Why Word of Mouth Trumps Traditional Advertising

• Research shows that word-of-mouth advertising is the most powerful customer persuasion tool.
• Word-of-mouth advertising is effective with all generations, but especially millennials.
• Influencer marketing, user-generated content, referral programs and highlighting reviews can help you market via word of mouth.
• This article is for small business owners looking to perfect their word-of-mouth advertising.

When it comes to swaying consumers, nothing beats word-of-mouth advertising. That's been true since 2012, when a well-known Nielsen survey found that 92% of people trusted recommendations from friends and family above all other forms of advertising when making a purchase decision. That represented a nearly 20% increase from 2007.

Those findings, however, only began to highlight the changing advertising model. According to the study, fewer than half of all people still found paid traditional television, magazine and newspaper ads credible. Those numbers were down 24%, 20%, and 25% from 2009, respectively. As for online customer reviews, 70% of people professed trust in them, up 15% from four years prior. 

Below, we'll discuss what Nielsen's 2012 report can teach small business owners like you. We'll also offer newer statistics that you can learn from as well.

Nielsen's 2012 Global Trust in Advertising report

The above statistics are taken from Nielsen's 2012 Global Trust in Advertising report. The brand had this to say upon the survey's release.

"While brand marketers increasingly seek to deploy more effective advertising strategies, Nielsen's survey shows that the continued proliferation of media messages may be impacting how well they resonate with their intended audiences on various platforms," said Randall Beard, global head of advertiser solutions at Nielsen at the time of the survey's release. 

"Although television advertising will remain a primary way marketers connect with audiences due to its unmatched reach compared to other media, consumers around the world continue to see recommendations from friends and online consumer opinions as by far the most credible. As a result, successful brand advertisers will seek ways to better connect with consumers and leverage their goodwill in the form of consumer feedback and experiences." [Read related article: Consumers Have Humanlike Relationships With Brands]

Online advertisements were a growing medium when the study was released. The prevalence of consumers who found online banner ads credible grew from 26% in 2007 to 33% in 2012. Additionally, nearly 40% of people trusted ads viewed in search engine results and on social networks. Consumer trust in ads from mobile devices, such as tablets and smartphones, as well as text message ads showed growth in the 2012 survey too – 61% since 2007. (You can learn more about text ad platforms on our text message marketing best picks page.)

Key takeaway: Since the early 2010s, research has shown that word-of-mouth advertising is effective.

Creative ad formats

More creative forms of ads were also starting to grow in credibility at the time of Nielsen's 2012 study. According to the research, nearly 60% of consumers responded to advertising on company websites, while 50% of consumers responded to company emails. Surprisingly, slightly more than 40% of people were swayed when seeing product placements in television shows and movies.

"The growth in trust for online search and display ads over the past four years should give marketers increased confidence in putting more of their ad dollars into this medium," Beard said. "Many companies are already increasing their paid advertising activity on social networking sites, in part due to the high level of trust consumers place in friends' recommendations and online opinions. Brands should be watching this emerging ad channel closely as it continues to grow."

The information in the Nielsen Global Trust in Advertising survey was based on the responses and behaviors of 28,000 people from 56 countries.  

2021 word-of-mouth advertising statistics

A blog that online visibility management company SEMrush published in March 2021 provides more recent word-of-mouth advertising data. Among the blog's 49 statistics, the following 10 stand out most prominently:

1. 90% of customers will choose a product that comes with a person's recommendation (even if they don't know that person) over one lacking this endorsement.
2. Over 1 in 4 customers will completely avoid a small business about which someone they know shares a negative story.
3. 17% of people who participated in Amazon Prime Day in 2020 learned about it from word-of-mouth advertising rather than from Amazon itself.
4. Millennials are 38% more likely to cite word-of-mouth advertising as the way they discovered a company.
5. 18% of Gen X and 16% of baby boomer customers regularly use word of mouth to find new products.
6. With a corresponding figure of 12%, Gen Z uses word of mouth to find new products less than older generations.
7. 20% of North Americans who learn about a product via word-of-mouth advertising instantly buy it.
8. Word of mouth may be directly responsible for 9 in every 10 purchases.
9. Word of mouth can generate up to five times as many sales as paid ads.
10. 64% of marketers say they find word-of-mouth advertising more effective than other tactics.

Key takeaway: If 2021's statistics hold, word-of-mouth advertising may be the most effective form of marketing in 2022.

How to improve your word-of-mouth advertising

The potential of word-of-mouth advertising to bolster your bottom line is clear. But how exactly do you advertise via word of mouth? Here are some key tips to follow:

• Incorporate user-generated content. If you've ever seen someone post about a brand and tag it on social media, you've seen user-generated content. This content, though it reaches a relatively small audience, costs nothing for your company to make and comes with clear creator incentives. Plus, the small number of people that follow ordinary folks probably know them in real life and trust their recommendations.
  
  
• Try influencer marketing. By definition, influencers have followers who trust them deeply. When these influencers recommend a product (typically through sponsored content), they're partaking in word-of-mouth advertising. You might see an uptick in engagement from their fans.
  
  
• Highlight your best reviews. Most website design platforms allow you to add a widget that displays your reviews from listing sites such as Trustpilot and Google Maps. This approach is a highly effective word-of-mouth advertising tactic for business-to-consumer (B2C) companies. Business-to-business (B2B) companies often fare better with client testimonials highlighted on their homepages or a separate testimonials page.
  
  
• Establish a referral program. Through referral programs, you give your customers an incentive to promote you. Whenever they acquire a new customer for you, they get a discount or reward, and you get a new customer through word-of-mouth advertising. Truly, everyone wins.

David Mielach contributed to the writing and reporting in this article.