News

Study shows word-of-mouth advertising down drastically in wake of recession

May 10, 2011

Despite an explosion in consumer conversation technology, Americans have cut back substantially since 2008 on the opinions they share by word-of-mouth (WOM) about companies and their offerings, according to COLLOQUY, a LoyaltyOne company that provides loyalty marketing publishing, education and research.

Of 3,295 U.S. consumers surveyed by COLLOQUY, 58 percent said they often have conversations with family, friends and coworkers about products and services they’ve used. That’s down from 73 percent when COLLOQUY posed the same question in 2008, a 20 percent drop off.

Additionally, 57 percent of respondents in the latest survey said they often recommend products and services to others, compared to 75 percent in 2008, a 24 percent decline, according to the research.
 
COLLOQUY indicated that the economic downturn is to blame and explored that notion by taking a close look at respondents holding favorable and unfavorable outlooks compared to the previous year.

Instead, it seems the tough economy during the last two years may be responsible for the willingness to engage in brand WOM. Of respondents who reported their households are doing better economically this year than last, 71 percent said they often have conversations with others about the products and services they use.

Yet, among those who now see themselves as worse off, just 56 percent reported having brand conversations, and 55 percent said they make product recommendations.

These findings suggest that worries about current employment and future prospects have crowded out discussions about brands among a significant portion of the consumer population.

“Consumers on shrinking budgets don’t seem to be in the mood to talk about the hottest new restaurant, the brightest plasma screen or the best airline," said Jim Sullivan, COLLOQUY partner. "Or, if they are in the mood to talk, they may be sensitive to the possibility that others in more dire straits are in no mood to listen.”

COLLOQUY’s WOM survey, featuring completed responses from 3,295 U.S. consumers nationwide, was conducted in December 2010.

COLLOQUY Managing Partner Kelly Hlavinka offered the following tips:

• Make sure customers not only have an opportunity for a dialogue with the brand, but with each other. Get the conversations started by asking for opinions and insights, and recognize contributions.

• Involve customers in WOM programs by forming online social sharing communities, panels and co-development platforms. Do your own social media.

• Be innovative and make sure content is relevant, fresh and rewarding. Start by transforming your marketing mindset from “incentive” to “service.” Be sure to nip any service problems in the bud and head off any negative WOM that can quickly go viral from these well-connected customers.