WoM marketing worth US$3bn by 2013

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By: Wise Marketer Staff |

Posted on August 3, 2009

Spending on word-of-mouth (WoM) marketing rose by 14.2% to US$1.54 billion in 2008, despite the worst economic recession in 70 years, perhaps aided by downward trends in traditional advertising and marketing media, according to research from PQ Media and WOMMA.

While year-on-year growth is expected to slow down somewhat during 2009, WoM spending is currently forecast to grow by another 10.2% by the end of this year, placing it among the fastest growing advertising and marketing segments. By comparison, the US economy (as well as the advertising and marketing services sectors) are all expected to decline in 2009 for the first time since the 'Great Depression' of the 1930s.

According to PQ Media, The WoM industry includes two major sectors (content & service providers and ancillary products) as well as six additional segments within those sectors (strategy & consulting, WoM agencies, online communities, WoM media, research & measurement, and technology & tools). The company therefore defines WoM marketing as "an alternative marketing strategy supported by research and technology, which encourages consumers to talk about products and services through various online and offline channels, often facilitated by brand ambassadors".

Industry spending increased at a compound annual growth rate (CAGR) of 37.6% from 2003 until 2008, as the rise in popularity of blogs, social networks and online communities led brands to shift spending to WoM as part of integrated media solutions in their quest to engage more elusive consumers.

"The most influential marketer in a consumer's life is someone they know and trust, such as a family member, friend or colleague," explained Patrick Quinn, president and CEO for PQ Media. "Our research shows that many brands already value and invest in word-in-mouth techniques, and that brands are allocating more of their budgets to long-term word-of-mouth campaigns that resonate with consumers."

The company's 'Word-of-Mouth Marketing Forecast 2009-2013', which is available for US$1,295 from PQ Media's web site (click here), analyses an industry that is changing and growing as consumers become more connected with each other through high-tech devices and social media outlets.

As a result, brand marketers - particularly those representing consumer packaged goods (CPG) and food & drink brands (which accounted for nearly 30% of all WoM spending in 2008) have increased their spending and emphasis on WoM strategies.

"All of our members - whether major brands, agencies or technology companies - have felt this new surge in word-of-mouth marketing," said John Bell, president of the board of the Word Of Mouth Marketing Association (WOMMA). "Recession or not, our research and experience clearly tell us that marketers see word-of-mouth marketing and social media marketing as essential. Done well and ethically, the trust, credibility and impact it builds is unsurpassed."

Among the report's main findings:

  • With the rise of WoM spending by brands throughout the world, content and service providers are experiencing sizeable growth. WoM strategy and consulting remains the largest segment at US$832 million in 2008, but year-on-year growth slowed to 7%. WoM agencies grew by 18.7% to US$197 million in 2008.
  • Developing WoM communities both online and offline are emerging trends within the content and services sector. Spending on WoM online communities increased 26.6% in 2008 to US$119 million. Although it's the smallest category, WoM media is the fastest growing content & services segment with spending up 34.6% in 2008 to US$109 million.
  • Changing consumer behaviours and advancing technology, and their residual effects on the advertising and marketing sectors, will continue to fuel growth in WoM marketing spending during the 2008-2013 period. Total spending on WoM is expected to increase at a CAGR of 14.5% from 2008 to 2013. Both major sectors (content & services and ancillary products) should post strong gains and contribute to overall growth. Ancillary products spending will increase faster than content & services spending, mainly because the market is smaller and therefore has more growth potential.

"Despite impressive growth in the industry, word-of-mouth remains just a fraction of the overall advertising and marketing landscape," concluded Quinn. "But double-digit growth in this economic environment is a strong sign of an increasingly important role in the future."

For additional information:
·  Visit WOMMA at http://www.womma.org
·  Visit PQ Media at http://www.pqmedia.com