Chapter 2: Word-of-Mouth

• 2 Word-of-Mouth
• 2.1 Theoretical Background
• 2.2 Pre-Purchase Information
• 2.3 Communication Channels
• 2.4 eWord-of-Mouth
• 2.5 Motives

2.4 Word of Mouth

WOM has been described as the “world’s most effective, yet least understood marketing strategy” (Misner, 1994, p.26). Blackwell et al. (2001) describes WOM as the informal transmission of ideas, comments, opinions, and information between two or more individuals, neither one of which is a marketer.

Despite its name, WOM does not necessarily have to occur through oral communication. Facial expressions, body language, audio-visual, texts or interactive material may also contain WOM. Naturally not all communication between people is WOM communication. WOM occurs when individuals talk about the characteristics of, or their experiences with a product or service. Usually, the communication directly or indirectly includes a recommendation. This recommendation can be positive or negative. Research has shown that positive WOM is more likely to occur than negative WOM (e.g., Rossiter and Percy, 1997; Chevalier and Mayzlin, 2003). However, the effect of negative WOM on consumer deci-sion-making is stronger than the effect of positive WOM (e.g., Holmes and Lett, 1977; Mizerski, 1982; Herr et al., 1991). The reason for this is that plentiful of positive mar-keter-generated information alerts consumers to anything that provides a different perspective (Blackwell et al., 2001).

Receivers and senders in the WOM process both gain from the exchange. WOM gives receivers more information about choices they have, which may serve as valuable input in their decision process. It can enable receivers to make more effective and more efficient purchase decisions, thereby decreasing the risk of a new negative buying experience, decreasing doubts after a purchase, and increasing the confidence of product choice (Blackwell et al., 2001). On the other side, senders are also able to decrease doubts after a purchase, increase their confidence in their product choice and buying behavior by recommending others to do the same. Senders may arise feelings of control and prestige by recommending others. Senders may gain advantage from engaging in WOM simply because they are very involved and like to talk about it.

WOM can have a more critical role in the decision-making process than advertising or other marketer-dominated sources (e.g., Price and Feick, 1984; Swartz and Stephens, 1984; Herr et al., 1991). This is primarily due to the greater perceived credibility of the sender, who is considered to have no commercially motivated reason to share information (Arndt, 1967; McGuire, 1985). When the receiver initiates the communication rather than the sender WOM tends to have more impact (Gatignon and Robertson, 1985). Finally, the influence of WOM is strongest with respect to high-risk products, new products, and intangible products that are difficult to compare (Zeithaml, 1981; Rogers, 1983; Wilkie, 1986).

2.4.1 Electronic WOM

WOM is a concept with a long history. eWOM or word-of-mouse is basically the extension of traditional WOM on the Internet. eWOM activity differs from those in the real world in many aspects. In the marketing literature WOM communication is "oral, person-to-person communication between a receiver and a communicator whom the receiver perceives as noncommercial, regarding a brand, a product, a service or a provider" (Arndt, 1967, p. 5). Adapting this definition to be relevant to the online medium requires reference to online communication modes (e-mail and hypertext), the existence of remote many-to-many communication (most information/recommendations are from strangers who have never met or will in the future, e.g. amazon.com). Hennig-Thurau et al. (2004) refer to eWOM communication "as any positive or negative statement made by potential, actual, or former customers about a product or company, which is made available to a multitude of people and institutions via the Internet".

Information technology (IT) and the Internet (e.g., bulletin boards, chat rooms, websites, and ratings) have vastly enlarged the potential impact of this ancient (social) force. A indi-vidual’s opinion no longer impacts just their family and friends; the Internet has given them the power to share their opinions and experiences with the world.

A recent Forrester study, for example, concluded that approximately 50% of young Internet surfers rely on online recommendations to purchase CDs, movies, Videos/DVDs, and games (Forrester Research, 2000).

Figure 2.1: A commercial eWOM company entitled iSquad

The non-commercial focus may not be certain. Most of these websites and forums point out that while they do not edit comments made by users, some get paid for referrals or purchases and/or get advertising income from advertising firms (see Figure 2.1). Therefore, consumers might question the viability of websites and forums. Further, eWOM is large in quantity compared to information obtained from traditional contacts in the offline world (i.e., traditional WOM). One more big advantage of eWOM is that it includes several units of positive and negative information presented together from multiple sources at the same time as opposed to a single piece of information that is either positive or negative.

The underlying benefit consumers obtain from availability of other consumers’ com-ments/recommendations on the Internet is the scale advantages they experience in going through their purchase decision making. eWOM exists in various forms that differ in accessibility, scope and source. Despite common wisdom that all content on the Internet is accessible, the large volume, variety of information and time limits faced by the consumer provide opportunities for marketers to make eWOM more accessible by placing them close to purchase information.

Figure 2.2: Amazon Customer Reviews: "Madonna - I'm Going to Tell You a Secret"

Reviews (i.e., user comments) or ratings (on a scale) of products conveniently provided along with purchase information at, for example, online stores (i.e., Amazon.com) and comparison shopping agents (i.e., Pricewatch.com) represent the most accessible and encountered form. In contrast, Internet Relay Chat (IRC) groups exist independently from purchase information, are less under marketer control but require prior knowledge of their existence and intentionally conceived effort by the consumer (e.g., www.efnet.org).