A survey of 315 consumers by Buzfactor found some things about consumer word of mouth that make lots of intuitive sense. Here are the bullets:
- A recommendation is 15X more influential than advertising “on where consumers shop and dine”
- 71.2% of respondents were “likely” or “very likely” to try a restaurant based on a recommendation
- 86% of respondents said the businesses they most often recommend are local
Source: Buzfactor
Using a calculation based on the survey findings Buzfactor determined that “each customer evangelist a business has potentially generates 19 new customers for their business.”
Here’s related data from the Allbusiness-Opus Research SMB survey (8/08) regarding the perception of WOM influence:
Source: Opus Research, AllBusiness.com, August, 2008, n=1071 US SMBs
The point of the above slide, to reinforce the Buzfactor data, is that most small businesses see at least half of their customers coming from word of mouth (in their self-reported perception).
Screenwerk 
May 1, 2009 at 5:54 pm
Thanks Greg! By the way, I recently polled self-identified, retail and restaurant owners on Linkedin and got very similar results: 64% said they received more than half of their customers through WOM.
May 1, 2009 at 6:40 pm
All interesting. The reliance on WOM suggests there’s a huge untapped opportunity with social media and SMBs
May 3, 2009 at 11:20 pm
Hmmm.
There appears to be an opportunity for a business model that can harness the power of referral marketing … assuming consumers were awarded for referrals and local vendors could see obvious value.
http://www.aboonda.com.
May 4, 2009 at 2:13 pm
Gregg –
“The reliance on WOM suggests there’s a huge untapped opportunity with social media and SMBs”
True. The US local ad market is estimated at $100B. Yet what is included in this calculation?
If SMBs and consumers agree that WOM is the preferred ad medium, then what is the $ value of local WOM?
– – Tim (http://twitter.com/yougottacall)
May 4, 2009 at 2:22 pm
Now, Translate the development of relationships through social media channels into advocates in your local market and you have a powerful sales FORCE.
May 5, 2009 at 10:30 pm
Greg – any idea if there is a response difference for personal recomendations (a friend or neighbor) vs. Yelp, etc.. Or, how the quality of the review (on Yelp, for example) affects response. Reviewer has written several reviews vs. one or two. Interesting post.
May 6, 2009 at 1:59 am
Rich:
I would imagine some of those variables impact response rates. I don’t have that information for the Buzfactor data however.
May 11, 2009 at 4:03 pm
Greg/Rich:
Another survey Buzfactor conducted may help shed some light on the issue. While websites offering online reviews attract a lot of attention, we found that only 19% of consumers often or very often read online reviews, and of these 24.4% say reviews strongly influence their ultimate purchase decision. So, the reality is that online reviews actual influence less than 5% (19% times 24.4%) of consumers.
In comparison, 74.1% of consumers say recommendations influence their decisions, and, most importantly for businesses, consumers say they act on these recommendations 64% of the time which means recommendations from trusted relationships have potentially 10 times ((74.1% x 64%)/(19% x 24.4%)) more impact than online reviews.
Hope this helps,
…Ron