Word of Mouth or Paid Advertisements: Are You Getting the Biggest Bang for Your Buck?

By: Jane Walsh

Have you ever thought about the marketing stages for different products? What is put out through paid advertisements and what you hear from your friends, both remind you of the product and can help you decide whether or not you are interested in it. But both ads and word of mouth trends tend to flow in waves. They work independently, as well as together to keep books, movies, video games, etc. in the public’s eye. Where paid advertisements may introduce you to a new product, word of mouth reminds you later on that it exists. We’ve all heard, “I just finished watching this Netflix movie,” or “Have you played the new Call of Duty yet?” Word of mouth is a free medium that tends to linger on after advertisements have died down.

At what point between was the public excited about the release of the fifth Harry Potter Book? Was it after they had read the fourth? Or maybe, because it was later in the series, the anticipation was grouped together with a few of the books in J.K. Rowling’s series. What about when the movies were being released? Harry Potter is a good example of a franchise that thrived off of great reviews through word of mouth, but also did its fair share of advertising. So this brings us back, if a product can reach such a large audience through word of mouth, where do companies spend their money on advertisements in order to be the most productive?

This article studied, specifically, four movies during both the theatre release and the video release. They compared the paid advertisements and the level of word of mouth spread with the revenues collected during each stage. What they found was that paid advertisements were the most successful initially, when the movies were headed into theatres. However, they did not show any increase in revenue when the movies came out on video. The results for word of mouth trends were the opposite. They showed more success when the movies came out onto video. With this information, marketing companies can save money on advertisements by using them more effectively.

Source:

Bruce, Norris I., Natasha Zhang Foutz, and Ceren Kolsarici. “Dynamic effectiveness of advertising and word of mouth in sequential distribution of new products.” Journal of Marketing Research, 49.4 (2012): 469-486.

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36 thoughts on “Word of Mouth or Paid Advertisements: Are You Getting the Biggest Bang for Your Buck?

  1. latikakarnani April 2, 2016 / 9:44 pm

    Conventionally top benefit of word of mouth is its trust and the biggest problem it that it is slow. But with modern technology where everything is getting integrated, we can easily alter the dynamics of word of mouth. Reviews posted are word of mouth in a way. It can reach many people but the authenticity of the review can become questionable.

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  2. Aishwarya Gunti April 2, 2016 / 11:19 pm

    The traditional ads are most helpful when product is newly launched in market. There is no chance for word of mouth to have the power to talk about something it is barely acquainted with. i personally feel that traditional ads are about bringing awareness and word of mouth is for defending the position traditional ads created.

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    • Megan Lac April 3, 2016 / 4:44 pm

      I agree that traditional ads are most useful and profitable when a product is being first introduced. It is extremely hard for a company to come out with a product based upon just word of mouth. Recommendations can travel slowly and many companies introducing a new product can’t afford to wait for people to find out about it just by conversation. However, that doesn’t mean that once a product is properly introduced that a company can’t back off of traditional advertising and try to rely on more word of mouth.

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    • Julie Wusenich April 5, 2016 / 12:57 pm

      I agree with Aish. When a product is first launched traditional ads go a long way, as they create awareness and the need to purchase this new to market item. This is especially true for a new company with their first product launch. However, I think word of mouth goes a long way, especially for larger purchases. For example, buying a car or planning a luxury vacation, as you will be spending thousands of dollars. I would ask my friends and family members, especially if they have recently purchased a car or gone on vacation – they will be honest and let you know what they like / don’t like and if they would make the same purchase again.

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  3. Jennifer Buonarosa April 3, 2016 / 6:44 pm

    I believe the two options go hand and hand. You have to have the initial paid advertisements up front, get the product into the person head so when they hear a friend talking about the product they remember it. Then hearing the word of mouth feedback they are ensured that it is a great or not so great product. People trust others opinions so when they see that something has a great review via word of mouth they tend to trust it. I do not think you could go with just paid advertisement or word of mouth you need to have both to be sucessfull.

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    • Marisa April 5, 2016 / 6:57 pm

      I agree, many of the people who are promoting using word of mouth saw it in a paid advertisement. The larger advertisements are probably more successful since they can reach a greater number of people all at once. Word of mouth advertising is usually only a small group of people hearing about the brand/products.

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    • Joseph Sanfilippo May 5, 2016 / 7:27 pm

      I agree that the two probably go hand in hand. You cannot have one type of advertising without the other. Word of mouth is a great way to advertise because it is free, but you need to advertise your product so that people can see it and then get the word out there. I think that paid advertising is the best way to get your product out to the public, but word of mouth is the best way to create loyalty, as many people trust their friends and families opinions on certain products.

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  4. Meghan Gulbrandsen April 3, 2016 / 8:05 pm

    I believe that when it comes to making a potential customer remember something about a product or even just that product in general the traditional methods of advertising are going to be much more effective than relying on word of mouth. This is because we know that advertisements are put out for the purpose of trying to catch our attention on the specific product a company is trying to market and sell. With this being said, we are more likely going to look back and remember an advisement if we thought it was appealing rather than remember a conversation that you had throughout a busy day where you had various other conversations. The image of the advertisement if done well is easier to remember than say someones words in a conversation mixed in with their opinions on the subject matter and any other thoughts they may have had at that time.

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  5. Ashley W. April 4, 2016 / 2:54 pm

    I think that the general benefits of both approaches are apparent, but deciding which one is best for your brand or product depends greatly on exactly what that is and what message your are trying to portray; if you are simply trying to get people to try your brand for the first time, then word of mouth would definitely be the top method of advertisement as people are most likely going to take the word of their friends on where the best new clothing store is or where they had great food or service. However, if you are a clothing store who just launched a new line of bathing suits for Summer 2016, traditional advertisement methods would likely be more beneficial as the images and experience that you portray in your advertisements would draw in your target audience, rather than simply increasing foot traffic. While there is never a downfall to having word of mouth working for you, traditional advertisements can offer a more direct message.

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  6. Sharon Masucci April 5, 2016 / 4:09 pm

    I agree with everyone else I think paid ads are good to get the product out there and noticed. I think getting your product through word of mouth is better and more reliable. Ads often can be not completely accurate but usually friends or family are upfront and honest. I think word of mouth keeps more loyal customers.

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  7. Olivia Sullivan April 5, 2016 / 8:12 pm

    Using a movie example I feel that word of mouth is best because although advertisements get peoples attention they do not necessarily follow through with going to see the movie. With people talking about how good a movie was it gets people to want to see it more, and actually following through. An ad is not always the truth when it comes to a product so I think that hearing a review from someone is more beneficial.

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  8. Justin Flory April 6, 2016 / 2:44 am

    I find word of mouth to be a lot more successful than traditional advertising. When people talk, others are going to listen but a traditional print ad can easily be looked past. Some people don’t have social media or read magazines with print ads, and more people are going to talk about what their interested in. If they like a movie, they’re going to talk about it with their friends and family. More people are bound to talk about a good movie they just saw rather than post about it on Facebook or share an advertisement from the movie.

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  9. reganka April 6, 2016 / 6:10 pm

    I think that both word of mouth and traditional advertising compliment each other. Clearly traditional advertising reaches a larger audience but word of mouth may be more meaningful. When using a new Harry Potter movie as an example, I believe that word of mouth promotion would be more effective. Often times you see a movie commercial that has positive quotes from critics. However, I do not personally trust that a movie is worth seeing until I hear what someone that I know has to say about it.

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  10. Sean April 7, 2016 / 7:22 pm

    Traditional advertising is necessary when launching a product. Companies must spend on traditional advertising when launching, to spread awareness. Word of mouth definitely comes after the traditional, and a company should be able to tell if word of mouth is picking up steam. Both are great methods and very useful to companies. I believe word of mouth might be more valuable, but both are needed for a product to succeed.

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  11. Hechuan Lou April 7, 2016 / 9:50 pm

    I think traditional advertising still very important. When company introduce a new product, or when the customers first purchase the product, but they don’t have the resource to get the words of mouth. Advertising will be very important in this situation. Sometimes not all people believe the word of mouth. For example, I went to a super market with a friend and when I chose an ice cream, she introduced me a special flavor of a brand. However, when I got home and tried this flavor, I felt it terrible and thought I bought the wrong ice cream. For these types of products, different people have different hobby, and advertising would be more important here.

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  12. kentma April 7, 2016 / 10:20 pm

    I would say that the traditional initial advertisements that come out first are essential before word of mouth begins. While i think word of mouth is very effective and has proven to be so, I don’t think it would be as effective if there was no traditional advertisement. I think the initial advertisement that launches helps create a buzz around the product or service, essentially helping to jumpstart the word of mouth which then takes off from there. I agree that the two definitely compliment each other and I would also say they feed off each other as well.

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  13. Eddie Rouxinol April 7, 2016 / 10:56 pm

    I think that word of mouth advertisements can be very effective in some other industries beyond entertainment, like the food industry for example. You could spend a lot of money of advertisements for your pizza place on TV or the radio or social media, but for something like food, people trust others’ opinions greatly. If a friend or family members suggests a food place or an item on a menu I know I can trust their judgement, where as if you were to see an ad on TV, sure the food looks great, but you have no idea how it tastes or any other information about the business. I believe that the balance between word of mouth and traditional advertising can be a tough balance to find and that the industry that they are in should have a significant impact on their marketing strategy.

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  14. Ronald Zampanti April 8, 2016 / 3:08 pm

    Businesses should spend more money on paid advertisements before their product is released. Once it is released and has been in the market for about a month or so, there should be a tremendous decrease in paid advertisements. Word of mouth can take over from that point in order to continue to generate sales.

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  15. m0llymollz April 10, 2016 / 5:46 pm

    I believe that businesses need both word of mouth and paid advertisements to reach the peak point of their product. I feel as though word of mouth could reach a larger demographic as well, because not everybody pays attention the the advertisements they see.

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  16. Chansamone Voralath April 10, 2016 / 7:01 pm

    I strongly believe that if the product is new, traditional form of advertising is needed to create a brand awareness. As time goes on and people are more aware of the products or services of the company, word of mouth will slowly travel to consumers. I personally rely heavily on word of mouth and reviews on reliable websites when I need to make a purchase of certain products or services.

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  17. Andie-Jane Phinney April 11, 2016 / 6:16 pm

    Agreeing with the other blog posts, both of the advertising options go hand in hand. I believe that paid advertising is key, in this case, to launch the exposure of the movie. At first, I believe paid advertisement is what needs to be done to get the movie out into the public. Spend the money on making sure the exposure gets to the public, and spread the awareness of the movie. Once the movie is launched, that is when the importance and success of word of mouth advertising comes into play. Especially in the movie industry, once the movies are out, referrals and suggestions of certain movies become very popular. Many people suggest to go see a certain movie because they enjoyed it themselves. This is where we see word of mouth advertising become very valuable. Both ways of advertising are very important. The paid advertising launches the process, and the word of mouth is what creates the buzz along the way.

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  18. Derek Lawton April 14, 2016 / 12:01 am

    I feel that traditional ads are the safer route even though it is more expensive. You need traditional ads to get the word of mouth out then it is spread. Word of mouth is not a safe route but it can be affective if you have a good product.

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  19. CJ Enos April 14, 2016 / 1:06 am

    This article brings up a thought in advertising that I never thought about. Word of mouth is very valuable especially when there is a positive buzz about a product. That reach can be extended when people post about a positive experience with a product on social media. This would allow a company to advertise up front and then let word of mouth take the product even further.

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  20. cassidylebert April 14, 2016 / 5:07 pm

    Businesses need to put in the initial investment to get the positive feedback in the end. I’d find it hard to believe that a movie did well in the box office just from people talking. Once the movie or product has been out and in use I think then they can cut back on paid advertisement and rely on word of mouth. I think this holds true for DVD releases. Once a movie is released on DVD you typically only see a few commercials because the hype is already out there and the business knows whether they performed well or not so they rely mainly on word of moth advertising to do the rest.

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  21. Meg April 19, 2016 / 6:41 am

    Word of mouth is an interesting marketing concept that can’t be controlled as well as print advertisement. Learning when to spend money on print advertisement is a critical part of businesses marketing plans, as businesses need to tightly control their marketing budgets. It is better to spend more on print resources right before the product is available for consumption. With traditional ads, you can control what people you are targeting, but it is expensive and not as effective as word of mouth.

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  22. Aidan Kelly April 21, 2016 / 11:57 pm

    This is a very interesting article. I’ve always wondered the revenue comparisons of movies at the point when they are in theaters and at the point when they are on DVD. I would like to see how they make the calculations to compare the the effectiveness of word of mouth on revenue.

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  23. alexzahlaway April 22, 2016 / 12:40 am

    I completely agree with the article where paid advertisements are more beneficial in the beginning but fall of later and word of mouth having an inverse relationship. The question you raise is an important one and I wonder if this makes companies consider doing this but what I find must be difficult to determine is where do you draw the line for these ads? Obviously there are benefits to continuing paid ads after things like a movie premier, but how do companies determine when to end these? It presents a very difficult situation because if there is no revenue increase wouldn’t you naturally completely end advertisements, but that could also be detrimental to your product/service.

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  24. Abagail Stacey April 22, 2016 / 5:32 pm

    I think the traditional advertisements are important to have to get the product out there for people to see initially, then comes the word of mouth. People have to see it through advertisements first in order to even be able to talk about it through word of mouth. And like Olivia said, a lot of people will see the advertisement about a movie for example but then they don’t always go and see the movie after that. Word of mouth can be very beneficial when wondering through a person’s experience. It may look great on the advertisement and very intriguing, but once you get it it’s always as great as you thought it was going to be. So having word of mouth to double check and finalize your decision would come in handy.

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  25. Colleen Flynn April 24, 2016 / 3:28 am

    I believe that the data collected from the study is extremely beneficial for marketers in the future. I believe that a mixture of both traditional and word of mouth marketing is crucial for a product, whether than be a movie, restaurant, toy or any new thing on the market. The key part about the study emphasizes when there should be more traditional or word of mouth marketing, not one or the other. Traditional marketing is certainly needed when something is first introduced to the market. No one can talk about the product if not one knows what it is or when it is actually coming out! This is still true even for largely known things, such as Harry Potter books. Word of mouth is still extremely high, but the initial traditional marketing is used to tell what exactly the customers can expect and when something is released. Traditional marketing goes beyond just explaining what something is, but instead giving more information as well. Word of mouth is all the extra, free buzz that comes along. The study definitely can be easily understood and marketers should absolutely take advantage of this knowledge.

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  26. Nichole Urbanski April 26, 2016 / 8:53 pm

    Most of the time when I am purchasing something it is because I either saw it on social media, TV or word of mouth. While social media plays a large role in the investments that people make, I personally take comments from what people say about products more to heart when making a purchase decision. While I might see something on Facebook such as a pair of sneakers that are on sale or a tropical vacation on Groupon, I typically tend to ask people for their advice first. In fact, my friend purchased an all inclusive trip to the Bahamas a month ago on Expedia and had an awful experience. When she first told me that she was going to the Bahamas I was so jealous because the price she paid was such a good deal for an all inclusive trip. However, what she ended up getting was a trip from hell. They ended up having to pay for the hotel when they got there even though they paid online… the hotel cost hundreds of dollars a night… but they really had no choice. Their flight also got messed up as they over booked the flight. They had to wait in the airport for several of hours until another plane arrived. She told me that she would never use Expedia again and since then I haven’t used it. For other types of purchases, it really depends on what I am purchasing when deciding on an ad or word of mouth. For example, one time I saw this shirt from a Facebook ad that I thought was really cute and the proceeds were supposed to go to the Elephant fund. So, I bought the shirt without reading any of the reviews and TWO AND A HALF weeks went by without notice of when the shirt would be arriving or anything. I finally decided to do some research and read the Facebook comments which said things like, “do not buy from this company, they are cheap and take forever to ship.” Another said, “this is a fake organization, they stole the brand from the original company and are selling it for much less, the fabric is cheap and non of the proceeds go to elephants.” At the end of the day, the shirt finally came but, it definitely was cheap and what made me the most upset was the fact that the money didn’t go to the elephant fund. All and all I think it depends what I am purchasing in order to make the decision to use an ad or word of mouth but personally I prefer word of mouth.

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    • Sam Walsh May 5, 2016 / 1:57 am

      I’m with you on preferring word of mouth over an ad when deciding whether to try or buy a product or not. While an ad raises the awareness of the product, it’s the word of mouth that really sells the product. In the advertisements, everything is going to look all fine and dandy; that you are getting this amazing trip to the Bahamas for a great rate. However, advertisements can clearly be extremely deceptive. The way I look at it, someone is being paid to create advertisements to get you to buy a specific product, while with word of mouth, there’s no real incentive for the reviewer, most of the time. For example, if I really enjoy a restaurant, I’ll tell friends or family that they need to try it out, not because I’m receiving compensation for spreading awareness about the restaurant, but because I want others to enjoy the same experience that I had. Of course, what one person thinks about something may be different than what you think about something, so it can be best to take word of mouth with a grain of salt. Due to the fact that we see or hear thousands of advertisements every day and they’ve almost become white noise, word of mouth is more likely to get me to try or buy a product.

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    • Sam Walsh May 5, 2016 / 2:02 am

      I’m with you on preferring word of mouth over an ad when deciding whether to try or buy a product or not. While an ad raises the awareness of the product, it’s the word of mouth that really sells the product. In the advertisements, everything is going to look all fine and dandy; that you are getting this amazing trip to the Bahamas for a great rate. However, advertisements can clearly be extremely deceptive. The way I look at it, someone is being paid to create advertisements to get you to buy a specific product, while with word of mouth, there’s no real incentive for the reviewer, most of the time. For example, if I really enjoy a restaurant, I’ll tell friends or family that they need to try it out, not because I’m receiving compensation for spreading awareness about the restaurant, but because I want others to enjoy the same experience that I had. Of course, what one person thinks about something may be different than what you think about something, so it can be best to take word of mouth with a grain of salt. Due to the fact that we see or hear hundreds of advertisements every day and they’ve almost become white noise, word of mouth is more likely to get me to try or buy a product.

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  27. cimminoc May 4, 2016 / 2:23 pm

    A product will always need an initial paid advertisement. This helps get word out, and if there is brand loyalty or positive experiences with the product, then word of mouth with take over. Word of mouth can be spread over social media after a consumer experiences a paid advertisement. These two techniques are dependent on eachother and a product cannot experience success without the help of both.

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  28. Tyler Finigan May 5, 2016 / 11:36 pm

    I’ll always prefer word of mouth over paid advertisements. The point of the advertisement is to sway your opinion whichever way the advertiser wants. You’ll never see a Coca-Cola ad try to dissuade the viewer away from buying Coke products. At least with word of mouth, the person is usually giving their honest opinion on the topic. Whenever I’m thinking of going to see a movie or thinking of purchasing something, I always ask my friends for their opinions if they have previously seen the movie or own the product. Now with services such as Yelp, people should be aware of reviews with sole purpose of swaying people away from a competing business

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  29. Jessica May 12, 2016 / 7:50 pm

    I think really think a successful product or company should be able to sell itself. With that i think word of mouth is huge, also more trustworthy. If you look at high end products especially cars, you don’t see commercial and advertisements everywhere. You hear about through word of mouth. Working in fitness and group exercise, word of mouth is huge. At a time now where exercising is so popular there is a lot of competition. If your teaching a Bodypump class your advertising it the same way hundreds of other classes in the same area as you are marketing it. So what is going to get people into your class? word of mouth, People first hand experiences and references.

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  30. gabriellepecher May 12, 2016 / 8:57 pm

    Jane I loved your presentation! I thought this was such an interesting topic and something I could definitely relate to. I think that today people rely heavily on costumer reviews – whether it’s for the movies, beauty products, electronics, etc. I know before I go out to eat anywhere I will always look on Yelp and see what rating the restaurant received and then will choose whether to go there or not solely based on the review. I also rely heavily on word of mouth from friends when going somewhere or trying out new products. I especially rely on reviews when purchasing items online because I find so many times I receive items that don’t match the online description if I don’t read reviews of the company or the product. However, I have found comments that I have questioned the authenticity of. I have thought that some reviews have secretly been posted by the company, which makes me skeptical and sometimes hesitant to buy the product.

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