Can Word of Mouth Save E-Commerce?

Word of mouth is one of the strongest marketing mediums available — so strong that some struggling dot-coms, desperate to save advertising dollars, are begging their customers to help spread the word about their products and services.

“Word of mouth is very powerful in terms of buying power,” Forrester Research analyst Christopher Kelley told the E-Commerce Times. “It can be incredibly effective.”

Kelley and Michele Pelino, director of Internet marketing strategies at the Yankee Group, agreed that word of mouth advertising programs that offer consumers rewards for referring friends are especially effective.

Pelino told the E-Commerce Times that Internet service providers (ISPs) use referral bonuses “all the time” to encourage customers to refer their friends.

However, sometimes one company’s marketing tool is another company’s last-chance grab from the edge of the abyss.

Saving Webvan

In what Kelley termed a desperate bid to woo and keep customers, chief executive officer Robert Swan of Webvan (Nasdaq: WBVN) e-mailed customers Tuesday to ask for their support in keeping the struggling online grocer afloat.

“Recently, many of our loyal customers have expressed their concern and support for Webvan in the current climate of uncertainty in e-commerce,” Swan wrote. “I’d like to take this opportunity to thank everyone who has contacted us and to tell all of our customers how we can work together to ensure that Webvan will emerge from this period a better and stronger company.”

Swan told shoppers that “one of the most important things you can do is to continue to recommend Webvan.”

Public Struggle

Kelley said that the Webvan e-mail was “a testament to how public [Webvan’s] struggle has been recently. He likened Swan’s letter to a desperate bid by a failing political candidate to “round up the loyal troops to help in anyway they can.”

Webvan also promised customers that later this spring, it would be introducing Webvan Rewards as “our way of thanking loyal customers with extra savings, enhanced delivery benefits and priority service.”

Kelley believes that Webvan’s letter will bring additional business to the company, but said that the real issue is, “Will it drive enough to keep Webvan afloat?”

There is evidence to support both “yes” and “no” answers to that question.

People Power

A recent Forrester Research survey found that more people learned about e-tailers from friends than from search engines.

Online shoppers listen to their friends, according to Kelley, because “consumers who buy online want power.” When they hear about a friend having a positive online shopping experience, they want to replicate that experience for themselves by shopping at the same e-tailer.

Pelino pointed out that a word of mouth campaign is effective because of the “credibility factor.” She said that people were more apt to believe positive comments about a site from a friend than from an advertisement.

Free to Be

Relying on word of mouth can be a good solution for cash-poor dot-coms because it is a fairly cheap advertising medium. Kelley said that a word of mouth campaign would provide “more bang for the buck” than other forms of advertising. However, he cautioned that the results of such a campaign are “impossible to track.”

Kelley also said that a word of mouth campaign would reach a smaller audience than a television campaign that went out to 30 million viewers. However, Pelino pointed out that a word of mouth campaign could be more targeted than a mass media campaign, and was more likely to reach consumers with similar interests.

Pelino cautioned that word of mouth could backfire if an e-tailer does not have adequate customer service and support in place. In that instance, Pelino said, customers could tell all their friends about the terrible experience they had shopping at a particulare-tailer — and the company could actually lose out on potential customers.

Power of the Press

Additionally, although the power of the people may inspire some shoppers, the power of the press is keeping others away with stories of dot-com demises.

Slightly more than 30 percent of respondents to a recent Forrester survey said that they would no longer shop at dot-coms that they knew were having financial difficulties, and 20 percent of respondents said they were less likely to buy from dot-com pure plays.

Some dot-coms, according to Kelley, are “having a hard time acquiring customers because of adverse publicity.”

Such hurdles ultimately leave dot-coms with few alternatives. So if a grass roots, word of mouth campaign is the last chance to help a company survive, dot-coms are willing to take it.

6 Comments

    • I also find it funny that more companies have not seen the value in the viral marketing method.

      One of my customers grew their email list from zero to 500,000 people in one year and all of that was accomplished through viral marketing.

      There are not many products that have addressed this market for companies.

      The only one that I have seen that covers the midsize to small business, (which is what most e-commerce operations are), is a product called The Lead Engine.

      They have a turn key solution that promotes viral marketing in a turn key fashion.

      • It’s funny… there are so many companies out there that have “tell-a-friend” type tools (even companies selling these things commercially!), but almost none of the viral marketing or customer loyalty products (like MyPoints) actually provide any tools to build the relationship. The customer slips right through the web site owner’s hands at the most critical moment. In the case of MyPoints, it is even worse – you get spammed relentlessly by MyPoints.

        If someone is out there telling people about a company’s business, shouldn’t they want to capture that, and reward the person for doing it?

        Regards,

        Thomas

        • Viral marketing only works if the thing itself is something that everyone wants, like free e-mail or funny pictures to send around the Web. Mypoints and sites like that try to leverage viral marketing principles, but don’t really get it.

  • The question implies word-of-mouth can be controlled. Yes, it can be stimulated and given a hand at some cost – history of marketing shows cases where marketers gave incentives to influential consumers (aerospace executives were given free liquor for a new brand and it worked well)

    The catch is that word-of mouth is largely not controllable. Movies live and die on the movie-goers first weekend. No AM ount of advertising can save a clunker film that people did not like.

    Hey, e-commerce. Its the product. People do not like what you offer most of the time. Fix it. Find out what the customers want. Maybe they will like mail or brick and mortar, not websites. Do not push websites all the time.

  • I AM surprised that it is only now that companies recognize the power of “word of mouth” advertising. Just look at Sam’s Club, they hardly advertise, but they are so huge and of course “profitable”. Another industry that most people still do not understand is network marketing which uses nothing but word of mouth advertising. It is such a powerful business model and has created many millionaires over the years (thanks to the Amway Corp. for maintaining the same model over the years and did not cave in to the criticisms from the masses). I AM a beneficiary of this model and I AM glad it is now beginning to be accepted by mainstream businesses.

Leave a Comment

Please sign in to post or reply to a comment. New users create a free account.

Related Stories

CRM Buyer Channels