THE WALL STREET JOURNAL: Word-of-Mouth Is Cheap, But Valuable, Survey Finds: "Word-of-mouth had similar impact on companies with the lowest reputations in the ranking. It accounted for about a third of the future purchase decision in the case of Royal Dutch Shell...: Posted 6 December 2005
By RON ALSOP
Staff Reporter of THE WALL STREET JOURNAL
December 5, 2005 7:25 p.m.
Talk may be cheap, but it can be incredibly valuable to companies and their reputations.
For the first time in its seven-years of studying corporate reputation, Harris Interactive Inc. analyzed the effect of word-of-mouth communication and found that it strongly influences reputation and people's plans to buy a company's products. The survey of the American public shows that word-of-mouth -- comments from friends, family members, co-workers and others -- carries much more weight than corporate advertising and public relations.
About 85% of survey respondents said word-of-mouth communication is credible, compared with 70% for advertising and PR. About three-quarters rated media stories about a company as credible, and 84% found the opinions of company employees believable. Only personal experience with a company scored higher than word-of-mouth, with 92% of people calling it credible.
Among the top-five companies in this year's ranking, word-of-mouth buzz proved to be a significant driving force, accounting for a quarter to more than a third of the intent-to-purchase decision. The greatest word-of-mouth impact was with United Parcel Service Inc., at 37%, compared with only a 9% effect for corporate communications. Purchasing decisions for 3M Co.'s products were less influenced by word-of-mouth, at 24%, while its own communications mattered more, at 20%.
"People think of 3M mainly for its Scotch tape and Post-it notes; it's not as much in the mainstream of discussion as many of the other companies in the ranking," says Bruce Tedesco, president of Tedesco Analytics Inc., a business partner of Harris Interactive's. "UPS, on the other hand, has reached a level where its delivery service is talked about a lot." While UPS benefits greatly from positive word-of-mouth, it may also be more vulnerable to a negative development. "If something bad were to happen," says Mr. Tedesco, "almost everybody would know immediately."
Word-of-mouth had similar impact on companies with the lowest reputations in the ranking. It accounted for about a third of the future purchase decision in the case of Royal Dutch Shell, while corporate communications showed minimal effect, at 7%.
The Harris study reinforces the importance of monitoring word-of-mouth messages, including chatter in blogs and other sites on the Internet. Companies are remiss if "they aren't getting a handle on what's being said about them and trying to manage it," says Jonathan Dewitt, a senior vice president in Harris's Wirthlin Brand & Strategy Consulting group. "Companies should start trying to measure PR, promotional events and sponsorships based on their impact on what people are talking about and whether or not it's positive talk."
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