Spending on word-of-mouth (WOM) marketing from 2007 to 2008 rose 14.2% to $1.54 billion, and is expected to hit $3 billion by 2013, according to a report based on extensive WOM research from PQ Media, MarketingCharts writes.
PQ Media's "Word-of-Mouth Marketing Forecast 2009-2013" reported that while year-over-year growth is expected to slow in 2009, WOM spending is on pace to grow another 10.2% 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.
Though WOM was only a $300 million "blip" in the marketing services sector in 2003, the report revealed that industry spending increased at a compound annual growth rate (CAGR) of 37.6% from 2003 to 2008, as the rise in popularity of blogs, social networks and online communities led brands to shift dollars to WOM. This has been in response to a shift away from time spent with traditional media and a corresponding increase in time spent with alternative media:
Over the next five years, total spending on WoM is expected to increase at a CAGR of 14.5% from 2008 to 2013. Both major sectors defined in the report - content & services and ancillary products - are expected to post strong gains and contribute to overall growth. Ancillary products spending will increase faster than content & services spending primarily because the market is smaller and, therefore, has more growth potential.
CPGs Biggest WOM Users
The report, which provides an in-depth analysis of industry changes as consumers become more socially connected online, found that brand marketers - particularly those for packaged goods and foods & drinks - continue to increase spending and emphasis on WoM as part of their overall marketing strategies.
CPGs are the major user of WoM, accounting for 17.4% of spending in 2008, the report said. Other top-five product categories are food & drink, finance & business-to-business services, electronics & telecommunications, and retail. Auto & transportation likely would have been in the top five if not for the financial woes that befell the industry last year, PQ Media said.
Content & Service Providers Grow Too
At the same time as brands are increasing their WOM spending, content & service providers are also experiencing sizeable growth. WOM strategy & consulting remains the largest segment at $832 million in 2008, even though year-over-year growth slowed to 7%. WoM agencies grew 18.7% to $197 million in 2008.
Emerging Trends in WOM
PQ Media also identified the following trends in WOM for the coming years:
- Increased investment in online and offline WOM communities: Spending on WoM online communities increased 26.6% in 2008 to $119 million. Although it is currently the smallest category within the content & services sector, WoM media is the fastest growing segment, with spending up 34.6% in 2008, to $109 million.
- Changing consumer behaviors and advancing technology: Behavioral changes and technology improvements, and their residual effects on the advertising and marketing sectors, will continue to fuel growth in WOM marketing spending during the 2008-2013 period.
- Demand for better measurement: Although more leading brands are accepting WoM, they are demanding data to justify their spending. Marketers are requesting research that extends beyond anecdotal information about online conversations and consumer attitudes. They expect proof of return-on-investment, and WOM research companies are developing new metrics to address these demands.
"Despite impressive growth in the industry, word-of-mouth remains just a fraction of the overall advertising and marketing landscape," said Patrick Quinn, president and CEO of PQ Media. "But double-digit growth in this economic environment is a strong sign of an increasingly prevalent role in the future."
A recent industry forecast report from Veronis Suhler Stevenson predicted that the entire communications industry, fueled in large part by spending on alternative media, will grow faster than the US GDP and will reach $1 trillion by 2013.
About the report: The five-year industry forecast, 2009-2013, divides the WOM industry into two major sectors - content & service providers and ancillary products - as well as six additional segments within those sectors, including strategy & consulting, WoM agencies, online communities, WoM media, research & measurement, and technology & tools. PQ Media defines WoM marketing as an alternative marketing strategy supported by research and technology, which encourages consumers to dialogue about products and services through various online and offline tactics, often facilitated by brand ambassadors.