Word-of-mouth advertising can sometimes be thought as old-fashioned or not as effective as traditional paid advertising. However, there are several unique advantages that word-of-mouth advertising has. In this article, we explain four of the biggest advantages of word-of-mouth advertising as well, some disadvantages of traditional paid ads, and what word-of-mouth marketing looks like in the modern era.
The Advantages of Word-of-Mouth Advertising
Cost Efficiency
The biggest advantage of word-of-mouth advertising is that it is so cost efficient. This type of marketing is much cheaper than most traditional paid advertising campaigns, which is especially helpful for startups and other small businesses that don’t have much of a marketing budget yet. Paid advertising is naturally better for bigger businesses, but word-of-mouth is cost efficient for companies of any size.
Word-of-mouth advertising also leads to a higher ratio of sales than paid advertising models. Some studies even suggest that word-of-mouth results in three to five times as many sales as competitor paid ad campaigns. This is because word-of-mouth advertising helps customers find companies that they can trust, which is something that other forms of advertising simply cannot match.
For example, a person may have been told by their coworker to go to a tent rental business because they heard about great add-ons they mentioned they need for their next event (e.g. air conditioning and heating). A paid ad could not know that same potential customer’s specific needs nor recommend a company with the same level of built-in trust.
Reliability of Ads
Word-of-mouth advertising is almost much more reliable to get a prospective customer’s attention. Paid ads, particularly the digital ones, are fairly easy to ignore. Individuals can simply swipe away digital ads, mute the ad being played, or even turn away from physical ads that are put up around them.
Word-of-mouth advertising is much more reliable to get a prospective customer’s attention because it is coming from a person they know rather than from an inanimate picture, video, or other visual object. For example, a person telling you that they just had a seamless experience renting a tent for their corporate retreat is more effective than seeing an ad from that same tent rental company on social media.
Building a Loyal Customer Base
Word-of-mouth advertising is also much more effective at building a loyal customer base than paid advertising is. The magic of this kind of marketing is that it generally comes with a greater amount of built-in customer trust. Prospective customers tend to trust brands that an actual friend, family member, and/or colleague has recommended to them more than a paid ad has.
Word-of-mouth advertising also helps build a loyal customer base because customers that recommend products to others are more likely to keep purchasing as well as being more likely to upsell or cross-sell. Word-of-mouth advertising slowly creates a network of loyal customers instead of affecting individual prospective customers one at a time.
For example, a satisfied customer at a tent rental company is likely to recommend the company’s services to their friends who also throw corporate events, creating more satisfied customers who are also likely to recommend the various services offered by said tent rental company.
Personalizing Your Marketing
Word-of-mouth marketing also brings a much more personalized feel to your marketing. In fact, one of the biggest reasons that it is so effective is because friends, family, and work colleagues tend to recommend products that they think the prospective customer would be interested in. Paid ads try to guess at the wants and desires of their target demographics, but these people actually know.
Friends, family members, and coworkers also naturally tend to understand on a deeper level why a prospective customer would be interested in a business’s products or services and that is a unique advantage in this modern technological age. For example, a person might overhear that their friend is looking for a long-term tent rental and recommend a rental company that has everything they need.
The Disadvantages of Paid Advertising
There are also some major disadvantages of paid ads worth discussing. The first and biggest is that paid advertising is typically quite expensive, which means that your business is taking a significant financial risk that you hope will result in enough revenue that makes up for the amount of money that you spent.
As mentioned above, paid ads can unfortunately be ignored rather easily in ways that word-of-mouth advertising cannot. It is tempting to simply pay for a customized advertising campaign from a marketing firm, but it will not be as cost-efficient or reliable as word-of-mouth advertising in the long run.
Word-of-Mouth Advertising in the Modern Era
One of the main reasons for why some people might believe that word-of-mouth advertising is old-fashioned is because they do not know what it looks like in the current technological era. Word-of-mouth advertising no longer refers only to one customer talking face-to-face with one or multiple prospective customers.
In the modern era, word-of-mouth advertising is more commonly seen as one customer sending product links to a prospective customer over text or sending a direct message that contains information about a business’s product or services. Sharing products via social media has become very popular, and satisfied customers will often tag the social media accounts of brands that they love while recommending the brand’s products.
Influencer marketing is a unique mix of traditional paid advertising and word-of-mouth marketing because it is a person recommending products or services to their followers, but they are often sponsored by brands to promote their products. Influencer marketing highlights a greater need to sometimes mix word-of-mouth marketing with paid ads to effectively reach their target customer base, but the takeaway remains the same: prospective customers are more likely to purchase a product when the recommendation comes from a real person that they trust.
Summary
Word-of-mouth advertising has often been considered ineffective or old-fashioned, but it has several major advantages over traditional paid advertising campaigns. Word-of-mouth advertising tends to be more cost-efficient, more reliable, more personalized, and better for building a loyal customer base. For all of these reasons, it is time to switch away from unreliable and expensive paid ads and instead focus on creating products and services that your satisfied customers want to advertise via word-of-mouth.
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