Any time someone recommendeds a product to a friend, he or she has engaged in word of mouth advertising. This type of advertising relies on personal recommendations to promote a product or service. Companies often rely heavily on it to sell a product or service, because it produces good results at a very low cost.
Companies value word of mouth advertising for several reasons. First of all, if a consumer tell someone how much he likes a business, that endorsement doesn't cost the business any money. Magazine, television, radio and Internet ads can be expensive, but word of mouth advertising is usually free. The less money the business has to spend on advertising, the more profit they can make.
Word of mouth advertising is also valuable because it tends to produce good results. People are sometimes skeptical of standard advertising. Maybe the ad doesn't appeal to them personally, or they feel like the company is trying to trick them into buying a product that they don't want. A testimonial from a friend can be trusted, and it's more likely to produce results.
Even more valuable are the word of mouth endorsements given by people who are presumed to be experts. Companies often offer free products or services to experts in an effort to gain free word of mouth advertising. Reviewers are sent products, or given early tickets to a movie for example, and the advertising that is generated when they write a review more than pays for the expense to the company.
It is often said in business that any publicity is good publicity. That is because publicity is essentially word of mouth advertising. If someone hears something about a business, even if it's something bad, they will remember the name. They will likely be curious about the business because of the news. Any time someone hears about a company and what they sell from a friend or from a news story, word of mouth advertising is helping the company become more familiar to people.
Companies sometimes encourage word of mouth advertising from their current customers. They may offer referral bonuses to current customers who bring in new clients. They may hold contests that get people talking about the prizes that can be won. Other businesses hold charity events or other acts of public service. Anything that gets people talking about a company is free advertising, and all successful companies know that free advertising can't be beat.