Still the best way
to light a fire

Word-of-mouth (WOM) marketing spend increased 35.9 percent in 2006 to $981 million (from 2005's $722 million).

It is expected to top $1 billion by a good deal in 2007, making it one of the fastest-growing alternative media segments, according to PQ Media's Word-of-Mouth Marketing Forecast 2006-2011, sister site MarketingCharts reports.

Driving the growth is the continued consumer shift to alternative media and marketers' need for increased brand engagement and ROI, PQ Media's first in-depth analysis of the emerging WOM marketing industry found.

Among the data and findings released by PQ Media:

• WOM marketing is the fastest-growing segment of the media industry's $254 billion (2006) marketing services sector, which includes, among others, the branded entertainment, direct marketing and public relations segments; the other three media industry sectors are advertising, consumer end user, and institutional end user.
• WOM marketing was the smallest of the seven segments of the marketing services sector in 2006 and constituted less than one percent of that sector; the largest segment, accounting for nearly 40 percent, was direct marketing, followed by branded entertainment, B2B promotions, B2C promotions, custom publishing, and public relations (in that order).
• However, WOM marketing grew almost five times faster than the overall marketing services sector in 2006 (35.9% vs. 7.7%) - and more than six times faster than the overall media industry and nominal GDP.

(For detailed charts related to the above data, please see the coverage by MarketingCharts.)

Among the other findings and forecasts of the PQ Media study:

• WOM marketing spending rose at a compound annual growth rate (CAGR) of 66.7 percent from 2001 to 2006 - from $76 million to $981 million.
• Spending on WoM marketing is forecast to grow 37.7 percent in 2007 to $1.35 billion, as brand marketers continue to shift more dollars to WoM marketing tactics as part of their cross-platform marketing campaigns.
• Total WOM marketing expenditures are projected to climb at a CAGR of 30.4 percent in the 2006-2011 period - reaching $3.70 billion.
• The growth of WOM marketing is expected to continue to outpace that of the overall advertising and marketing sectors, as well as the growth of the U.S. economy, in 2007.
• While no breakout is currently available on spending by product categories, data from various sources on the number of conversations held by category suggest that food and beverage, media and entertainment, and sports and recreation are among the heaviest users of WOM strategies.

(See related story: Communications Spend to Reach $1 Trillion in '08; Internet to Surpass All Ad Segments in 2011.)

Helping to fuel WOM marketing's growth are a projected 3.5 billion brand-related conversations per day in the US, according to Keller Fay Group, with nearly 80 percent of consumers trusting recommendations from family, friends and "influential" persons over all other forms of advertising and marketing.

Among the key trends driving growth, the internet has enhanced the ability of consumers to exchange ideas about brands through social networks like Facebook and MySpace and consumer-generated media such as blogs.

Though Keller Fay Group research indicates that 90 percent of WOM marketing still takes place offline, brand marketers have become actively involved in online WOM marketing via new media, metrics and WOM specialists, PQ Media said.

About the study: Analysis was limited to U.S. spending and outsourced WOM marketing expenditures, not including brand spending on salaries or internal WOM marketing initiatives.

To avoid double-counting with spending on other advertising and marketing services, PQ Media did not include the following categories: in-store product sampling; event marketing & sponsorships; public relations not associated with WOM marketing; and social network and consumer-generated media advertising.