Literature Review
Word of mouth (abbreviated as WOM) refers to the process of conveying information from person to person. The traditional kind of WOM happens offline, and it plays a major role the buying decisions of the customers (Richins & Root-Schaffer, 1988).
WOM in a commercial setting means customers share their own opinions, attitudes, experiences, concerns and reactions regarding businesses, products and services with other parties.
With the quick development of Internet technologies, a new type of WOM is now prevailing, it is known as electronic WOM (eWoM). The eWoM communication is now quite vibrant via Web 2.0 applications such as online discussion forums, electronic bulletin board systems, newsgroups, blogs, review sites, and social networking websites (Goldsmith, 2006).
Research shows that WOM, based on social-networks and mutual trust, is quite influential. Interestingly, it seems that people are more likely to trust seemingly disinterested opinions coming from outside their immediate social network (Duana, Gub, & Whinston, 2008).
From the corporate perspective—what is the significance of eWoM? Why should a company know at all about eWoM and why should a company endeavour to implement a smart eWoM strategy?
Incremental Sales
As mentioned in literature review, it is already a proven fact that positive eWoM would bring in new customers, and eventually generate higher revenue. In the meantime, reduces the costs of customer acquisition.
If the company reacts and respond to the negative eWoM in a proper and timely fashion, it will be able to protect the revenue by minimizing the number of lost customers.
Higher CSI (Customer Satisfaction Index)
During the process of eWoM communication, customers have a chance of self-expression, and such expression happens in an uncontrolled, natural way. Such utterance is valuable raw material for the firm to see what the customer’s perception of the products/services is, what the pros and cons are in customers’ eyes, what differentiates it from products/services from competitors or substitutes, what else customers are expect from the products/services (features that competitors have).