Effect of word of mouth on consumer buying decision

The German University in Cairo Faculty of Management Technology

Dr. Raghda El Ibrashi

“Word Of Mouth and Consumer Buying Decision”

Submitted by: Mariam Abou Shakra 25-­‐11971 Tutorial 02

Submitted to: Nancy Bouchra

1st July 2014

Table of Contents
1-Introduction ................................................................................................................. 3
2-Literature Review ........................................................................................................ 5
2.1 Word of mouth............................................................................................................ 5
2.1.1 Definition ............................................................................................................. 5
2.1.2 Types of word of mouth ...................................................................................... 5
2.1.3 Word of mouth communication channels ............................................................ 6
2.1.4 The importance of word of mouth ....................................................................... 7
2.2 Consumer buying decision ......................................................................................... 8
2.2.1 Definition ............................................................................................................. 8
2.2.2 Factors Affecting Consumer Buying Decision .................................................... 8
2.3 The effect of word of mouth on consumer purchasing decision ................................ 9
2.3.1 The impact of word of mouth on consumer buying decision ............................ 10
2.3.2 The effect of positive and negative word of mouth on consumer’s purchase decision ....................................................................................................................... 10
2.3.3 The effect of word of mouth on consumers attitude and behavior .................... 10
3-Research Gap ............................................................................................................. 11
4-References .................................................................................................................. 12

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1-Introduction
This paper aims to show the effectiveness between word of mouth as the most important marketing tool and consumer buying decision.
Word of mouth is one very effective tool used in marketing these days.
Marketers use positive word of mouth as a way of influencing consumers’ buying behaviors. On the other hand they try to hinder the effect of the negative word of mouth as it ruins both the company’s image and reputation it may also decrease customer loyalty (Gilden, 2002: 94). People are easily influenced by what others say whether or not they are aware of it; at some point the people around them have affected everyone.
There are different tools of advertising, the affect one person has on another is the most important in advertising. That is why word of mouth is a very important aspect. That would lead to one question, what is word of mouth? Word of mouth is the communication between people whether they debate a brand, product or service (Buttle,
1998: 242). In addition an individual is continuously making decisions in their life, whether its to purchase a product or not, or whether its to undergo a certain service or not, not only are these decisions important to the individual, but they are also from the main concerns of the company and the marketers (Bettman et al, 1990: 50).
Consumer buying decision depends on accumulated information that the consumer has about a certain product or service. The consumer buying decision processes it not changeable from the point of buying to the point of consuming. Consumers collect information about a certain product or service to reduce the risk of buying a product that may not meet their expectations (Merwe and Campbell, 2008: 29,33); (Casielles et al.,
2013: 45). Marketers and advertising agents noticed that joint consumer buying decision existed (Munsinger, et al., 1975: 60). Families’ buying decision is a type of joint consumer buying decision that concerns buying decisions made by all members in a family. Researchers have noticed that the buying decision process in families has caused conflicts between husbands and wives due to their different wants and needs, children also have a great role in the buying decision process, their roles depend on their age and knowledge (Lackman and Lanasa, 1993: 84).
This paper is composed of three sections. The first section gives a general overview about word of mouth, its types, the communication channels and its importance. The second section concentrates on the consumer buying decision its definition, and the

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factors affect the consumer buying decision. Finally, the third section focuses on the effect of word of mouth on the consumers buying decision.

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2-Literature Review
2.1 Word of mouth
This chapter will discuss word of mouth; starting with the definition, followed by the different types of word of mouth both positive and negative, the communication channels and finally the importance of word of mouth.
2.1.1 Definition
These days word of mouth is one of the main influences on consumers’ decision making. They rely on the transferred message from a trustworthy person. Consumers are usually affected by word of mouth if they are purchasing a product for the first time, or the product is expensive, at these points consumers tend to seek other point of views.
That is why researcher tends to define word of mouth advertising as “(informal group influence) as oral communication between two or more persons concerning a brand, product or service on a non-commercial basis” (Woodside and DeLozier, 1976: 13).
Word of mouth carries a message from a reliable source that spread where the consumer could trust the source and consequently, consumers make better decisions (Buttle, 1998:
242).
Thurau and Walsh also defined word of mouth (2003/2004) as “all informal communications directed at other consumers about the ownership, usage, or characteristics of particular good or service on their sellers”.
2.1.2 Types of word of mouth
There are two types of word of mouth, “positive word of mouth” and “negative word of mouth (Casielles et al., 2013: 44). Positive word of mouth about a certain product is more likely to convince the customer to buy the product; negative word of mouth will have a negative effect on the consumer (Romaniuk, 2012: 13).
2.1.2.1 Negative word of mouth

Word of mouth has been classified into two different types. First type is the negative word of mouth. Negative word of mouth is the effect of a negative opinion or comment on the product. Negative word of mouth was shown to have a very strong impact on consumers, as negative messages, comments or thoughts are more likely to attract the consumer and it affects their long run decision. It is said that a negative comment lasts

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longer in the consumers memory than a positive one, negative comments are also more likely to travel faster (Samson, 2006: 650). Negative word of mouth was defined as;
“interpersonal communication among consumers concerning a marketing organization or product which denigrates the object of the communication” (Richins, 1984).
Negative word of mouth is said to be of higher effect on people’s minds more than that of the positive word of mouth. The consumer gets attached to a certain product or service and become more loyal to it when they are satisfied, however, when a consumers expectations do not meet the reality consequently this causes a negative impact on the consumer’s opinion towards this specific product or service. This is where word of mouth could spread. Usually, word of mouth with a negative comment lingers more to the consumer’s mind (Buttle, 1998: 242).
2.1.2.2 Positive word of mouth
When a customer wants to purchase a product, the customer will prefer asking either other people’s opinions or the opinion of a reliable source in order to gain from their experiences. That is the reason word of mouth has a great influence on people. Either positive or negative word of mouth affects the consumer more than advertisements do.
Positive word of mouth is when a customer recommends a certain product, service or brand and provides a positive word of mouth. Researchers defined positive word of mouth as “making others aware that one does business with a company or store, making positive recommendations to others about a company, extolling a company’s quality orientation, and so on” (Hong and Yang, 2009:382-383). This shows that positive word of mouth reflects the clearer image, to the consumer of the product or service when being purchased. That is why most companies depend on their loyal customers since they play an important role in broadening the impact of positive word of mouth on the consumer’s decision making (Samson, 2006: 652).
2.1.3 Word of mouth communication channels
Social media has been increasing rapidly as each day goes by. Since, social media is being used by everyone, consumers use it to express their feelings towards a product or service, the most social media used now are; Twitter, Facebook, Instagram, Blogs, and many more (Berger and Iyengar, 2013: 567). Schumann et al. (2010: 62) highlighted that service companies invest in programs that help them gain new customers.

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2.1.4 The importance of word of mouth
These days’ companies prefer to use positive word of mouth as a way to market their brands and products, since people trust and rely on others opinions and experiences.
Consumers do not fully trust the advertisements, the printed advertisements or the media advertisements as much as they respond to the peer pressure and others’ opinions
(Buttle, 1998: 242-243). In contrast, Keller and Fay (2009: 155) introduced another point of view, which is advertising and word of mouth complete and support each other, not supposedly to compete with each other since both are considered to be tools and ways to reach the consumer and both are used to market the product of service.
Hong and Yong (2009: 383) also added to the importance of word of mouth on consumers’ decision making, they have highlighted the fact that word of mouth could change the behavior of a consumer towards anything, whether it is positive or negative influence. One of the importance’s that companies use word of mouth for is that consumers always respond to any to any satisfaction with positive word of mouth, which makes the consumers themselves loyal to the company. This could be used to reach other consumers and affect their decision making process. The reputation that follows a certain product, brand or service will encourage a consumer to purchase it, if the consumer is hesitant. Reputation and people’s recommendations are what companies are looking for (Lymperopoulos and Chaniotakis, 2008: 66).
Word of mouth is the most persuasive influence on sales. This influence is stronger on consumers when the recommendation comes from a reliable person than from a stranger. The word of mouth receiver must trust the sender and believe that they know the product or service (Woodside and DeLozier, 1976:14, Bansal and Voyal, 2000:167).
Gildin (2002: 98) also added that the most effective word of mouth is the one received from a family member or from a friend. That makes one trust the product or service and in the same time one wouldn’t mind taking the risk.

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2.2 Consumer buying decision
This chapter will discuss consumer-buying decision; its definition, the factors that affect it both; external and internal and the attitudes and behaviors, and followed the consumer decision process.
2.2.1 Definition
The envicroment, the people and everything around him/her affect their needs, wants and desires. As the world around them changes, people change their needs and wants change with them. This is when the person must statisfy these needs and desires. It comes along with the process called: the consumer decision process (Hawkins and
Mothersbaugh, 2009: 467).
Consumer buying decision is a process by which consumers identify their wants and needs, collect information needed, evaluate their alternatives and make their decision in the end (Merwe and Campbell, 2008: 29,33).
The consumer available information, the choice of buying a product and its alternatives affects the consumer buying decision (Casielles et al., 2013: 45).
2.2.2 Factors Affecting Consumer Buying Decision
There are two factors affecting the consumer decision process, which are internal and external factors (Hawkins and Mothersbaugh, 2009: 467). When these two factors the external and internal blend together, they result in an impact on the individual’s “selfconcept” which is the self-assessment that affects the individual’s “lifestyle” which is the way of living. The individual’s lifestyle, which arouse form the environment and culture the person has been developed in, create a group of needs and desires that should be satisfied. However, the individual might not always be attentive to what one will decide or one might not have the clear image when making the decision. It all depends on the way of living and the environment that one lives in. for example, an individual does not always think that he/she will purchase a certain product on purpose, he/she just buy it because that’s his/her way of living (Hawkins and Mothersbaugh,
2009: 29).

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2.2.2.1 Internal and External Factors
The internal factors are observed in the psychological and physical behaviors such as: personality, motives, memory, attitudes, perception, etc. and the external factors which are recognized in the demographic and the sociological behaviors such as: culture, family, friends, etc. these factors arouse our needs and wants; consequently, the process in making the decision of the consumer’s satisfaction takes place (Hawkins and
Mothersbaugh, 2009: 467). Bettman et al. (52) also added that the consumer is surrounded by many factors and information in the environment affecting his/her decision-making, which makes it hard to choose between all the varieties one have.

2.2.2.2 Attitudes and Behavior
There are certain factors that stimulate the individual’s attitudes and behaviors.
According to these factors, the consumer’s behavior is reflected and when the individual is put under different conditions, different attitudes are revealed. These factors, conditions and problems create the needs and desires that make the individual seek satisfaction. For one to be satisfied, consumer buying decision process takes place in order to fill these desires. In addition to that, the new technology inlfuences the individuals the most as they are used to the Internet in daily life; thus they cannot get rid of it (Hawkins and Mothersbaugh, 2009: 29). Furthermore, the individual is always surrounded by many tools of advertisments, many products and services, this causes difficulty for one to choose between that all. One might not be fully aware of the consequences of that decision and all of these affect the consumers’ buying decision
(Bettman et al., 1990: 50).
2.3 The effect of word of mouth on consumer purchasing decision
After reviewing both sides, word of mouth and consumer purchasing decision. The impact of word of mouth must be recognized on the consumer purchasing decision.
Gilden (2002: 100) documented the reasons why people exploit word of mouth. One of which was because when a consumer is purchasing a new product, one might not be fully convinced with it, thus people’s opinions is needed. If a consumer is satisfied with a product or service, he or she shall spread good words about it however, if a consumer was not satisfied he or she shall spread bad words about it (Bansal and Voyal, 2000:
167).

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2.3.1 The impact of word of mouth on consumer buying decision
Researchers have reached and conducted a numerous amount of theories regarding, the effect of word of mouth, which is also referred to as interpersonal communication, on consumer’s behavior. (Casielles et al., 2013: 43).
2.3.2 The effect of positive and negative word of mouth on consumer’s purchase decision
Word of mouth is a quick and great influence to consumers. This influence can either be positive or negative. Both affect the consumer’s beliefs, attitudes, behavior, and decision. A researcher revealed that when a certain product satisfies a consumer or service, he or she passes their positive experience down to three other consumers. On the other hand if a consumer is dissatisfied, he or she passes their negative experience down to seven other consumers. Accordingly, the negative word of mouth travels faster and to more consumers than the positive word of mouth does. Negative word of mouth is more effective on customers because people are usually expected to be satisfied, so when they talk about something they usually talk about something fascinating and memorable. On the contrary, if an individual is dissatisfied, makes it something that sticks to the consumers mind. Negative word of mouth ruins the brand’s image and reputation (Gilden, 2002: 99). Thus, companies tend to use positive word of mouth as a tool of marketing a brand, product or service so that consumers could be influenced to purchase the product.
2.3.3 The effect of word of mouth on consumers attitude and behavior Samson (2006: 652) said that word of mouth has an effect on the consumers’ attitude and behavior. This effect depends on certain factors, which are brand’s function, status, and the price of the product or service. These factors affect the influence of word of mouth on the consumer.
A message sent by using word of mouth might not influence the receiver if the receiver did not understand what the message is trying to tell him or her. The receiver could see the message from a different point of view from the one intended. In that case, the consumer’s behavior will not be affected (Tax et al., 1993: 75).

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3-Research Gap
After
reviewing the main aspects of word of mouth and the consumer’s buying decision, one found some limitations and gaps. This might be because many researchers are not aware of the importance word of mouth nowadays, or they might be concentrating more on the other tools of advertisements. Moreover,. Researchers did not focus on the effects of word of mouth in a specific industry or country like Egypt. They concentrated on word of mouth and its effects on the consumer buying decision in general.

The research question of this paper is “What is the effect of word of mouth on Egyptian consumers’ buying decision?”

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4-­‐References Bansal, H. S., Voyer, P. A. (2000). Word-of-mouth processes within a services purchase decision context. Journal of Service Research, vol. 3, No 2, pp. 166-177.
Berger, J., Iyengar, R. (2013), communication channels and word of mouth: how the medium shapes the message. In: journal of consumer research, vol. 40, pp. 567-579.
Bettman, J. R., Johnson, E. J., & Payne, J. W. (1990). Consumer decision making. 5079
Buttle, F. (1998). Word of mouth: understanding and. Journal of s t r a t e g i c m a n a g e m e n t, N o . 6 , p p . 2 4 1 - 2 5 4 .
Casielles, R.V., Alvarez L.S., Del Rio-Lanza, A.B. (2013), the word of mouth dynamic: how positive (and negative) WOM drives purchase probability an analysis of inter personal and non-interpersonal factors. In: journal of advertising research, vol. 53,
No. 1, pp. 43-60.

Gildin, S. (2002). Understanding the power of word of mouth.
R e v i s t a d e a d m i n i s t r a ção M a c k e n z i e , v o l . 4 , N o 1 , p p . 9 1 - 1 0 6 .

Hawkins, D. I., & Mothersbaugh, D. L. (2009). Consumer behavior: building marketing strategy. New York, NY: McGraw-Hill/Irwin
Hong, S, Yang, S. (2009), Effects of reputation, relational. In:
J o u r n a l o f P u b l i c R e l a t i o n s R e s e a r c h, v o l . 2 1 , N o 4 , p p . 3 8 1 - 4 0 3 .
Keller, E., Fay, B. (2009). The role of advertising in word of mouth. Journal of advertising research, pp. 154-158.
Lackman, C., Lanasa, J.M. (1993), Family decision-making theory: and overview and assessment. In: psychology & marketing, Vol. 10, No. 2, pp. 81-93.

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Liu, Y. (2006) word of mouth for movies: its dynamics and impact on box office revenue.
In: journal of marketing, Vol 70, No. 3, pp. 74-89.
Lo, S.C. (2012), consumer decisions: the effect of word of mouth. In: international journal of organizational innovation, Vol. 4, No. 3, pp. 188-196.
Lymperopoulos, C, Chaniotakis, I. (2008). Price satisfaction and personnel. Journal of financial services marketing, Vol. 13, No 1, pp.
63-71.
Munsinger, G.M., Weber, J.E., Hansen, R.W. (1975), joint home purchasing decision by husbands and wives. In: journal of consumer research, vol. 1, pp. 60-66.
Richins, M. L. (1984). Word of mouth communication as negative information.
Advances in Consumer Research , Vol. 11, pp. 697-702.
Samson, A. (2006), Understanding the buzz that matters negative vs. positive word of mouth. In: international journal of marketing research, Vol. 48, No 6, pp. 647-657.
Samson, A. (2010). Product usage and firm-generated. The market research society, Vol. 52, No. 4, pp. 459-482.
Shumann, J.H., Wangenheim, F.V., Stringfellow, A., Yang, Z., Blazevic, V., Praxmarer,
S., Shainesh, G., Komor, M., Shannon, R.M., Jimenez, F.R. (2010), cross-culture differences in the effect of received word of mouth referral in relational service explain. In: journal of international marketing, Vol. 18, No. 3, pp. 62-80.
Tax, S. S., Chandrashekaran, M., Christiansen, T. (1993). Word-of-mouth in consumer decision-making: an agenda for research. Journal of Consumer Satisfaction,
Dissatisfaction and Complaining Behavior, Vol. 6, pp. 74-80.

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Thurau, T, Walsh, G. (2003/2004). Electronic word-of-mouth: motives for and consequences of reading customer articulations. International
J o u r n a l o f E l e c t r o n i c C o m m e r c e, V o l . 8 , N o . 2 , p p . 5 1 - 7 4 .
Woodside, A. G., & DeLozier, M. W. (1976). Effects of word of mouth advertising on consumer risk taking. Journal of Advertising, Vol. 5, No. 4, pp. 12-19.

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References: Bansal, H. S., Voyer, P. A. (2000). Word-of-mouth processes within a services purchase decision context Berger, J., Iyengar, R. (2013), communication channels and word of mouth: how the medium shapes the message Bettman, J. R., Johnson, E. J., & Payne, J. W. (1990). Consumer decision making. 5079 Buttle, F Casielles, R.V., Alvarez L.S., Del Rio-Lanza, A.B. (2013), the word of mouth dynamic: how positive (and negative) WOM drives purchase probability an analysis of inter Gildin, S. (2002). Understanding the power of word of mouth. Hawkins, D. I., & Mothersbaugh, D. L. (2009). Consumer behavior: building marketing strategy Hong, S, Yang, S. (2009), Effects of reputation, relational. In: J o u r n a l o f P u b l i c R e l a t i o n s R e s e a r c h, v o l Keller, E., Fay, B. (2009). The role of advertising in word of mouth. Journal of advertising research, pp Lackman, C., Lanasa, J.M. (1993), Family decision-making theory: and overview and assessment Liu, Y. (2006) word of mouth for movies: its dynamics and impact on box office revenue. Lo, S.C. (2012), consumer decisions: the effect of word of mouth. In: international journal of organizational innovation, Vol Lymperopoulos, C, Chaniotakis, I. (2008). Price satisfaction and personnel Munsinger, G.M., Weber, J.E., Hansen, R.W. (1975), joint home purchasing decision by husbands and wives Richins, M. L. (1984). Word of mouth communication as negative information. Samson, A. (2006), Understanding the buzz that matters negative vs. positive word of mouth Samson, A. (2010). Product usage and firm-generated. The market research society, Vol Tax, S. S., Chandrashekaran, M., Christiansen, T. (1993). Word-of-mouth in consumer decision-making: an agenda for research Thurau, T, Walsh, G. (2003/2004). Electronic word-of-mouth: motives for and consequences of reading customer articulations Woodside, A. G., & DeLozier, M. W. (1976). Effects of word of mouth advertising on consumer risk taking