Word-of-mouth (WOM) is one of the most effective way of communication in marketing, and it plays important role in consumer purchasing decision. This paper explains the following key points about WOM- • WOM and its psychological drivers • How WOM plays a major role in marketing? • How Word-of-mouth marketing influences purchasing decision of consumers? • Credibility of sources/narrator • Effect of negative publicity on purchasing decision of consumer • eWOM

1. 8/12/2015
Word-of-Mouth
Marketing
Consumer Behavior Term-Paper
Submitted to: Prof. Payal S. Kapoor
Submitted by:
Naveen Kumar Suman
Roll No – 231094
FMG-23B

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Consumer Behavior Term Paper FORE School of Management, New Delhi
Contents
Introduction:.................................................................................................................................................2
Objective of the Term Paper:...................................................................................................................2
What is Word-of-Mouth?.............................................................................................................................2
Psychological drivers of WOM:................................................................................................................3
Word-of-Mouth in marketing and its impact on purchasing decision of the consumers:.........................3
Credibility of Source/Narrator:................................................................................................................5
Effect of negative rumors on purchasing decision of consumer: ...............................................................5
Damage of reputation:.............................................................................................................................5
Decreased Traffic:.....................................................................................................................................5
Loss of Support:........................................................................................................................................6
Opportunities: ..........................................................................................................................................6
Electronic Word-of-Mouth (eWOM):...........................................................................................................6
References:...................................................................................................................................................8

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Consumer Behavior Term Paper FORE School of Management, New Delhi
Introduction:
Word-of-Mouth (WOM) is a medium of information passing from one person to another by oral
communication. It can be as simple as to tell the time for the day, and as complex as narrating a
story.
Word-of-mouth (WOM) is considered as one of the most effective way of communication in
marketing. Word-of-mouth in marketing refers to information sharing between a non-
commercial communicator and a potential buyer/user of a product/service. Nowadays,
consumers like to get second opinion from their friends, relatives, peers, or even on internet.
These people act as influencer, and play important role in purchasing decision. WOM mediated
through electronic channels is known as Electronic WOM (or, eWOM).
Objective of the Term Paper:
The objective of this term paper is to explain various key points about the WOM Marketing –
 WOM and its psychological drivers
 How WOM plays a major role in marketing?
 How Word-of-mouth marketing influences purchasing decision of consumers?
 Credibility of sources/narrator
 Effect of negative publicity on purchasing decision of consumer
 eWOM
What is Word-of-Mouth?
Entrepreneur.com defines Word-of-Mouth as “An unpaid form of promotion in which satisfied
customers tell other people how much they like a business, product or service.” WOM is triggered
when a customer experiences something far beyond what was expected.
A number of researchers have demonstrated that WOM is one of the most influential channels
of communication in the marketplace. It is seen as more credible than marketer-initiated
communications because it is perceived as having passed through the unbiased filter of people
like us.

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Consumer Behavior Term Paper FORE School of Management, New Delhi
Psychological drivers of WOM:
Existing theoretical perspective suggests that WOM is driven by Motivation.
Interest: WOM specialists frequently contend that the products should be interesting enough to
be discussed. Sernovitz (2006, p. 6) proposes that the most critical rule in WOM advertising is to
be interesting and that no one discusses about boring organizations, boring products, or boring
advertising. A product is interesting if it's novel, exciting, or disregards expectations somehow.
Accessibility: Accessibility is one of the major drivers of Ongoing WOM. Products that are utilized
more ought to be more top of psyche. Visibility of products also helps in WOM. Public products
(e.g. cars) are easier to see than private products (e.g. antivirus), which increases accessibility.
Word-of-Mouth in marketing and its impact on purchasing decision of the
consumers:
WOM is very frequent and important medium of communication. People always talk about their
experiences to new products, complain about bad food/service at a restaurant, etc… In
marketing, the term “Marketing Buzz” of simply “Buzz” is used in WOM marketing – an
interaction of consumers/users of a product/service to intensify the primary marketing
messages. Positive buzz may lead to Viral Marketing, PR, advertising and of promoting on web
media. The term Buzz refers both to execution of marketing techniques, and the subsequent
goodwill that is created. Many companies use word-of-mouth as their advertising. For example
– Starbucks, the largest coffee-chain in the world with about 20000 outlets across the world,
focus on providing a unique experience to its customers – Starbucks Experience, and advertise
this unique experience through word-of-mouth advertising.
Meiners, Schwarting and Seeberger (2010, p 79-97) explains that the importance of WOM in the
realization of purchasing process was empirically confirmed again and again. The research paper
refers to a study carried out by GfK Roper Consulting. The study shows that for 67% of the
respondents in the study, recommendations from the social environment were the most
important source of information, far ahead of TV-spots (53%) and print-media (47%).

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Consumer Behavior Term Paper FORE School of Management, New Delhi
The research paper refers to another survey carried out by market research company Nielsen –
“Trust, Value and Engagement in Advertising”. This was an Internet-based survey, carried out in
2007 and 2009, and data from 25000 respondents across 50 countries were collected. The result
shows that the primary trust in the recommendations of other consumers (90%) and in consumer
opinions published online (70%) were way ahead of newspaper (61%), television (61%) and radio
(55%).
Consumer trust and satisfaction are determinants of positive WOM and customer loyalty.
“Customers continue to purchase those products with which they are satisfied and in telling others
about particularly pleasing products, they may influence the brand perceptions of those with
whom they communicate” (Richins, 1983, p. 68).
Fig – 1: Consumer trust in advertising by channel 2007 vs. 2009, Source: The Nielsen
Company, 2009.

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Consumer Behavior Term Paper FORE School of Management, New Delhi
Credibility of Source/Narrator:
Independence and credibility are the two most important characteristics of a recommendation.
Purchasing recommendations suggested by friends, family or colleagues specifically seem to have
more impact. The more the recommender is credible, the higher are the chances of acceptance
of the recommendation.
Effect of negative rumors on purchasing decision of consumer:
Positive remarks about a business or its products or services can prompt to higher sales and
successes. Similarly, negative word-of-mouth may seriously damage or even kill a business.
Understanding the effect of negative WOM can help a person to keep the sorts of awful situations
that incite buyers to talk unfavorably about your business. It may also help in learning how to
enhance and reinforce the brand image and customer relations.
Damage of reputation:
A negative WOM at first begins with two or more individuals talking about a bad customer
experience in person, via telephone or over the Internet like blogs, social networking sites, review
sites, forums or discussions rooms. Irrespective of the medium, the outcome is the same - the
company, the products or the services are painted in an awful light that may cause huge loss of
business/potential business. This is a particularly huge issue if negative WOM winds up on the
Internet on the grounds that word can spread so rapidly and broadly there. This may hit the
reputation of the business so quickly and extremely with a huge number of potential clients.
Decreased Traffic:
An increase in negative WOM results into decrease in customer traffic. A decreased traffic results
into less sales, and less sales implies less cash availability to pay the employees, purchase
materials, keep up the upkeep of the business or invest resources into order to expand the
business. A study led by Cone Communications in year 2011 observed that 80% of the buyers
who read a negative online review switched their choice to purchase a product or service
suggested to them. Decrease in traffic might begin small with less number of customers visiting

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Consumer Behavior Term Paper FORE School of Management, New Delhi
the store or making requests via telephone or on the web. It can then prompt less sales resulting
into less income generation.
Loss of Support:
Companies tied to an organization which is limelight by negative WOM may choose that keeping
up relations could bring down their reputation as well. A business partner may decline to proceed
with monetary support or renewal of an agreement, or demand a "risk" provision and security
deposit, which may result into extra cost. E.g. you may get vigorously marked down evaluating
through a supplier due to an in number, long-standing business relationship. Negative verbal may
lead the supplier to break ties with you, constraining you to spend extra cash looking for another
one. In the event that you can't discover an organization willing to offer you a comparable
arrangement to the one you had, your operational costs will go up.
Opportunities:
The only advantage of negative WOM is that it shows where your business is unable to succeed
and where you have to make necessary improvements. For instance, you may learn through a
client remark in an online discussion that one of your representatives gives a bad customer
service. This data prompts you to further investigate the issue, which brings about your disclosure
that a representative has a terrible state of mind. It's dependent upon you as the entrepreneur
to determine the issue. This may mean apologizing to the client, offering repayment and making
another preparing program that addresses conduct issues, enhances client benefit and makes
more content clients more inclined to talk positively about your business to others.
Electronic Word-of-Mouth (eWOM):
Electronic WOM (or, eWOM) refers to any positive or negative proclamation made by potential,
real, and previous customers about an organization or a product or service by means of the
Internet (HennigThurau et al., 2004). eWOM communication may happen in different settings.
Customers can write about their assessments, remarks and views on a specific product on the
online bogs (e.g. zomato.com, flipkart.com, etc…), discussion forums (e.g. paagalguy.com,
zapak.com, etc…), review sites (e.g. Epinions.com), e-release board frameworks, newsgroup,
social networking websites (e.g. facebook.com, twitter.com, etc…). While eWOM has a few

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Consumer Behavior Term Paper FORE School of Management, New Delhi
attributes in the same way as the traditional WOM, it is not the same as the traditional WOM in
a few measurements. These are the three dimensions attribute to the uniqueness of an electronic
WOM communication –
1. Unlike the traditional WOM, eWOM correspondences have remarkable versatility and
pace of dispersion. Similarly as with WOM, sharing of data is between little gatherings of
people in synchronous mode. The utilization of different electronic advances, for
example, online discussion forums, newsgroups, websites, audit destinations, e-bulletin
board and social networking sites, etc… encourage the data trade among communicators.
2. In contrast to the traditional WOM, eWOM communications are easily available,
accessible and persistent.
3. eWOM data are more quantifiable than traditional WOM.

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Consumer Behavior Term Paper FORE School of Management, New Delhi
References:
1. Effects of word-of-mouth versus traditional marketing: Findings from an Internet Social
Networking site, Trusov, Bucklin and Pauwels, Journal of Marketing, Sep’ 2009, p. 90-102
2. Electronic word-of-mouth via consumer-opinion platforms: What motivates consumers to
articulate themselves on the Internet? Henning-Thurau, Gwinner, Walsh and Gremler, Journal of
Interactive Marketing, Winter 2004, p. 38-52
3. Negative word-of-mouth by a dissatisfied customer: A pilot study, Richins, Journal of Marketing,
Winter 1983, p. 68-78
4. The effectiveness of electronic word-of-mouth communication: A literature analysis, Cheung and
Thadani, 23rd
Bled e-conference, Jun’ 2010
5. The Impact of Negative Word of Mouth, Blake, http://yourbusiness.azcentral.com/impact-
negative-word-mouth-9567.html
6. The impacts of Online Word-of-mouth on consumer’s buying intention on apparel: an empirical
study, Xiaofen and Yiling, Web Information Systems and Applications, May’ 2009, p. 24-28
7. The renaissance of word-of-mouth marketing: A new standard in twenty-first century marketing
management, Meiners, Schwarting and Seeberger, International Journal of Economic Sciences
and Applied Research, Dec’ 2010, p. 79-97
8. What drives immediate and ongoing word-of-mouth, Berger and Schwartz, Journal of Marketing
Research, Oct’2011, p. 869-880
9. Word-of-Mouth Advertising, http://www.entrepreneur.com/encyclopedia/word-of-mouth-
advertising
10. Word of mouth marketing: How smart companies get people talking, Sernovitz, Kaplan
publications, 2006 edition
11. Word-of-mouth research: Principles and applications, Allsop, Bassett and Hoskins, Journal of
Advertising Research, Dec’ 2007, p. 398-411