Advantage 1: Does not cost anything
The first benefit of word-of-mouth advertising is that it does not have any cost associated with it. If you are able to get customers to promote your product themselves (especially if referral bonuses are not required), then word of mouth advertising can create awareness for your products completely organically, and for free.
Advantage 2: Seen as more reliable source of advice
Word-of-mouth advertising may also be seen as a more reliable and trustworthy source of information than material published by the company. Advertisements in general can be seen with skepticism – people wary of claims made by the company trying to convince them to buy the product. Word of mouth advertising in comparison, comping from a friend or a colleague, may be seen as a more genuine source of product advice.
Advantage 3: Can reach hard to attract potential customers
Word of mouth advertising also has the potential to reach potential customers that may be otherwise hard to advertise to. Particularly for products that are very specialized (such as some business products), it can determine who in the firms are important decision-makers. Word of mouth advertising has the potential to reach such individuals.
Advantage 4: Can scale quickly
Word of mouth advertising can also scale quickly – potentially much quicker than your advertising budget may allow. If a high proportion of your customers speak about your products and services with their friends and colleagues, and the proportion of those that go on to try the service is not insignificant, then you may end up with a virtuous cycle, where your customer base naturally grows.
Advantage 5: Can attract potential customers most likely to be loyal customers
A final benefit of word-of-mouth advertising is that it may bring in customers that will benefit from your products the most, and in turn be particularly loyal customers. This can be particularly important with subscription services, where signup-bonuses or initial training mean that it is important not to just attract customers who join for only a short period. By reaching out through their friends and colleagues, word-of-mouth advertising may bring in customers pre-screened as being more genuinely interested in your product.