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Word-of-Mouth Marketing


Word-of-mouth marketing refers to the process where customers share information or recommend products or services to others in their social circles. This could be in casual, personal conversations or through social media and online reviews. It’s considered highly valued marketing since it stems from customer satisfaction and is often regarded as genuine and trustworthy.


The phonetics of the keyword “Word-of-Mouth Marketing” is: /wɜːrd əv maʊθ ˈmɑːrkɪtɪŋ/

Key Takeaways


  1. Highly Influential: Word of mouth marketing is one of the most powerful tools in a marketer’s toolbox. It is because the source of this type of marketing is typically friends, family, or other trusted individuals. Therefore, people are more likely to believe and act on word-of-mouth recommendations.
  2. Cost-Effective: Compared to other forms of marketing, word-of-mouth marketing is relatively low-cost. As long as a business provides excellent products or services, customers will naturally spread the word. Additionally, digital platforms provide opportunities for cost-effective, scalable word-of-mouth marketing campaigns.
  3. Builds Trust and Loyalty: Since word-of-mouth recommendations come from happy, satisfied customers, they help in building trust and loyalty. These customers are not only likely to become repeat buyers, but they also serve as brand ambassadors influencing others to try the product or service.



Word-of-mouth marketing is crucial in business and finance because it is one of the most effective and influential methods of spreading information about a product or service. When an individual shares their positive experiences or satisfaction about a company’s offerings, it can have a significant impact, often more than traditional advertising methods. This type of marketing brings about a certain level of credibility and trust as it usually comes from friends, family, or individuals with no financial motivation behind their endorsement. Therefore, it can lead to increased brand awareness, stronger reputation, and ultimately higher sales and profits. It’s also important for businesses to monitor and manage this type of marketing, as negative word-of-mouth can likewise spread and potentially harm a company’s reputation and customer base.


Word-of-mouth marketing, often abbreviated as WOMM, principally serves as a strategy where a business relies on customer experiences and recommendations to gain popularity and broaden its consumer base. It is a powerful tool that businesses employ to maximize their reach and potential growth. The basis of word-of-mouth marketing lies in the credibility of personalized experiences. When customers engage in spreading positive reviews and sharing their experiences about a product or service, it generates trust among potential customers, influencing their decision-making process. This, in turn, leads to increased market visibility for the business.The use of word-of-mouth marketing is primarily aimed at spurring organic conversations about a business’s product or service and capitalizing on customer satisfaction to increase brand awareness. Satisfied customers tend to act as brand ambassadors, endorsing the business’s products or services to their network of contacts. This form of promotion is not only free but also tends to have a more powerful impact because of the trust established through personal relationships. Hence, businesses often motivate this by providing exceptional customer service, creating referral programs, or creating a product or service that sparks customer conversations.


1. Dropbox: When the company was trying to increase its user base, it used a unique word-of-mouth marketing technique. For every user that recommended Dropbox to a friend, both users got an additional 500MB of storage space. This incentivized users to actively promote the service and was a big reason why Dropbox garnered over 1 million users in 7 months.2. Tesla Motors: Tesla spent next-to-nothing on advertising, as most of their sales come from word-of-mouth marketing. They are known for their high-quality, environmentally-friendly cars, and satisfied Tesla customers often share their positive experiences, which contributes significantly to the company’s growth.3. Airbnb: Initially, the company faced a challenging task convincing people to let strangers into their homes. However, Airbnb used word-of-mouth marketing by encouraging satisfied users to share their experiences and, in return, offered them travel credits. The success stories shared by these users online greatly contributed to Airbnb’s popularity and trust.

Frequently Asked Questions(FAQ)

What is Word-of-Mouth Marketing?

Word-of-mouth marketing is an unpaid form of promotion in which satisfied customers tell other people how much they like a business, product or service. It can take place in person or digitally through various social platforms or via email.

Why is Word-of-Mouth Marketing important?

Word-of-mouth marketing is important because it harnesses the power of positive customer experiences and feedback to attract new customers. It is often more trusted by people than corporate advertisements, as it comes directly from personal experiences.

How can I encourage Word-of-Mouth Marketing for my business?

Delivering high-quality products or services, providing excellent customer service, and engaging customers on social media can help encourage word-of-mouth marketing. Additionally, referral programs, where existing customers get rewards for referring new customers can also encourage word-of-mouth marketing.

Can Word-of-Mouth Marketing negatively impact my business?

Yes, if customers don’t have a favorable experience with your product or service, they may spread negative word-of-mouth which can deter potential customers. It’s important to address concerns promptly and professionally to mitigate any potential negative impact.

Are testimonials a form of Word-of-Mouth Marketing?

Yes, testimonials are considered a form of word-of-mouth marketing. They provide an opportunity for satisfied customers to share their positive experiences with your product or service.

Can Word-of-Mouth Marketing be measured and tracked?

It can be challenging to measure the exact impact of word-of-mouth marketing. However, methods such as online customer reviews, social media analysis, and consumer surveys can provide insights on how much word-of-mouth activity your business is generating.

What is the difference between Word-of-Mouth Marketing and Viral Marketing?

While both rely on customers spreading the message, viral marketing typically involves a specific piece of content that is shared rapidly on digital platforms, while word-of-mouth marketing often happens naturally and organically from customer satisfaction with a product or service.

Related Finance Terms

  • Consumer Testimonials
  • Social Media Sharing
  • Referral Programs
  • Brand Advocacy
  • Influencer Marketing

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