't have ulterior motives. People have a higher trust for suggestions or the opinions of friends/family members than the recommendation of a company. people tend to act on one in three of those impressions. and that they aren't trying to "sell you" anything. You aren't just getting comments from strangers. Word of mouth pioneer George Silverman states. Recommendations are a major advantage that word of mouth marketing. Consumers will only recommend products for people that are in that certain type of market. According to White Paper (2007) ³«word of mouth marketing is what companies do to spark consumer interest in a way that causes them to share their experiences with others. but from people whose opinions you respect.
If a consumer has a negative experience then they will not recommend the 4 . The reason being is because consumers are less likely to come in contact with someone that they could recommend the product. When new customers occur because of WOM then it¶s highly likely that the customer will build a loyalty for the company or brand. It¶s important for firms to offer high quality product or service. it's easier to find out what people are saying about your company. People will be honest about their experience with the product and the word of mouth strategies will simply allow your customers to spread disapproval. WOMM can produce numerous new customers for a company and this allows the firm to focus more on keeping the customers. The product should function as advertised and should be of the same quality as promised because of it isn¶t than WOMM can back fire. There are some downfalls of word of mouth marketing if it is negative. The main focus of word of mouth marketing is the people.000 times more effective than traditional marketing. With word-of-mouth marketing. especially if they're saying it on social networking sites. Word-of-mouth marketing allows you to use the "grapevine" to more quickly find out what people think of your company. The communication between individuals is no expense for the company and this is why word of mouth is inexpensive.Word of Mouth Marketing tells us that peer influence is 5. All products cannot be successfully marketing with word of mouth. Also products that lacks a form of stimulation whether it be excitement or element of surprise it will be a struggle to get people to talk about your product. Another advantage of word of mouth marketing is the increase of customer loyalty. Word of mouth marketing can be a very effective marketing tool if used properly. measure results of your marketing efforts and get new messages to the public.´Another advantage of word of mouth marketing is how inexpensive it is. Products that are extremely niche specific will more than likely not work of a WOMM campaign. The reason why it¶s so inexpensive because it is carried out by customers.
companies can use networks such as Twitter and Facebook to see if their brand is mentioned. an airline company. the quality of service. It's virtually impossible for companies to track every feature of word-of-mouth marketing. WOMM lacks the structure of email marketing.Word of Mouth Marketing product and their experience may influence another¶s consumer decision on whether or not to purchase the product. DVR. I had a very bad experience with this airline company and I used Twitter to find other people that had negative experiences and I also used twitter to express my opinion about the company. thus allowing companies to see the impact of marketing tool. Negative consumer feedback can impact a business due to word of mouth. With such decline the use of WOMM has grown substantially and the most used form of marketing. From my personal experience. and online social networks has contributed to the decline TV viewers in recent years. or entire company. Consumers can be dissatisfied with a product because of price. Another disadvantage of WOMM is the inability to track impact of WOMM.. According to Bayus. I used Twitter to search Air Tran. Email marketing can be tracked by open rates and clicks.. ³.´ Poor word of mouth can result in costly damage control and the failure of a product. With the rapid growth of technology. movie. and can all affect a business through word of mouth marketing. This is a prime example of how WOMM can be negative. Recent technology advances has had a direct impact on the increase of word of mouth marketing. I also used the ³retweet´ function of Twitter to retweet as many negative Tweets about the airline I could find. A recent study by Nielsen validates companies¶ word of mouth marketing efforts. The use of TIVO. 5 .it is perhaps even more important for a firm to be aware of negative word of mouth about its products.
³At this unique point in the information revolution. According to Erickson (2005). social networks. The feedback isn¶t biased. blogs. and YouTube has put the use of word of mouth marketing in over drive. The emergence of online discussion boards.Word of Mouth Marketing To What Extent Do You Trust the Following Forms of Advertising Marketing Strategy Recommendations from Consumers Newspapers Consumers opinions posted online Brand websites Television Magazines Radio Brand Sponsorships Email Signed Up For Ads Before Movies Search Engine Ads Text Ads on Mobile Phones Percent 78% 63% 61% 60% 56% 56% 54% 49% 49% 38% 36% 18% Source: Nielsen Online Global Consumer Study April 2007 This study shows that consumers are more likely to make a purchase decision based on a recommendation than based on any other form of advertisement. Consumers have more trust in the opinions of friends and/or family because they are more likely to give honest opinions. the modern media that has caused the overload has also made 6 .
2007). in particular. I utilized surveys. The ³buzz´ is new term for spreading a vast of amount of information. (Survey 1 in Appendix I).´ This is why WOMM is the most utilized form of marketing for small businesses. According to White Papers (2007). how did they hear about the salon. The first element of my research is a survey. and research shows its influence grows daily. The survey included several questions in reference to what hair salon do they prefer. often do not have the resources to conduct ongoing advertising campaigns. radio commercials. satisfied with service etc.Word of Mouth Marketing word of mouth much more accessible. ³Small businesses. WOMM is essential for small businesses because they don¶t have access to resources to create a mass advertising campaign. According to Hall (2007). questions and interviews to get a better understanding of how effective WOMM can be for small businesses. but that is really to narrow. Word of mouth is now known as the ³buzz´ (Pai).´ with a focus on the hot new thing. 7 . The bulk of my research is based on word of mouth marketing for small businesses such as hair salons. ³In earlier periods we have referred to this as ³buzz. Small businesses do uses ³one and done´ commercials.´ This information can be spread in large amounts in a short amount of time because of the growth of the internet and its many features. and newspapers ads. I surveyed 20 random women.´ This simply means that consumers has unlimited access to information about any type of product or item that they are considering purchasing because of the revolution of technology. as well (White Paper. It also applies to the not-so-hot old things too.
I also did a survey. The survey consisted of several questions about the experience once they visited the salon based on the recommendation. I currently still visit the salon. classmate. Over fifty percent of the women that I surveyed actually visit a salon because it was recommended by a peer. The results show the strength of recommendations. I decided to visit the salon without even seeing any of their work. etc. co-worker. family-member. Of the twelve ladies that actually chose recommendation as the reason they visited their chosen salon. as well as recommended it to several of my other friends. 8 . I currently get services from a salon that was recommended by a friend. The recommendation came from someone such as a friend.0 shows the results of my survey.0 Why I Chose My Salon Recommendation Walk-In Radio Ad Craigslist 10% 5% 25% 60% Figure 1. From my personal experience. (Survey 2 in Appendix II). but simply because it was highly recommended. The salon was recommended because I was discussing a particularly style that I wanted to achieve and my friend told me about a salon that provided the service and does great work at affordable prices.Word of Mouth Marketing Figure 1.
Word of Mouth Marketing Figure 2. very professional. giving 100% effort.´ In her salon she preaches the importance of being polite. The interviewed included a variety of questions. NC. The satisfied customer will tell people about the positive experience and even recommend it to friends. Satisfied customers will more than likely become a returning customer.0 shows that of the twelve individuals that visited the salon based on a recommendation. This is why is important for companies to hold true on their promises on their product and services.0 My Experience at Salon Satisfied Not Satisfied Neutral 33% 58% 9% Figure 2. fifty-eight percent was actually satisfied. The owner of the salon stated that ³provided quality service is the key to a satisfied customer. (See the interview questions and answers in Appendix III). Returning customers are a strong representation of customer loyalty as well as word of mouth marketers for your business. and being focused on the task at hand. All of her employees operate on these key 9 . Another element of my research was an interview with a local salon owner out of Fayetteville. The bulk of the questions involved the importance of customer service.
On a weekly basis. It¶s a very simple study. so WOMM is an inexpensive yet effective way to market. It¶s important for small businesses to provide quality service because this is how they create a strong customer based via word of mouth. but shows volume of the impact of WOMM. Most small businesses do not have access to abundant resources to implement large advertising campaigns. The bulk of these new customers come because of a recommendation from another customer. she said that they can get anywhere from 25-50 new customers. NC.Word of Mouth Marketing principles and by doing so they have created a large customer pool for a small salon. 10 . My research is based on a local hair salon out of Fayetteville.
A. ³The History of Word of Mouth Marketing´ Agri Marketing. Lam. 3 June/July (1985): 31-39 Erickson.Word of Mouth Marketing References Bayus.´ Journal of Advertising Research 25. R.´ Journal of International Marketing 17. B. K. 43. ³Word of Mouth: The Indirect Effects of Marketing Efforts. S. 7 September (2005): 38 Lee. 6 July/August (2005): 42 Erickson. and Mizerski. ³The Effects of Cultural Values in Word-of-Mouth Communication. 1 (2007). 3 (2009):55-70 Seema. K. ³The Impact of Word-of-Mouth on Purchase Decisions: The Case of Motion Pictures´ ³White Papers: Tips for Effective Word of Mouth Marketing´ gL Market Research.. and Siddarth. 11 . P. D. ³Why Word of Mouth Works´ Agri Marketing. November Vol.. 43.
) o Walk-In o Radio Ad o Other (Craigslist.) 2. etc.Word of Mouth Marketing Appendix I: Survey 1 1. How would you rate your first experience at the salon? o Satisfied o Neutral o Dissatisfied 3. etc. How did you find your current hair salon? o Recommendation (friend. How likely will you return? o Highly Likely o Likely o Not Likely 12 . family.
Where you referred to this salon by a friend or family member? o Yes o No 2. Are you still currently visiting the salon? o Yes o No 13 . Where you satisfied with the service? o Yes o No o Somewhat 3.Word of Mouth Marketing Appendix II: Survey 2 1.
What principles do you encourage in your salon? a. My employees are very polite. hard workers. The obvious answer is excellent customer service. Why do you think your business has been successful? a. This has allowed me to build a strong customer base. and love their job. I feel my salon has been successful because I have continued to provide excellent service for a long period of time.´ 3. 2. It¶s also important for my employees to always be professional. Their positive attitudes show through their work. How do you maintain a satisfied customer? a. 14 . It¶s important to provide quality service is the key to a satisfied customer. I expect for all of my employees to treat our customers the way they would want to be treated.Word of Mouth Marketing Appendix III: Interview Q&A 1.
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