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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 factorsthat 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).

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    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 third-

    party 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 ofeleven 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).

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    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 amovie) (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 calledfor 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 varyconsiderably 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 hasbeen found to be highly persuasive due to the receiver's ability to give feedback (Arndt, 1967,

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    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 purchasedecision, 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

    WOM

    Importance of WOM

    Pervasiveness of WOM

    Persuasiveness of WOM

    Multiple dyads

    Re-transmission

    Can spreadquickly

    Global incidence

    Across productcategories

    High proportionengage in

    High proportionrely on

    Accessible anddiagnostic

    Tailored andpersonalised

    Credible,trustworthy &

    reliable

    Ability to givefeedback

    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, thepersuasiveness of WOM can impact on the pervasiveness of WOM. As discussed earlier, the

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    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 ofWOM 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 bycompanies 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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