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 Spread the News: Word of Mouth Worth $1 Billion

Thursday, November 15th, 2007

Arguably World’s Oldest Form of Marketing Is on the Rise as Advertisers Pour More Into Discipline

Published: November 15, 2007

NEW YORK (AdAge.com) — What’s consumer word-of-mouth advocacy worth to marketers? Try $1 billion.

That’s how much marketers spent on WOM — as it’s known to its practitioners — in 2006, according to an independent research report on the field that will be unveiled during a session at the annual Word-of-Mouth conference in Las Vegas today. The analysis, believed to be first in-depth look at word of mouth, reports that spending on the emerging discipline has increased from $76 million in 2001 to $981 million in 2006 and is expected to grow to approximately $3.7 billion by 2011.

“It’s starting to be recognized as an established industry,” said Leo Kivijarv, Ph.D., VP-research of PQ Media, which performed the analysis.

Meteoric rise
It’s been a meteoric rise of late for word-of-mouth marketing, defined by PQ Media as “supported by research and technology that encourages consumers to dialogue about products and services.” Still, the discipline accounted for just 0.4% of the share in the $254 billion marketing-services category, a grouping that includes direct marketing, branded entertainment and public relations, among others. If PQ Media’s analysis is correct, however, word-of-mouth marketing won’t stay small for long: The field grew 35.9% in 2006, far more than both the overall marketing-services category (7.7%) and the U.S. Gross Domestic Product (5.7%).

Though perhaps the world’s oldest form of transferring messages, word-of-mouth marketing began in earnest in the late 1990s, when brand marketers began grappling with the fragmented media and were actively seeking ways to break through the cluttered landscape. But it has taken off of late due to the industry’s focus on proving it provides a measurable return-on-investment for marketers.

“The new media industry axiom, ‘Only what gets measured gets bought,’ has led to a discernible shift in media spending from traditional to alternative advertising and marketing strategies,” Patrick Quinn, CEO of PQ Media, said in a statement. “The word-of-mouth marketing industry is capitalizing on this trend through its ability to provide ROI to brand marketers in a highly cost-effective platform.”

Research points to effectiveness
Equally important to the success of word-of-mouth marketing may be the research suggesting it is more effective than other forms of advertising. For instance, a recent Nielsen Global Survey of over 26,000 people found that nearly 78% of respondents trusted “recommendations from consumers,” a total 15% higher than the second-most credible source, newspapers. And this trust, according to Mr. Kivijarv, leads to more sales at the cash register.

“When you compare word-of-mouth as a strategy [to other methods], trusting a friend or influential person is the most determining factor when someone decides to purchase a product,” he said.

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