How do small companies become big companies? I guess to answer that question you have to look at the companies marketing strategies and how consumers receive information about the companies products and services. By doing so, you can see that companies can either look into investing a large sum of money into traditional marketing strategies such as tv or email’s or instead a company can invest and ensure that they have develop an effective word of mouth channel which is also known as the most efficient and cost effective marketing strategy (Misner 1999; Trusov, Bucklin, and Pauwels 2009). Solomon, Russell-Bennet, and Previte, (2018) States that word of mouth is where the Product information is transmitted by individuals to individuals because people tend to trust what their friends and family or social group have to say about products and whether it was a beneficial and good purchase for them .
So ask yourself this, have you ever purchased a product or switched services such as a phone provider because your best friend or parents have made amazing comments about the product? Or on the other hand have they made negative comments which made you not purchase a product? if so, think about how it made you purchase or not purchase the product and if it influenced your decision and if so imagine how many other it has influenced as well. But despite this, it can also work against a company as negative word of mouth can have a negative effect from other people and these comments weigh more heavily than they do positive comments (Trusov, Bucklin, and Pauwels 2009).
Instead of spending big bucks on traditional media to spread the word, outdoor Patagonia relies on its own customers to administer word of mouth and is the underlying driving force on why this ecological sustainable company has grown from a small Start up company to a billion dollar company. (1) They have been able to achieve this as they believe that “Our customer is our best advocate” (1) and by “having more interactions our brand increases the rate that they become comfortable recommending us.” (1) In addition because the consumers have become more environmentally sustainable, Patagonia uses this to their advantage by telling their customers of how they recycle and reuse certain materials that last for over 5 years, in order to better the environment for this generation and future generations.
As a result, consumers positively communicate this to their friends and family as they believe they are doing something good within themselves and believe that the business is doing something sustainable and care about the environment we live in today. Therefore, “customers come to understand our product quality, they become more interested in telling their friends and family” (1). As they have the “right information to do that, because it builds their confidence to know what they’re talking about” (1). Hence, word of mouth has become the strongest form of marketing for Patagonia which is what can explain they large success.
For example, a study shows that conducted by Nail (2005) found that “40% fewer people agree that advertisements are a good way to learn about new products, 59% fewer people report that they buy products because of their advertise- ments, and 49% fewer people find that advertisements are entertaining”. Thus, showing that the traditional marketing methods are significantly becoming unpopular. Therefore, it also shows that Patagonia have noticed the decline in this (1) and implemented word of mouth In order to gain a competitive advantage over it’s competitors which is proven successful through the success of Patagonia.
Reference: (1) https://www.digitalcommerce360.com/2004/02/18/patagonia-polishes-off-the-magic-bullet-of-word-of-mouth-a/
(2) Trusov, M., Bucklin, R.E. and Pauwels, K., 2009. Effects of word-of-mouth versus traditional marketing: findings from an internet social networking site. Journal of marketing, 73(5), pp.90-102. <http://citeseerx.ist.psu.edu/viewdoc/download doi=10.1.1.622.9010&rep=rep1&type=pdf>.
(3) Misner, Ivan R. (1999), The World’s Best Known Marketing Secret: Building Your Business with Word-of-Mouth Marketing, 2d ed. Austin: Bard Press.
(4) Solomon, M, Russell-Bennet, R, & Previte, J 2018, Consumer Behaviour: Buying, Having Being, P.Ed Australia, Melbourne, ProQuest Ebook Central.
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