Word-of-Mouth in a Social World

A large part of the young population use social media periodically.  As the young population ages, in the future a larger percentage of the overall population will be using social sites as a means of communication.  Banks who establish a strong presence in social media sites will continue now and in the future on retaining customers.  Word-of-mouth is a powerful marketing tool that can ruin or build a company’s reputation.  Using social media sites to promote products and services through loyal users can help spread word-of-mouth to reach a larger audience.  Fiancialbrand.com explains that word-of-mouth banking in the past five years has influenced banking purchases.  In addition, there has been a seven percent to fourteen percent increase in consumers’ purchasing decisions through word-of-mouth on online social sites (the financialbrand.com, 2011). 

While social media is beneficial for all businesses, social media can damage a company’s reputation.  Establishing a team to monitor information about a company on social sites will help pinpoint critical issues to resolve and to help improve an organization’s strategy.  Managing consumers’ issues, complaints, and questions on social media will help banks re-build some of the trust damaged due to the financial crisis.  Not only will financial institutions benefit by using social media, all businesses, whether they deal with consumers directly or indirectly, should establish and maintain a social media presence.


Word-of-mouth (WOM) and Electronic WOM (eWOM)

Word-of-mouth (WOM) shapes behavior and attitudes of consumers regarding products and services, and is the main source of information used by consumers for their decision-making (DiPietro, Wang, Rompf, & Severt, 2007).  People believe WOM is more influential in consumer decision making than marketer-controlled source of information (Breazeale, 2009).  Although positive WOM have a significant impact on consumer decision-making, research shows that negative WOM is even more influential because dissatisfied consumers tell others more about their experiences than will a satisfied customer.  WOM previously described as having a fleeting nature because it vanishes as soon as words emerge (Breazeale, 2009).  However, in the Internet age, WOM no longer spontaneously vanishes.  Consumer created sites on the Internet changed the definition of WOM by increasing the customer’s ability to voice their opinion to numerous people and for a longer time-period.  These changes affect an organization’s ability to manage and at times manipulate WOM.

Electronic WOM (eWOM) have been discussed since 1993 when the first user-friendly web browser, NCSA Mosaic was introduced (Breazeale, 2009).  Various formats of eWOM provide consumers opportunities to amplify their voices in an unprecedented way.  Consumer-created complaint sites, online feedback, blogs, and discussion boards concern organizations that did not consider consumer responses years ago.  Consumers come together to form communities centered on organizations they love and hate.  It is not wise for organizations to ignore the social component of eWOM.

Consumers read comments online to save time on decision-making, which allows for more informed buying decisions.  Consumers belonging to and participating in a social community place significant value in their community.  The customer’s desire for social interaction creates factors leading consumers to participate in eWOM (Breazeale, 2009).  In the not so distant past, organizations created and controlled their reputation.  Now, the Internet and two-way communication among the masses has changed the development of an organization’s reputation.  Companies should embrace the ability to hear voices of the consumers and understand that consumers’ voices will not go away.  In 1954, Peter Drucker wrote that the consumer has the power position in the economy (Breazeale, 2009) and the Internet and eWOM enhance that power.  Organizations that accept and understand eWOM will be around longer.

Social Media and Digital Interactions

Consumer tastes and technological innovations contributed to considerable changes in marketing.  Word-of-mouth through digital media affects consumers’ shopping habits through consumer recommendations and discovering new products or services.  Word-of-mouth on social media has given consumers a powerful tool to share information with other consumers and businesses.  The reputation of a business can increase or decrease with viral information spreading over the Internet.  Using social media as a marketing tool enables businesses to promote products or services and increase visibility to millions of users through social network advertising.  In addition, word-of-mouth on social media encourages shoppers to discover and select products through crowd sourcing (Singer, 2012).

Consumers rely on social media, digital interactions, and peer-to-peer evaluations to make their decisions regarding brands (“The social business,” 2011).  Customers use digital media heavily but companies are finding it challenging to convert from traditional methods to social technologies.  Once businesses converge with the new trend, digital media could translate to sales and companies not willing to partake of this growing trend will soon become irrelevant.  In the digital world, the most important factor for organizations to remember is to concentrate on relationships as well as the technologies.