Word of Mouth - Ultimate Marketing Strategy - Essay Example

1. Word of Mouth: The Ultimate Marketing Strategy 1 Elucidating the Notion of Word of Mouth Word of mouth (WOM) has often been considered to have a significant impact in the field of buyer behaviour and marketing in a general sense (Buttle, 1998; Trusov, Bucklin, & Pauwels, 2009). One prominent definition of WOM communication is that it is oral communication that occurs between one person and another that the person receiving perceives to be as non-commercial (Arndt, 1967). However, this definition is not fully accurate in modern times. One issue with this definition is that it considers WOM communication to only occur when two people are face-to-face and communicating orally (Stokes & Lomax, 2002). Electronic communication has become prevalent in the modern era, such as through the internet or telephone. In particular, the internet has become a popular method of spreading information, both positive and negative (Buttle, 1998). Other potential WOM mechanisms that are not included in Arndt’s definition are forms of written communication such as e-mail, letters and faxes. The second problematic aspect of this definition is that the person communication is considered to be unassociated with the item that is being discussed. Consumers are becoming more wary about how independent advice from a third party is, but WOM remains an influential source of information. Many businesses have been working to try and take advantage of the ability of WOM to promote goods or services, by playing a direct role in the recommendation process. For example, relationship marketing uses the approach of rewarding customers who recommend family or friends. Likewise, the use of reciprocal referrals has been developing in many businesses (Stokes & Lomax, 2002). One form of this is schemes that are known as Member Get Member (MGM). In addition, network marketing has developed to the extent that the personal relationships that an individual has and that clients have, have become crucial in the development of sales. The fact that this form of recommendation is often successful shows that although the person giving the recommendation is not independent, there is still a significant effect on behaviour, and thus, it is a WOM activity. These arguments have resulted in the development of a more up-to-date definition of WOM, which is all communication that occurs between people that focuses on either products or services, where the communication is believed to be impartial by the receiver (Stokes & Lomax, 2002). The use of personal referral is often considered to be a highly effective method of influencing the behaviour of consumers. However, it remains a relatively new field that few companies have attempted to take advantages of. Although WOM itself has been a subject of research for a considerable length of time, marketing has only recently begun to pay attention to this approach as a means of increasing sales. The first time that WOM was considered in marketing was in the 1940s, after the Second World War, and its use has grown since this point (Buttle, 1998). The appeal of WOM comes from the fact that this approach has the potential to get past the resistance of consumers, while at the same time having a fast mechanism of delivery and a low cost compared to alternative methods. Strategies used for WOM marketing vary significantly, based on aspects such as the level of solicitation, the focus and timing of the marketing strategy and the level to which management is involved (Trusov, Bucklin & Pauwels, 2009). The use of WOM for marketing has begun to be highly popular among those that use it and those that promote this form of advertising. It has resulted in the development of books which promote WOM as an efficient alternative to methods of communication that are traditionally used in marketing. However, while WOM is potentially the most effective strategy available in marketing, it is arguably the one that is understood the least. Increasing understanding of WOM has been of particular interest to people involved in marketing because traditional marketing approaches are beginning to become less effective (Trusov et al., 2009). One survey found that the attitudes of consumers towards advertisements dropped considerably in a period of less than two years. The study took place between 2002 and 2004, and the authors found that the amount of participants that brought products on the basis of advertising was down 59%, the entertainment that consumers received from advertisements was down 49% and the number of people that considered advertisements to be an effective way of learning information about new products had decreased by 40% (Nail, 2005). This is just one example of how advertising is becoming less effective and it indicates the importance of new methods. As such, WOM has the potential to substantially influence marketing. The next aspect of this paper considers the way in which WOM can potentially be used as a method of increasing the level of customer satisfaction about the quality of service 1.2 Customer satisfaction in Telecommunication Companies The use of modern technology by the companies in the area of customer service is leading to increased customer satisfaction. Vodafone Spain applied a new system of “speech-enabled call centres”. This approach has been highly productive, with a survey finding that 95% of the services customers found the system easy to use and 89% considering the system to be speed efficient (Station, 2007). The maximum capacity of the system is around 35,000 calls per day, and it is estimated that around 62% of these calls will be able to be met without the need for any human intervention. In addition, this system has the ability to select a sample of customers for measuring customer satisfaction for the service provided to them through the system (Station, 2007). Shea (1996) showed that price, compared to network service, customer service and image of the company, is the greatest component in customer satisfaction in telecommunications companies. In addition, the degree of customer satisfaction depends on the rate of spending; those whose bills are for less than $100 have a higher degree of satisfaction than those whose bills are higher. Moreover, customer dissatisfaction affects companies in different ways; for example, they may gain a bad reputation among customers and the loss of customers. This is particularly important, as it is argued that a customer who is dissatisfied will spread this information to around ten other people, while one that is satisfied, will only tell up to five people (Gerson, 1993). As such, negative perceptions spread much faster than positive ones. Furthermore, Bolton (1998) maintains that any change, either an increase or a decrease, in customer satisfaction has an impact on the financial situation of the organisation. On the other hand, another study examined the way that dissatisfied customers behaved and found that three forms of reaction were common, with most customers following one of the three approaches. The first of these was by taking no action. Under this behaviour, the consumer would continue to use the service, despite their dissatisfaction. The second approach was taking action, which could involve behaviours such as moving to a competing organisation, or refraining from any future dealings with the company. Finally, the third approach is some form of public action, such as a legal approach (Bearden & Tell, 1983). While the relationships between maintaining customer satisfaction and service quality have an effect on companies’ performance and profitability, it is difficult to know whether it is more important for a company to concentrate on customer satisfaction or service quality. In Hishamudi and Khatibi’s (2004) study of the Malaysian Communications Company, the results showed that it is more significant to focus on service quality rather than customer satisfaction; this is because customer satisfaction comes later. This highlights the importance of understanding how customers perceive service quality and what aspects are important to them, what may then be applied to the banking sector. 1.3 Customer Satisfaction and Long-term Business Relationship It can be argued that customer satisfaction is strongly related to the amount of time that an individual has been dealing with a particular company, with satisfaction increasing over time. This occurs because as a person spends more time with a particular company, the business has more opportunity to behave as the consumer desires them to, and thus, satisfaction increases. However, this is not always true, if the organisation frequently fails, the customer tends to become dissatisfied. As such, the relationship between length of interaction and level of satisfaction is not straightforward (Bolton, 1998). Another approach to this problem is to consider it from the perspective of the company. A continued positive relationship with a consumer has the benefit of increasing the income of the organisation and saves on advertising, as it is much easier to retain a current customer than to recruit a new one. Finally, customer satisfaction leads to the dissemination of information and good publicity about the company, and WOM recommendations of the company to others. For this reason, the researcher will try to measure the effect of time for customer satisfaction in this case study. Read More