– 0% from radio
– 1% from billboards
– 4% from TV ads
– 4% from print ads
– 15% from magazines
– 40% from referrals by colleagues or family
The reasons behind this phenomenon are complex and varied. The globalization of commerce has produced an economy rich with choices and many consumers have begun to feel overwhelmed with the multitude of available options. Thus, marketers and ad agencies feel the need to scream louder and more often just to be heard. Research by Yankelovich Partners released in 2000 found that the average person is exposed to more than 3,000 advertisements per day. As a defense mechanism, many consumers have become immune to the cacophony of advertising messages.
The purpose of our model was to compare and represent the effect of mass advertisements versus word of mouth advertising (WOM). By modeling the differences between these two, we aimed to:
- determine in which situations it would be advantageous to use one method over the other
- investigate the interaction between the two methods when used in conjunction
The theory of Word-of-Mouth was originally presented by Katz (1975) and relies on the social network through which word-of-mouth flows. According to this view, WOM is a dynamic social process with four key characteristics which distinguish it from other forms of marketing communication:
- Non-marketing source
- Face to face exchange
- Free exchange of information
- Two-way flow
Due to these characteristics, WOM generates higher order beliefs and thus stronger attitudes because it is believed to have come from an unbiased and more credible source than traditional mass media ads. It is thus used frequently by customers as a risk reduction strategy. One study showed that 40% of Americans seek the advice of others before buying a product or a service (Griffen, 1995), and even more commonly in situations when perceived risk and uncertainty has not been sufficiently reduced by formal sources, and which involvement is high enough to justify seeking information through these informal routes (Cox 1963). This has been shown in several studies, which demonstrates that word of mouth is the most important source of risk reducing information and has greater impact than other forms of mass media (Arnt 1967; Dichter 1966).