Our basic word-of-mouth marketing model describes how contacts among potential customers and customers over time combined with positive likelihoods of referral and persuasion can stimulate the rapid accumulation of customers. Harnessing the power of social networks through word of mouth is exciting because it offers the potential for rapid buying rates, relatively low cost, and a reduction in time it takes you to reach breakeven cash flow.
That said, it’s important to realize that embedded within the model is an important assumption. Given a total market consisting of customers and potential customers, the standard word of mouth model assumes that everybody is connected to everybody else—technologically and socially. That has a really important implication: adoption of your product or service may occur more quickly or more slowly depending on the likelihood of persuasive referral, but the universal connectivity assumed in the model means all of your potential customers will—sooner or later—become customers.
But is universal connectivity a sound assumption, even in this age of pervasive social media? If universal technological and social connectivity is unrealistic, how much is enough to permit rapid customer conversion through word-of-mouth marketing?
We talk about a product or service going “viral” to describe rapid, widespread adoption. We also talk about how a product or market “catches fire” to describe a cascade of adoption. However, starting a forest fire of adoption can be harder than it might first appear.
Specifically, the degree to which potential customers will buy because of word of mouth can be very sensitive to the extent to which members of your target market are interconnected. Even if you were to construct a perfectly persuasive word-of-mouth marketing message, it won’t spread very far unless the members of your target market are connected beyond some tipping point threshold.
It’s true that a pure advertising strategy is limited to linear growth and can be quite expensive. A pure word of mouth strategy, on the other hand, offers the potential for inexpensive, very rapid customer growth. However, growth can take a long time to kick in. Furthermore, if the people in your target audience aren’t sufficiently connected, you aren’t likely to achieve much market penetration.
Of course, it’s a false choice. Smart marketers employ advertising and word-of-mouth marketing techniques. We’ll explore the implications of such a combination strategy in the next lesson.
