• by Jack Loechner , Staff Writer @mp_research, August 5, 2009

According to new research from PQ Media, spending on word-of-mouth marketing rose 14.2% to $1.54 billion in 2008, despite the worst economic recession in 70 years. However, 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 U.S. 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 1930's.

PQ Media defines WoM marketing as an alternative marketing strategy which encourages consumers to dialogue about products and services through various online and offline tactics, often facilitated by brand ambassadors.

The industry includes content & service providers, ancillary products, and six additional segments within those sectors, says the report. The segments include strategy & consulting, WoM agencies, online communities, WoM media, research & measurement, and technology & tools.

Industry spending increased at a compound annual growth rate 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 as part of integrated media solutions in their quest to engage more elusive consumers.

Total spending on WoM is expected to increase at a CAGR of 14.5% from 2008 to 2013. Both major sectors - content & services and ancillary products - will post strong gains and contribute to overall growth. Ancillary products spending will increase faster than content & services spending primarily because the market is smaller with more growth potential.

Spending on Word-of-Mouth (WoM) Marketing ($x000)
Category	2008	2009	2003-2008 CAGR	2008-2013 CAGR
WoM - Content & Service Providers
Spend	$1,257	$1,375
Growth %	13.0%	9.4%	37.3%	13.6%
Share %	81.5%	80.9%
WoM - Ancillary Products
Spend	$286	$326
Growth %	19.7%	13.8%	39.1%	18.4%
Share %	18.5%	19.1%
Total WoM Spending
Spend	$1,543	$1,701
Growth %	14.2%	10.2%	37.6%	14.5%
Source: PQ Media

Patrick Quinn, President and CEO of PQ Media, notes that "The most influential marketer in a consumer's life is someone they know and trust, such as a family member, friend or colleague..."

Brand marketers, particularly packaged goods and food & drink brands, accounting for nearly 30% of all WoM spending in 2008, have increased spending and emphasis on WoM as part of their overall marketing strategies.

% Share of WoM Spending by Marketers in 2008
Brand Market	Share of WoM Spend
Consumer Goods Products	17.4%
Food & Drink	12.2%
Finance & B2B Services	9.5%
Electronics & Telecom	9.4%
Retail	9.2%
Auto & Transportation	8.6%
Entertainment & Media	7.5%
Apparel & Accessories	6.2%
Health Care & Pharma	4.1%
Sports & Gaming	3.6%
Travel & Leisure	3.3%
Home & Garden	3.2%
Other	5.8%
Total	100.0%
Source: PQ Media, July 2009

With the rise of WoM spending by brands, content & service providers are experiencing sizeable growth. WoM strategy & consulting remains the largest segment at $832 million in 2008, but year-over-year growth slowed to 7%. WoM Agencies grew 18.7% to $197 million in 2008.

Developing WoM communities both online and offline are emerging trends within the content & services sector. Spending on WoM online communities increased 26.6% in 2008 to $119 million. Although it's the smallest category, WoM media is the fastest growing content & services segment with spending up 34.6% in 2008 to $109 million.

"Despite impressive growth in the industry, word-of-mouth remains just a fraction of the overall advertising and marketing landscape," added Quinn. "But double-digit growth in this economic environment is a strong sign of an increasingly prevalent role in the future."

As a service to those involved, likely to become involved, or more interested in this marketing and advertising segment, PQMedia has prepared a word-of-mouth marketing "Definitions and Segmentation" addendum to their study describing in more detail the categories, industry segments and ancillary products used in the collection and segmentation of data.

For a PDF file of this useful addendum, please go here, or to review the complete release, please visit PQMedia here.