Relying on friends and peers rather than experts
Consumers increasingly rely on their digital social networks – friends, colleagues and mere acquaintances – to make decisions about which products or services to buy or which candidate to vote for. They no longer trust traditional forms of adverting such as television or mass media and are placing increasing trust in the experience of other people, often readily available online. Consumers seem to trust and rely on word-of-mouth (WOM) or buzz in this manner even when they don’t know the posters personally or when these individuals share their experience anonymously, as is often the case with, for example, online travel agencies such as Booking.com.
The WOM effect is substantial
On average, a 7 % increase in favorable WOM messages can increase a company’s revenues by as much as 1 %. Similarly, a recent study in the hotel industry conducted in Europe showed that an increase of 10 points of a hotel’s e-reputation score on TripAdvisor translated into a 10 % increase in bookings at that hotel. Conversely, an increase of 1,000 word-of-mouth complaints can cost the airline industry an accumulated loss of as much as $8.1 billion over 20 months. Therefore, being able to successfully spread positive, and limit negative, word-of-mouth about one’s products and services has become an essential skill.
Many social media handbooks recommend targeting customers’ close connections and encouraging consumers to spread the word about their products and services among friends. This perspective assumes that one’s friends are disposed to speak favorably about products and services. But is this always the case? Not really!