Word-of-Mouth May Not Be All It’s Cracked Up to Be

The DMA’s Catalog on the Road conference on Jan. 29, in Cambridge, Mass., turned its luncheon podium over to a true Cambridge brainiac, David Godes, associate professor of business administration at the Harvard Business School. He offered some unexpected insight on the school’s research into sales management and word-of-mouth marketing.

Most notably, Godes pointed out that word-of-mouth isn’t always a good thing. At the same time, loyal customers aren’t very useful in attracting newer customers to a company or brand. What’s more, the actual transmission of word-of-mouth is more often than not selfish, which, too, doesn’t necessarily help companies.

In a study of TV shows a few years ago, Harvard Business School found online conversations about shows didn’t help predict that more people would watch those shows in the ensuing weeks. “People were talking about shows not on a grand scale, but on different communities,” Godes said. “So I’d rather that two different people talk about them rather than 10. It’s very difficult getting communication to flow from community to community; easier within communities.”

His advice on promoting useful word-of-mouth: “Make sure you kick it off in many different communities with many different people.”

As for loyal customers’ lack of usefulness to companies, Godes cited a Harvard Business School study of restaurants. A “buzz agent” had a panel of agents talk about restaurants in a field experiment designed to create “buzz” about a restaurant.

Another group in the test consisted of loyalty cardholders. “We tracked how much word-of-mouth was created,” Godes said. “We were able to correlate word-of-mouth and the level of conversations generated, and found conversations generated by loyal customers had no impact on sales. On the other hand, conversations of less loyal customers had a big impact over time.”

The inherent problem in getting loyal customers to talk about a product or service is the information will only go to other loyal customers, Godes said. “It’s unlikely that’ll get to new customers. But if you get new customers to talk about it, they’re more likely to talk to other new customers. Loyal customers are less useful in that regard.”