The Effect of Word of Mouth on the Consumer

Buying Decision

Date: July 05, 2015

Table of Contents

Table of Contents...............................................................................................................1

Introduction.......................................................................................................................2

1. Literature Review.......................................................................................................3

1.1. Overview on Word of Mouth..............................................................................3

1.1.1. Definition of Word of Mouth..........................................................................3

1.1.2. Tie-Strength and Word of Mouth....................................................................3

1.1.3. Types of word of mouth..................................................................................4

1.1.3.1. Traditional and Online word of mouth.................................................4

1.1.3.2. Positive and Negative Word of Mouth.................................................5

1.2. Overview on Consumer Behavior.......................................................................6

1.2.1. Definition of Consumer Behavior...................................................................6

1.2.2. Models of Consumer Purchase Decisions.......................................................7

1.2.2.1. Unplanned Purchases...........................................................................7

1.2.2.2. Theory of Planned Behavior................................................................7

1.3. The Effect of WOM on Consumer Purchase Decision.......................................8

1.3.1. The Impact on Consumer Perception..............................................................9

1.3.2. Effect of Word of Mouth on Consumers Awareness.......................................9

1.3.3. Risk Reduction..............................................................................................10

2. Research Gap...........................................................................................................12

3. References................................................................................................................13

1
Introduction
Several previous researches have demonstrated that word-of-mouth (WOM) is
considered as one of the marketing communication channels that has a strong influence
and effect on consumer behavior (Allsop, Bassett and Hoskins, 2007: 398). Word of
mouth as a communication channels is organized into two main types. These types are
online word of mouth and offline word of mouth (Bayraktar & Erdogan 2015: 95).

Word of mouth is an unofficial communication regarding a product or service

(Yong, 2006: 74). It refers to searching for information and providing information
within consumers. Consumers might promote a feeling of being threatened when they
count on advertisements, which they realize it is a marketing tool, when they look for
information. As a result, they might become reluctant to the massage being delivered
through advertisements and hence they refer to word of mouth which they consider as a
reliable guidance when making their purchase decisions (Dichter, 1966: 147). This
means that consumers view advertisements as being biased and might not reveal all the
truth about a product or service and here comes the role of word of mouth as a reliable
source of credible information (Bayraktar & Erdogan 2015: 96).

However, with the new advances in modern technology, and the appearance of
the numerous online social networks, the internet has paved the way for the existence of
a new significant channel of word of mouth that enables the diffusion of the messages
being transferred. Because word of mouth became more influential than ever, marketers
increased their interest in both off line and online word of mouth due to its nature as a
non commercial channel (Bayraktar & Erdogan 2015: 95). Such increasing interest in
WOM has initiated this research. This research aims to find out the effect of word of
mouth on the consumer buying behavior and to answer the research question “What are
the effects of word of mouth on the consumer buying decision?”

In order to serve the purpose of the research and answer the research question
the research is constructed as follows: The first section introduces the significance of
the topic being researched. The second part provides insights on the meaning of Word of
mouth and its importance and types. The following section casts light on the consumer

2
buying behavior and its stages. The next section discusses the relation between word of
mouth and the consumer buying decision. Then the research methodology is presented
as well as the conclusion.

1. Literature Review
1.1. Overview on Word of Mouth
Since the research discusses the effect of word of mouth on the consumer buying
behavior, there is a need to understand the meaning and nature of word of mouth. This
section provides some information on this topic.

1.1.1. Definition of Word of Mouth

Yong (2006) defines Word of mouth as an unofficial communication regarding a
product or service (Yong, 2006: 74). Other definitions broadly define word of mouth as
….. the art of possibility, on which marketers and advertising companies rely on. It is
the indirect mass-media; a way that relatives, friends and even private parties use in
their communication. It is also defined as non- paid promotion and marketing in which
customers mutually inform each other and tell their relatives, friends and even their
neighbors if they are prone or cone a product or a service (Chung & Tsai 2007: 329).
Other researchers define word of mouth as the scale of complacence that a customer
conveys to his relatives, friends and colleagues about a certain product. Simply it is
defined as the information that customers convey to their primary ties about the service
with the respect of customer satisfaction and word of mouth and includes the level of
customer satisfaction (Söderlund 1998: 172).

1.1.2. Tie-Strength and Word of Mouth

Word of mouth is considered as a social behavior in all societies. It does not vary
within poor and rich people. There is always a word of mouth whether it is negative or
positive. Tie strength plays a role here in this behavior (Writz and Chew 2002: 144). Tie
strength is the level of strength of the relationship between the recommendation source
and the decision maker. Tie strength is considered strong when recommendation source
knows in person the decision maker or the consumer and might accompany the
consumer while shopping while it is considered weak when the recommendation source

3
hardly knows the decision maker or does not know him/her at all (Duhan et al. 1997:
284). Every consumer or customer interact and talks with various people who have
different tie-strength degree. The scale here varies from primary like (husband, spouse
or mother) and secondary like a guy you just met in any coffee lounge. Actually strong
ties have been shown that it provide information. It is more likely to be a flow of
information and copying the same image even though, listener did not share the same
experience of the word of mouth giver. They also found that groups who have strong-tie
relations within, they generated a big amount of word of mouth compared to groups
who have weak relations accordingly. Word of mouth increases whenever the
satisfaction towards the product is higher. The positive effect of the satisfaction is more
powerful when the word of mouth is transferred through strong ties more than week ties
(Writz and Chew 2002: 144).

1.1.3. Types of word of mouth

1.1.3.1. Traditional and Online word of mouth
A lot of studies that has been conducted to study the word of mouth, they found
a lot of power that the word of mouth can do. Sometimes the impact of word of mouth
is much bigger than personal sales. There is an offline word of mouth which is the
traditional word of mouth and there is an online word of mouth. Both types carry high
level of credibility of the information disseminated between the sender and the receiver
(Steffes & Burgee, 2008: 42). Today, users make use of reviews that are available online
and consider these reviews as a significant source of information which replaced other
forms of business-to-consumer messages about the qualities of a product or service.
Therefore, marketers today rely on websites to provide the consumers with community
content in order to generate brand loyalty (Chevalier & Mayzlin 2006: 345).

Steffes and Burgee (2008) confirms this and argue that some customers use
offline word of mouth and other uses online word of mouth. Although there is a
common purpose of the traditional and online word of mouth, there are some
differences. Traditional word of mouth is an instance and close conversation. On the
other side the online word of mouth is by means of electronic email or web blog about a
product. The online word of mouth has shifted the power of the marketplace from the

4
producers to the consumers’ point of view. Consumers have a wide social network
which includes strong-ties like family members and very close friends and weak ties
mere acquaintances (Steffes & Burgee 2008:42).

1.1.3.2. Positive and Negative Word of Mouth

Gremler et al. (2001) defined positive word of mouth as the words spoken from
an existing and excited customer to a potential customer by injecting a positive thoughts
and word about how this business is doing great, how was his experience with that good
or service and the impact of the positive word of mouth usually is more efficacious with
a strong-ties. On the other side is a negative word of mouth. Here we see two ways of
word of mouth; the first one is saying a bad words and negative connotation to my
relative or a friend due to experiencing a service or a good which was short coming or
the customer did not feel the satisfaction that he was expecting. Here we see the normal
negative connotation (Gremler et al 2001: 1). Both positive and negative impacts of
WOM could be influential as Herr et al. (1991: 454) emphasized that the transmission
of the WOM messages from one person to another has a strong impact on both long and
short term consumer buying behavior. He added that this action would contribute to the
formation of various opinions to a definite product or service.

Gremler et al. (2001) suggested six ways for developing positive, strong and
widely spread WOM. The first one is familiarity. They defined the familiarity as the
recognition of the customer that the employee knows details about his needs in a
specific service. Familiarity is developed by the repeated association with the customer
and the depth of interaction. When someone visit a restaurant on a weekly basis that the
amount of gaining knowledge about his needs and how to meet his wants more than
going to a technical centre every three months. Familiarity is considered necessary but
to gain the sufficient development from the service provider and attain customer
relationship it appears that it has a role in the customer services providing to the
customers. Second one is care can be defined as the customer recognition of the
employee taking care of him. Third one is trust, forth one is personal connection and we
can say that personal connection is the bond based on a certain relationship. When we

5
develop a familiarity environment and includes some care it turns to a trust. Then finally
it turns to be a positive word of mouth (Gremler et al. 2001: 47).

1.2. Overview on Consumer Behavior

Within this section, consumer behavior concept is introduced. This includes
defining consumer behavior, types of consumer behavior and the models of consumer
purchase behavior.

1.2.1. Definition of Consumer Behavior

Before identifying consumer behavior, there is a need to define the consumer.
“Consumers are individuals or group who purchase goods and services to satisfy their
personal consumption needs. It is very imperative that the marketers and marketing
researcher have to understand the consumers and enable design strategies that will make
it possible for the marketing practitioner not only to satisfy the consumers but equally to
win consumers patronage” (Uchenna, 2015: 205). Thus, consumer behavior is defined
as the study of individuals, groups or organization and the process that is used by them
to select, use and dispose for the products, services, ideas or experience to satisfy needs
and the impact these processes have on the consumer and on the society (Hawkins, Best
& Coney 2004: 7). Langley et al., (1995: 260) have described “decisions” as discrete
and actual phenomena driven by a national bounded minds, undressed of influence,
insight and history. Consumer behavior is a multidimensional and a complex process.
However, all marketing decisions and regulations are based on the consumer behavior
assumptions. So, in order the organizations to survive in the competitive environment,
organizations must provide the consumers more value than the value provided by
competitors. As a result, it is important for organizations to know the meaning of
customer value, which is the difference between all the benefits derived from a total
product and the costs of acquiring these benefits (Hawkins et al., 2004: 7). However,
Uchenna (2015: 205) defines consumer behavior as “The dynamic interaction of affect
and cognition, behaviour, and environmental events by which human beings conduct the
exchange aspects of their lives” (Uchenna, 2015: 205).

1.2.2. Models of Consumer Purchase Decisions

6
 1.2.2.1. Unplanned Purchases
Whilst consumers normally posses a picture of the items i to be bought when
they are shopping, it ends up most of the time for them to do unplanned purchases,
spontaneously or due to in-store promotion playing the role of a proposal or reminding
factor. Similar purchases offer significant beneficial chances for organizations (Koufaris
Kambil & LaBarbera 2002: 117). Normally, unplanned purchases, specifically
impulsive ones are usually based on the factors time and money there at the time of
shopping, enjoyment of the purchasing operation and the inclination for impulsive-
buying as well as the fact of being exposed to marketing promotions (Beatty & Ferrell
1998: 170). Occasionally on the Web, circumstances allowing a consumer to take less
time to shop, might cause extra unplanned purchases. The possibility to look for extra
and different merchandises, commodities and data could take the consumer to extended
buying decisions combined with passive effects regarding unset shopping list. The
sufficiency of money is a crucial and essential element for on-line as well as off-line
shopping. Yet, Shopping enjoyment is considered as being a defy for online shops. They
are unable to offer the extreme experience provided when going around a shop finding
everywhere nicely shown and exhibited products, escorted all around with nice relaxing
played musical pieces, visualizing various the total of offered and displayed products
(having the chance to touch, smell and occasionally taste them), essaying an item and
being around and interacting with other buyers. The unopened experience of electronic
shopping could diminish the fun and decrease the unplanned sales (Koufaris et al. 2002:
117).

1.2.2.2. Theory of Planned Behavior

As a matter of fact, the theory of planned behavior (TPB) is an expansion of the
theory of reasoned action (TRA), formed as an indispensable theory by the latter
model’s incapability to contract with behaviors over which persons have imperfect
volitional management. At the essence of TPB is the individual’s inner desire to execute
a given behavior (Figure 1) (George 2004: 199). TPB and it can be described as follows.
The inner desire to carry out an action is formed by three concepts: attitude towards the
action, subjective norm, and perceived behavioral control. Attitude towards the action is
the measurement of the action for the possible actor, i.e. whether and to which degree

7
the action is considered to be as constructive or unconstructive. Mind-set is in sequence
decided by outcome beliefs, i.e. a person’s beliefs about the predictable outcome of a
known behavior. Subjective norm means how the possible actor deems pertinent others
will act in response to achieving the action, i.e. constructively or unconstructively.
Subjective norm is decided by normative beliefs that the individual has about the
behavior predictable by pertinent referent individuals. Perceived behavioral control
means a person’s capability to carry out a known behavior. Perceived behavioral control
is estimated to influence the structure of intentions, but also on the performance itself.
Beliefs about factors that make easy or obstruct the performance of the behavior, control
beliefs, are influential believed behavioral control (Ramus & Nielsen 2005: 337).

Figure 1 TPB (George 2004: 199)

1.3. The Effect of WOM on Consumer Purchase Decision

In this section, the relation between word of mouth and the consumer buying
decision is introduced and discussed.

8
 1.3.1. The Impact on Consumer Perception
It can be easily understood that the purpose of consumer search before making a
purchase decision is minimizing the perceived risk. One such resource of information is
word of mouth (WOM). Indeed, marketing researchers have revealed that WOM
communication has an immense influence on consumer behaviors, the amount of
consumer's risk, short-term and long-term product judgments and purchase decisions
and preference tendency (Lau & Ng 2001: 164). It is still debated that in view of the fact
that the consumer is fully controlled by WOM, it is realized as being more dependable
and truthful than any other communications of a firm. Certainly, conventional forms of
communication such as advertising come into view to be losing their success, probably
because consumers distrust their dependability and credibility. The trustworthiness of
WOM, on the other hand, accompanied by the fact that consumers will be more
implicated in WOM than in advertising for the reason that WOM has stronger
consequences and better cognition (Prendergast et al. 2010: 687). About the more useful
source of information they rely on when they make their decisions regarding purchasing
products. They survey provided four categories for these products. The consumers
responses in three of four of these categories revealed that word of mouth that comes in
the form of recommendations from friend, family members and/or people from work or
school had the most impact on their decisions. The fourth category was computers and
the responses reveald that the recommendations of an expert in the field followed by
word of mouth had the most impact on their buying decisions (Allsop, Bassett and
Hoskins, 2007: 398).

1.3.2. Effect of Word of Mouth on Consumers Awareness

There are some arguments over the importance of WOM have been triggered by
scholars in relation to its impact on the awareness of customers and their buying
behavior (Chaniotakis & Lymperopoulos 2009: 229). Ennew et al. (2000: 75) have
argued that WOM is not expected to be received as of same significance with all kinds
of products, markets, and business work set. For example, the impact of WOM is found
to be most effective when products are perceived as of high quality, or with those
products that are related to a purchase that contains a high level of risk (Chaniotakis &

9
Lymperopoulos 2009: 229). Thus, the importance of word of mouth increases with the
increase of the quality of the products that consumers are expected to purchase.

In much the same way, service consumers are mostly affected by positive
messages from trusted individuals before actually getting to become consumers of that
certain service. In addition, WOM is quite effective in regard to reducing the risk
accompanying the purchase of specific kinds of services. This argument has been
supported by another one by Berry and Parasuraman’s (1991) who argued that WOM is
of the essence for the success of those firms that provide an uncertain type of services
(Chaniotakis & Lymperopoulos 2009: 230). WOM is known to be one primary source
for negative news about a specific product. Scholars have studied that found that
specific brands and services such as professional services, movies, automobiles, and
travel services are very exposed to the impact of WOM. In addition, griping is seen as a
basic means of showing dissatisfaction for a certain service. Therefore, WOM is
considered a momentous and reliable basis of unpleasant product reputation (Smith &
Vogt 1995: 134).

1.3.3. Risk Reduction

As with those studies that focus on the consumer as the receiver of WOM, those
studies have focused on how WOM can be a very successful strategy that lessens the
level of risk as anticipated by those consumers (Roselius 1971: 60). WOM is quite
important as it is capable of start a logic selection as when consumers consider WOM in
regard to a specific brand as convincing to lessen the probability of a dissatisfactory
purchase, or to lessen the possible related loss while performing their purchase or while
switching to other products with less possibility of failure during the purchase (Ennew
et al. 2000: 76). Roselius (1971: 60) has also argued that WOM helps to initiate a
positive attitude in regard to the risk associated with the purchase of a product.
Customers who are very hesitant towards risk perceive WOM as a successful approach
that results in a considerable reduction in the level of any anticipated risk. A qualitative
study that mainly focused how customers behave in regard to the risk associated with a
purchase has found that a positive word of mouth from a family member or a close
friend would act as great help in making a reasonable purchase decision. Furthermore,

10
same study has also found that customers who anticipate a high level of risk in regard to
a specific purchase have taken part in conversations about those products perceived as
risky within a six-month period (Ennew et al. 2000: 76).

Midgley (1983: 76) debates that previous scholars stressed that people with high
anticipation of risk are more likely to get involved in communications and WOM that
tackle those risky perceived brands in order to lessen the ambiguity they sense towards
these brands. By and large, most marketing researchers have found that the higher the
risk in any purchase, the more important the role of individual communication is within
the making of a purchase decision (Locander & Hermann 1979: 269).

11
2. Research Gap
Despite the useful information that was included within the literature review,
there is still a gap in the research that need to be covered through conducting additional
research. The research mentioned briefly that word of mouth has impact on the
consumer purchasing services however it did not mention how it could differ from the
behavior upon purchasing products. Future research should cover in details the service
sector and the effect of word of mouth on the consumer behavior within the service
sector. Future research also should answer the question: What are the effects of word of
mouth in the service sector?

12
3. References
Allsop, D.T., Bassett, B.R. and Hoskins, J.A. (2007) “Word-of-Mouth Research:
Principles and Applications” In: Journal of Advertising Research, December, Vol. 47,
No. 4, pp. 398-411.

Bayraktar, A. & Erdogan, E. (2015) “What Makes Offline Word-Of-Mouth More

Influential Than Online Word-Of-Mouth?” In: Global Journal of Business Research,
Vol. 9, No. 2, pp. 95-107.

Beatty, S.E., & Ferrell, M.E. (1998). “Impulse buying: Modeling its precursors” In:
Journal of Retailing, Vol. 74, No. 2, pp. 169-191.

Chaniotakis, I.E. & Lymperopoulos, C. (2009). “Service quality effect on satisfaction

and word of mouth in the health care industry” In: Managing Service Quality, Vol. 19,
No. 2, pp. 229-242.

Chevalier, J. & Mayzlin, D. (2006). “The Effect of Word of Mouth on Sales: Online
Book Reviews” In: Journal of Marketing Research (JMR), Vol. 43, No. 3, pp. 345-354.

Chung C. & Tsai, Q. (2007). “The effects of regulatory focus and tie strength on word-
of-mouth behavior.” In: Asia Pacific Journal of Marketing, Vol. 21, No. 3, pp. 329-341.

Dichter, E. (1966). “How Word-of-Mouth Advertising Works.” In: Harvard Business

Review, Vol. 16, pp. 147–166.

Duhan, D. F., Johnson, S. D., Wilcox, J. B., and Harrel, G. D. (1997). “Influences on
Consumer Use of Word-of-Mouth Recommendation Sources”.In: Journal Of The
Academy Of Marketing Science, Vol. 25, No. 4, pp. 283-295.

Ennew, C.T., Banerjee, A.K. & Li, D. (2000). “Managing word of mouth
communication: empirical evidence from India” In: International Journal of Bank
Marketing, Vol. 18, No. 2, pp. 75-83.

13
George, J.F. (2004). “The theory of planned behavior and Internet purchasing” In:
Internet Research, Vol. 14, No. 3, pp. 198 – 212.

Gremler, D.D., Gwinner, K.P. & Brown, S.W. (2001). “Generating positive Word-of-
mouth communication through customer-employee relationships” In: International In
Journal of Service Industry Management, Vol. 12, No. 1, pp. 44-59.

Hawkins, D.I, Best, R.J & Coney, K.A. (2004). “Consumer Behavior” NewYork, Jhon
E. Biernat.

Herr, P.M., Kardes, F.R. & Kim, J. (1991). “Effects of word-of-mouth and product-
attribute information on persuasion: an accessibility-diagnosticity perspective” In:
Journal of Consumer Research, Vol. 17 No. 4, March, pp. 454-462.

Koufaris, M., Kambil, A. & LaBarbera, P.A. (2002). “Consumer Behavior in Web-
Based Commerce: An Empirical Study” In: International Journal of Electronic
Commerce, Vol. 6, No. 2, pp. 115-138.

Langley, A., Mintzberg, H., Pitcher, P., Posada, E., and Macary, J. (May-Jun., 1995).
Opening up Decision Making: The View from the black stool. In: Organization Science,
vol.6, No. 3, pp. 260-279.

Lau, G. & Ng, S. (2001). “Individual and situational factors influencing negative word
of-mouth behavior” In: Canadian Journal of Administrative Sciences, Vol. 18, pp. 163–
178.

Locander, W.B. & Hermann, P.W. (1979), “The effect of self-confidence and anxiety on
information seeking in consumer risk reduction” In Journal of Marketing Research, Vol.
16, May, pp. 268-74.

14
Midgley, D. (1983). “Patterns of Interpersonal Information Seeking for the Purchase of
a Symbolic Product” In: Journal of Marketing Research (JMR), Vol. 20, No. 1, PP. 74-
83.

Prendergast, G., Ko, D., & Siu Yin V., Y. (2010). “Online word of mouth and consumer
purchase intentions” In:International Journal Of Advertising, Vol. 29, NO. 5, pp. 687-
708.

Ramus, K. & Nielsen, N.A. (2005). “Online grocery retailing: what do consumers
think?” In: Internet Research, Vol. 15, No. 3, pp. 335-352.

Roselius, R. (1971). “Consumer Rankings of Risk Reduction Methods” In Journal of

Marketing, Vol. 35, No. 1, pp. 56-61.

Söderlund, M. (1998). “Customer satisfaction and its consequences on customer

behavior revisited” In: International Journal of Service Industry Management, Vol. 9,
No. 2, pp. 169-188.

Smith, R.E. & Vogt, C.A., (1995). “The Effects of Integrating Advertising and Negative
Word-of-Mouth Communications on Message Processing and Response” In Journal of
Consumer Psychology, Vol. 4, No. 2, pp. 133-151.

Steffes, M.E., & Burgee, E.L. (2009). “Social ties and online word of mouth” In:
Internet Research, Vol.19, No.1, pp. 42-59.

Uchenna, U.J. (2015) “The Impact of Consumer Behaviour and Factors Affecting on
Purchasing Decisions” In: Global Conference on Business and Finance Proceedings,
Vol. 10, No. 1, pp. 204-2012.

Wirtz, J. & Chew, P. (2002). “The effect of incentives, deal proneness, satisfaction and
tie strength on word-of-mouth behavior.” In: International journal of service Industry
Management, vol. 13, No. 2, pp. 141-162.

15
Yong, L. (2006). “Word of Mouth for Movies: Its Dynamics and Impact on Box Office
Revenue.” In: Journal Of Marketing, Vol. 70, No. 3, pp. 74-89.

16