Word-of-mouth marketing, also known as viral marketing, is the dissemination of messages about your company through customer interaction. Much of this communication takes place informally as family and friends share their experiences with your company in conversation. However, companies can become more assertive about finding satisfied customers and promoting referral opportunities if they get others to buy.

Credibility

A major advantage of word of mouth compared with paid for messages is its credibility factor. When people hear messages about your company, products and services from someone they trust, they are more likely to believe them. When you pay for marketing messages, you customers, expect you are only going to say positive things to get customers to buy. This is why customer satisfaction is so important. Not only do you retain customers, but you also give them more positive ammunition to attract other people to your business.

Low Cost

In theory, word-of-mouth marketing has no direct cost. It is simply the interaction of customers in the marketplace who share their experiences. However, the investments you make in hiring, training and motivating service employees are indirectly tied to word of mouth. You essentially pay to deliver to customers experiences they want to brag about. These costs are still modest compared with money spent on mass media campaigns, especially those involving TV ads.

Lack of Control

A major drawback of word of mouth is that you have limited control over the messages. If a customer has a very negative experience with your product or service, he will likely share it with others. The Internet and social media have given upset customers a larger audience for their vented frustrations. Companies have made a more concerted effort to get some control over word of mouth by getting top customers directly involved. Some use consumer advisory boards or peer marketing groups to build a positive relationship with the most vocal customers.

Difficulty Evaluating Results

Word-of-mouth effectiveness is much more difficult to measure than traditional marketing tactics. You can do awareness surveys to check for increased brand awareness or monitor sales data to see if your marketing increased revenue. However, word of mouth takes place during mostly informal conversations between consumers. Unless you are directly involved in the conversation, it is difficult to find out whether business improvements came from word of mouth. Some companies use point-of-sale inquiries to find out how new customers heard about the business.