WOM retains lead role

25 March 2011

NEW YORK: Word of mouth remains the most trusted source of product information among US consumers, but advertising registers extremely low approval ratings in this area.

According to a study from Satmetrix, the customer loyalty specialist, surveyed 22,000 shoppers in the country to gain an insight into how well businesses are meeting their promises.

It reported that 22% of interviewees had stopped trading with a particular company following a negative experience during the second half of 2010.

More specifically, 34% of contributors stated a "rude or disinterested" staff member motivated them to choose a different vendor.

A further 20% switched after being hit with unexpected charges or fees, the same score as recorded by those seeking out another firm because of poor product quality.

Matters exerting a "less immediate" influence yielded a smaller effect in prompting defections, shown by the fact just 3% of people mentioned sub-optimal refund and returns policies as the reason for such a change.

John Abraham, general manager of Net Promoter programmes at Satmetrix, suggested investing in training and CRM is essential.

"Most companies don't have a handle on how customer interactions impact individual customer relationships in the long run, and most don't understand the impact of word of mouth on customer acquisition," he said.

"Online consumer recommendation websites have raised awareness with many companies, but they still underestimate the overall impact of word of mouth both online and offline."

In all, 49% of the sample referred friends or workmates to a brand owner that had excelled in 2010, and 10% advised against an organisation that delivered a disappointing performance.

Elsewhere, 83% of shoppers trusted opinions provided by independent sources, a result which was especially pronounced when they had a personal link with the third party concerned.

Exactly 50% of participants cited recommendations from friends, family or colleagues as the indicator carrying the strongest credentials on this measure.

Product test reviews secured 18% on the same metric, while user-generated feedback posted on the internet lodged 15%.

By contrast, just 4% of the panel expressed a similar confidence in advertising as a means of gaining the most valuable insights when choosing which brand to buy.

"Companies still need to advertise to create market awareness," said Abraham.

"But market trends such as the increased use of social media networks and consumer reviews online are all increasing transparency about the actual experiences that companies deliver."

He added: "You just can't hide any longer behind bad quality. Advertising and marketing messages need to line up with customers' real experiences."

Data sourced from Satmetrix; additional content by Warc staff