Customer Word of Mouth, Both Good and Bad

What is word-of-mouth?

Word-of-mouth represents the oldest and most trusted form of marketing: relying on others to share information and positive opinions of your brand with people in their network. This organic form of communication carries exceptional weight because it comes from trusted sources like friends, family members, colleagues, or respected community members. It doesn’t come from the business or its employees in most cases.

Word-of-mouth in business and marketing

In the business world, word-of-mouth has transformed into a sophisticated marketing phenomenon that drives purchasing decisions across every industry. Modern word-of-mouth marketing encompasses several forms. 

• Organic word-of-mouth: unprompted recommendations
• Amplified word-of-mouth: encouraged through referral programs
• Electronic word-of-mouth (eWOM): shared through digital channels 

Studies show that 92% of consumers trust recommendations from people they know, while 83% of consumers say online reviews influence their purchasing decisions. For businesses, this means that every customer interaction has the potential to generate powerful marketing momentum or devastating setbacks.

Why does word-of-mouth matter for businesses?

The impact of word-of-mouth on business success cannot be overstated, particularly in an era where consumers have unlimited access to information and opinions about every product and service imaginable. Word-of-mouth drives an estimated $6 trillion in annual consumer spending globally, and customers acquired through word-of-mouth recommendations have a 37% higher retention rate than those acquired through other channels.  

For small businesses and startups, word-of-mouth often represents the most cost-effective path to sustainable growth, requiring minimal investment while delivering maximum credibility.

Advantages of word-of-mouth marketing

Word-of-mouth marketing offers unique advantages that other methods can’t replicate.

• Authenticity and trust. Recommendations from real customers carry more weight than any corporate message.
• Cost efficiency. Organic word-of-mouth typically costs nothing to generate yet delivers powerful results.
• Targeted reach. Satisfied customers naturally share with others who have similar needs and interests.
• Compounding effects. Positive word-of-mouth builds momentum over time, creating exponential growth.
• Higher conversion rates. Word-of-mouth leads convert at rates 3–5 times higher than traditional marketing leads.

Challenges and risks

Negative word-of-mouth can lead to serious challenges for businesses unless they stay on top of managing negative reviews. A single negative review or social media complaint can reach thousands of potential customers within hours. 

Research indicates that dissatisfied customers tell between 9–15 people about their negative experiences, while social media amplifies this reach exponentially. The viral nature of negative feedback means businesses must have response strategies ready to use as soon as negative attention starts building.

How to encourage positive word-of-mouth for your business

Building a sustainable word-of-mouth marketing strategy requires deliberate effort and consistent execution across every customer touchpoint. The following step-by-step approach will help you create an environment where positive recommendations can shine, minimizing the risk that negative feedback will spread unchecked.

1. Deliver exceptional products and services consistently

Focus on building a strong reputation with your target customers, as this is the best way to earn positive reviews through word-of-mouth. 

• Exceed customer expectations with quality and value.
• Maintain consistency across all locations and channels.
• Invest in continuous improvement based on customer feedback.

2. Encourage and respond to customer feedback actively

Businesses can and should use negative feedback to identify ways to improve their business and better meet customer needs, but it needs to be handled the right way.

• Create multiple feedback channels (surveys, social media, review sites).
• Respond to all feedback within 24–48 hours whenever possible.
• Thank customers for positive reviews and address concerns professionally.

3. Engage on social media and review platforms strategically

Rather than simply reading reviews on social media pages and review platforms, use those platforms as a way to engage with your customers, but do it strategically.

• Monitor mentions of your brand across all platforms and respond to negative comments professionally.
• Share user-generated content and testimonials to boost credibility.
• Build relationships with influential customers and industry voices through affiliate programs.

4. Identify and empower brand advocates

If you’re delighting your customers, you’ll find that a few supporters are more vocal and willing to speak for your brand than others. Use this to your advantage.

• Recognize your most loyal and vocal supporters on social media, in person, or on forums.
• Provide exclusive benefits or early access to new products to earn more positive attention.
• Create referral programs that reward recommendations.

5. Monitor and address negative feedback swiftly

Instead of viewing negative feedback as something to ignore, watch for it and address it quickly. You can do this in several ways.

• Set up alerts for brand mentions and reviews across social media and review platforms.
• Develop response templates for common customer complaints so your team can respond quickly.
• Train staff on de-escalation and problem resolution to prevent negative feedback in the first place.

6. Use referral and loyalty programs effectively

Referral programs can help speed up the number of referrals you receive by incentivizing your customers to recommend your products or your company. 

• Design programs that benefit both referrers and new customers.
• Make sharing easy with pre-written messages and simple processes.
• Track and optimize program performance regularly.

7. Use the right business structure

Building trust through proper business formation and compliance also enhances your credibility. When customers see that you've invested in proper LLC formation, obtained necessary business licenses, and protected your brand with trademarks, they're more likely to view you as a legitimate, trustworthy business worth recommending to others.

Word-of-mouth vs. traditional advertising

While both approaches have their place in a comprehensive marketing plan, they serve different purposes and deliver different types of value. These are some of the key differences you’ll want to keep in mind.

• Trust and credibility: Word-of-mouth comes from unbiased sources. Traditional advertising is clearly promotional.
• Cost structure: Word-of-mouth requires minimal direct investment. Traditional advertising demands significant budgets.
• Reach and targeting: Word-of-mouth spreads organically to relevant audiences. Traditional advertising casts a wider net.
• Message control: Businesses can't control word-of-mouth messages. Traditional advertising offers complete control.
• Longevity: Word-of-mouth can persist for years. Traditional campaigns have defined start and end dates.
• Measurability: Word-of-mouth doesn’t offer precise metrics. Traditional advertising offers does, making it easier to quantify.

The most successful businesses recognize that word-of-mouth and traditional advertising work best in tandem. Traditional advertising can spark initial awareness and interest, while positive word-of-mouth provides the social proof that converts interest into purchases. 

Smart businesses use traditional channels to amplify positive word-of-mouth, sharing customer testimonials and reviews through paid media to extend their reach.

How LegalZoom can help entrepreneurs build trust and positive word-of-mouth

Building a business that generates positive word-of-mouth starts with establishing credibility and trust from day one. When customers research your business, they will look for signs of professionalism and legitimacy that indicate you're worth recommending to others. 

LegalZoom helps entrepreneurs lay this foundation through comprehensive business formation services, from LLC formation and incorporation to trademark protection and ongoing compliance support.

Choosing a formal business structure and establishing it as a legal entity signals to customers that you're serious about your venture and committed to operating legitimately, which translates directly into customer confidence.

Word-of-mouth FAQs

How is word-of-mouth different from word-of-mouth marketing?

Word-of-mouth occurs naturally when people share their experiences, while word-of-mouth marketing involves deliberate strategies to encourage and amplify these organic conversations. Marketing efforts might include referral programs, influencer partnerships, or creating shareable experiences designed to generate discussion. Both methods can add value to your integrated marketing strategy and can generate more interest or more sustained interest.

Is word-of-mouth still important in the digital age?

Absolutely. Digital technology has amplified the importance of word-of-mouth by extending its reach and speed. Online reviews, social media recommendations, and instant messaging have made word-of-mouth more powerful than ever, with 88% of consumers trusting online reviews as much as personal recommendations.

How do I measure word-of-mouth success?

Track metrics like customer referral rates, social media mentions and sentiment, online review quantity and quality, customer lifetime value from referred customers, and organic traffic growth from branded searches. Many businesses use specialized software to monitor brand mentions across digital channels.

Can negative word-of-mouth be repaired?

Yes, but businesses need to act quickly and take the feedback to heart. Respond to complaints promptly and professionally, offer sincere apologies and appropriate compensation, fix the underlying issues that caused dissatisfaction, follow up to ensure resolution, and encourage satisfied customers to share their positive experiences to balance the narrative.

What's the difference between word-of-mouth and viral marketing?

Word-of-mouth grows organically through genuine customer experiences and recommendations, while viral marketing involves creating content specifically designed to be shared rapidly across social networks. Viral campaigns are planned and often include entertainment value, while word-of-mouth emerges naturally from customer satisfaction or dissatisfaction.

How can small businesses compete with larger companies through word-of-mouth?

Small businesses often have advantages in generating positive word-of-mouth through personalized service, community connections, agility in addressing feedback, authentic brand stories, and the ability to create memorable, unique experiences that customers want to share.

Stephanie Morrow contributed to this article.