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Word of Mouth: Why is it so Significant?

Bodo Lang, Manukau Institute of Technology Abstract Word of mouth (WOM) is a concept of ever increasing importance to both marketing academics and practitioners. Despite the interest in WOM, no research to date has summarised the factors that contribute towards WOM's significance. Based on a synthesis of the literature, this paper develops a conceptual framework of the factors that contribute towards the significance of WOM. Eleven factors are identified that contribute towards WOM's significance. The eleven factors can be summarised under two headings: WOM's pervasiveness and persuasiveness, both of which are thought to be interdependent, rather than independent of each other. Introduction and Purpose Word of Mouth (WOM) is a concept of strong interest to both marketing academics and practitioners. From an academic perspective, WOM has attracted research attention during the past six decades (Gruen, Osmonbekov, and Czaplewski, 2006; Knapp, 1944). Last year alone nineteen academic articles were published with the term "Word of Mouth" in the title (see references). Thus, WOM is an area of sustained research enquiry and the intensity appears to be increasing. Practitioners also have a growing interest in WOM; whether it is margarine (Elliott, 2005), hybrid cars (Guyer, 2005), music (MusicWeek, 2005), books, (Cohen, 1999), Internet telephony (Davis, 2005), or handheld video games (Godes and Mayzlin, 2004), marketing practitioners are increasingly shying away from traditional mass communication tools in favour of WOM campaigns. In line with this trend, dedicated WOM agencies have emerged that focus on generating and spreading WOM for their clients (Frost, 2005). Furthermore, two new practitioner associations have been launched to cater exclusively for WOM marketing practitioners (Howell, 2005). It appears that both marketing academics as well as practitioners would benefit from a better understanding of WOM and the reasons why it is so significant. A 'deconstruction' of the factors that make WOM so important may allow marketing practitioners to develop more diagnostic ways of measuring the effects of (potential) WOM campaigns. This would echo researchers' calls for greater use of WOM in market research (Reichheld, 2003). Thus, the overall goal of this article is to develop a parsimonious conceptual framework of the factors that contribute towards WOM's significance. Word of mouth (WOM) can be described as informal communication between consumers about goods and services without either party being formally rewarded for this communication (Anderson, 1998; Dichter, 1966; Westbrook, 1987). While early definitions focused on oral WOM (Arndt, 1967, 1967), more recent research includes non-personal communication via electronic channels, such as email, mobile phone text messages, bulletin boards and other means that would comprise what may be called digital WOM (Bickart and Schindler, 2002; Newman, 1999; Stokes and Lomax, 2002).

WOM's Significance Researchers have recognized that WOM is probably the most powerful force shaping consumer behaviour (Whyte, 1954), which lead researchers to describe WOM as almost irresistible (Arndt, 1967) and a response that may be among the most important (Brown, Barry, Dacin, and Gunst, 2005). How persuasive WOM is, particularly in comparison with more traditional marketing communication channels such as advertising, has long been a topic of inquiry (Katz and Lazarsfeld, 1955). Research has found that informal information, such as WOM, was a more important source of information compared to mass media such as print or television advertising (Beal and Rogers, 1957; Buttle, 1998; East, Hammond, Lomax, and Robinson, 2005; Hinde, 1999; Katz and Lazarsfeld, 1955; Traylor and Mathias, 1983). WOM has even been found to be more important in influencing consumers compared to independent thirdparty reviews such as Consumer reports (Herr, Kardes, and Kim, 1991; Hinde, 1999; Price and Feick, 1984). Lastly, WOM can also be more powerful than the consumers own attitude toward a product (Bourne, 1957). While it has become clear that WOM can dominate other information channels, no research has summarised why WOM has such a significant impact on consumers; this is what this paper wishes to investigate. Thus, this paper will now turn to a synthesis of previous research to fill this gap. At the most fundamental level, one could think of two fundamental factors that fuel WOM's significance: The pervasiveness of WOM, that is its reach or the number of consumers exposed to it, and the persuasiveness, that is its impact on consumers' attitudes and behaviours. The following two sections synthesize findings from the literature regarding the pervasiveness and persuasiveness of WOM and build a conceptual framework consisting of eleven drivers that contribute towards the significance of WOM. The Pervasiveness of WOM Based on extant literature, seven factors can be thought of as contributing towards the pervasiveness of WOM. Firstly, WOM is a global phenomenon (Money, 2000; Takada and Jain, 1991; Watkins and Liu, 1996), although individualist and collectivist cultures may engage in WOM to a different extent (Watkins and Liu, 1996). WOM has been found to be of importance in western countries such as the UK (Ranaweera and Prabhu, 2003; Stokes and Lomax, 2002), the US (Brown et al., 2005; Whyte, 1954), Canada (Bansal and Voyer, 2000), Germany (Wangenheim, 2005; Wangenheim and Bayn, 2004) and Sweden (Anderson, 1998), Asian countries such as Japan (Money, 1995; Money, 2000), South Korea (Babin, Yong-Ki, Eun-Ju, and Griffin, 2005) and Singapore (Chew and Wirtz, 2001; Wirtz and Chew, 2002) and developing nations such as India (Ennew, Banerjee, and Li, 2000) and the former Soviet Union (Bauer and Gleicher, 1953). Thus, WOM can be seen to be effective across geographical borders. Secondly, WOM operates across all industries. WOMs importance stretches across diverse industries encompassing corporate services (Money, 2000), personal services (Reichheld, 2003; Swanson and Kelley, 2001), basic goods (Belk, 1971) and complex goods (Arndt and May, 1981; Gilly, Graham, and Wolfinbarger, 1998; Herr et al., 1991; Price and Feick, 1984; Schindler and Bickart, 2002; Stuteville, 1968; Swan and Oliver, 1989; Westbrook, 1987).

Thirdly, the proportion of consumers engaging in WOM has been found to be very high (Bone, 1995; Bristor, 1990). Data from the Swedish and US customer satisfaction barometers indicate that more than half of all consumers engage in WOM (Anderson, 1998). Similarly, 57% of people who had initiated contact with a manufacturer (e.g. email, phone, web) talked to at least one other person about their experience (Bowman and Narayandas, 2001) and more than 70% of consumers had engaged in WOM after product consumption (i.e. watching a movie) (Bayus, Carroll, and Rao, 1985). Other research findings have suggested that as many as 80% of consumers engage in WOM (Bone, 1992; Larsen and Hill, 1954). Thus, a sizeable proportion of consumers engage in WOM, across a variety of industries. Fourthly, the proportion of consumers relying on WOM has been found to be very high. While the precise proportion is disputed (East et al., 2005; Walker, 1995), it is clear that the majority of consumers often rely on WOM for decision-making. The proportion of consumers who rely on WOM as the main source of information can vary from nine percent to 65% (East et al., 2005). A number of other studies support the notion that at least half of all consumers rely on WOM when making purchase decisions (Barnes, 1986; Engel, Blackwell, and Kegerreis, 1969a; Engel, Kegerreis, and Blackwell, 1969b; Feldman and Spencer, 1965; Walker, 1995). Fifthly, WOM can spread quickly. In a study of how many people an innovator had spoken to a few days after trialling a product, 90% of innovators had told at least one person about their experience, while 40% of people had told two or more people (Engel et al., 1969b). Importantly, the speed with which WOM is re-transmitted is even greater for digital WOM (Phelps, Lewis, Mobilio, Perry, and Raman, 2004). Sixthly, one of the key factors in allowing WOM to spread quickly is the fact that WOM may be re-transmitted (Bristor, 1990). That is, WOM may be received by a consumer who then passes the message on to another consumer and so forth (Arndt, 1967). Early research called for an investigation of this phenomenon (Richins, 1984; Sheth, 1971) with subsequent inquiries showing that re-transmission is a real world phenomenon in traditional settings (Brown and Reingen, 1987; Reingen, 1987; Reingen and Kernan, 1986) as well as for digital WOM (Phelps et al., 2004). Lastly, one of the most powerful facets of WOM is that it can be shared with more than one person, i.e. multiple dyads. Some research has found that WOM is 'only shared on average with a relatively low number of three people (Bowman and Narayandas, 2001; Larsen and Hill, 1954). Using Swedish and US national customer satisfaction barometers, it was found that those who engaged in WOM, talked to an average of 9.5 people (Sweden) and 7.9 people (US) (Anderson, 1998). The number of people talked to by each WOM sender can vary considerably from zero to up to 35 in a traditional WOM context (Larsen and Hill, 1954). Digital WOM appears to vary even more substantially, ranging between one and 177 digital episodes in a month (Phelps et al., 2004). After having discussed the pervasiveness, or reach, of WOM, the following section discusses the persuasiveness or impact of WOM. The Persuasiveness of WOM Based on the extant literature, four factors have been identified that contribute towards the persuasiveness of WOM. Firstly, it is generally agreed that the persuasiveness of WOM is mainly due to WOM being seen as credible, trustworthy and reliable (Arndt, 1967; Dholakia and Sternthal, 1977; Heckman, 1999; Richins, 1984; Sobczak, 1990). Secondly, WOM has been found to be highly persuasive due to the receiver's ability to give feedback (Arndt, 1967,

1967). Thirdly the sender's ability to deliver tailored (Lazarsfeld, Berelson, and Gaudet, 1948) or personalized information (Bolen, 1994) in which information may be added or filtered or one's own interpretation is added makes it more relevant to the receiver, thus making WOM highly persuasive (Arndt, 1967). Lastly, research has identified that more accessible and diagnostic information has a greater impact on consumers (Feldman and Lynch, 1988). Diagnosticity in this instance refers to how useful information is for making a purchase decision, for example, how much brands differ and whether certain brands are judged better than others. Importantly, WOM fares well in both accessibility and diagnosticity compared to non-personal sources of information such as advertising (Herr et al., 1991; Lynch, Marmorstein, and Weigold, 1988) thus making it a highly persuasive communication channel. Discussion of Conceptual Framework So far this paper has distilled eleven factors that contribute towards the significance of WOM. Figure 1 integrates these factors into one framework. The following section discusses the interrelationship between the pervasiveness and the persuasiveness of WOM. Figure 1: Conceptual Framework of Factors that Contribute Towards the Significance of WOM

Importance of WOM
Pervasiveness of WOM
High proportion engage in Across product categories Global incidence High proportion rely on Can spread quickly Re-transmission

Multiple dyads

Accessible and diagnostic Credible, trustworthy & reliable Tailored and personalised Ability to give feedback

Persuasiveness of WOM

The labels pervasiveness and persuasiveness appear conceptually clear cut. That is, one is concerned about the reach of WOM, while the other is concerned about the impact of WOM upon consumers once they are reached. However, one should consider the pervasiveness and the persuasiveness of WOM not as two independent factors but rather as two interdependent factors. Furthermore, both factors appear interdependent upon each other. Firstly, the pervasiveness of WOM impacts on the persuasiveness of WOM. The greater the number of people who utter consistent WOM to a consumer, the higher the chances of that consumer following the collective advise of WOM senders (Watts, 2003). Thus, the sheer pervasiveness of WOM can contribute towards the persuasiveness of WOM. Secondly, the persuasiveness of WOM can impact on the pervasiveness of WOM. As discussed earlier, the

pervasiveness of WOM is in part driven by the presence of multiple dyads and consumers' ability to re-transmit WOM to other consumers (Anderson, 1998; Bowman and Narayandas, 2001; Brown and Reingen, 1987; Larsen and Hill, 1954; Reingen, 1987; Reingen and Kernan, 1986). Research has found that message content, including its persuasiveness, can influence consumers intentions to share WOM with other consumers (i.e. multiple dyads) and consumers' intention to re-transmit WOM (Phelps et al., 2004). Thus, the persuasiveness of WOM can also impact on the pervasiveness of WOM. This discussion suggests that each of the eleven factors may be powerful individually, but that a combination of two or ideally more of these factors would yield stronger synergistic effects. In this sense, the framework may be seen as a checklist for an 'ideal WOM campaign'; the more factors that apply, the more powerful the WOM campaign is likely to be. Thus, the framework may be used by practitioners to assess a WOM campaign's likely impact prior to its implementation. Conclusion In summary, the first conceptual framework of the factors that contribute towards WOMs significance has been proposed. The framework was developed by synthesizing WOM research from the past six decades. Two higher order factors, the pervasiveness, or reach, of WOM and the persuasiveness, or impact, of WOM were identified. Eleven factors were found to have contributed towards these two higher order factors. Lastly, the pervasiveness of WOM and the persuasiveness of WOM were conceptualized as two interdependent factors. It is hoped that this framework serves as a useful framework for both academics and practitioners. For practitioners, this framework could serve as a diagnostic tool to assess the appropriateness of WOM to a particular situation. For example, the tool could be used by companies to assess how fully the eleven factors apply to a given situation. The more fully the factors apply, the more appropriate WOM may be as a communications tool in that particular situation. For instance, if the content of a WOM message is highly engaging, then multiple dyads and re-transmission rates are likely to be high, thus resulting in higher pervasiveness and persuasiveness of the message. It is also hoped that the framework presented in this paper is of use to academics. During the past six decades, significant progress has been made but some questions remain unanswered. This paper wishes to fill one of these gaps by making the significance of WOM more explicit. It is also hoped that the proposed theoretical framework will stimulate discussion and highlight WOM's significance even further. The extensive review of the literature is a good starting point for building the framework. However, this has restricted the research to being purely inductive in nature. A logical next step would be to engage in a test of the framework, or, in other words, a deductive step. Such progression would result in a more developed understanding of a phenomenon that has caught the imagination of both marketing academics and practitioners, in itself a rare occurrence as often academics and practitioners priorities are not closely matched. WOM maybe one of the few exceptions to this; thus allowing for both: Relevance and theory development.

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