Seeding, Referral, and Recommendation Creating Profitable Word-of-Mouth Programs

• Published in: California management review Vol. 59; no. 2; pp. 68 - 91
• Main Authors: Haenlein, Michael, Libai, Barak
• Format: Journal Article
• Language: English
• Published: Los Angeles, CA SAGE Publications 01.02.2017
• Subjects: marketing; customer relations word-of-mouth; word-of-mouth programs; social media; social influence; customer relationship management; customer lifetime value
• ISSN: 0008-1256; 2162-8564
• DOI: 10.1177/0008125617697943

In recent years, word-of-mouth (WOM) marketing has been the subject of considerable interest among managers and academics alike. However, there is very little common knowledge on what drives the value of WOM programs and how they should be designed to optimize value. Firms therefore frequently rely on relatively simple metrics to measure the success of their WOM marketing efforts and mainly use rules of thumb when making crucial program design decisions. This article proposes a new method to measure WOM program value that is based on the impact of WOM on the firm’s customer equity. It then provides recommendations for the five main questions managers face when planning a WOM program: Who to target? When to launch the program? Where to launch it? Which incentives to offer? and How many participants to include?