Good customer services: poor reputation via word of mouth

The idea

Word of mouth is informal communication between people about a business, such as friends, family, colleagues or online reviewers sharing their experiences. When customers receive poor service, they often tell others, and negative comments can spread quickly, especially through social media and review sites. This can create a poor reputation: potential customers may avoid the business, existing customers may switch to rivals, and the business may need to spend more on advertising to rebuild trust. Reputation is valuable because it influences whether people choose a business in the first place. Good customer service encourages positive word of mouth, which can attract new customers at little direct cost. Businesses can limit reputational damage by responding to complaints promptly, apologising where appropriate, putting things right and showing that lessons have been learned.

What earns the marks

• Defines word of mouth as informal communication between customers about a business, including online reviews and social media.
• Explains how poor customer service leads to negative comments being shared with potential customers.
• Explains the reputational consequence, such as lost sales, customers switching to rivals or higher spending needed to rebuild trust.
• Contrasts negative word of mouth with positive word of mouth, which can attract customers at little direct cost.
• Suggests a response that limits damage, such as prompt complaint handling, an apology, a remedy or visible improvements.

Common mistakes and how to put them right

• Treating word of mouth as paid advertising.

  Put it right: It is informal communication between people, though it may happen on public online platforms.

• Assuming only spoken conversation counts.

  Put it right: Reviews, ratings and social media posts are also forms of word of mouth.

• Believing a poor reputation affects only existing customers.

  Put it right: It also puts off potential new customers before they ever buy.

Exam tips

• Name the channel when giving an example, such as a negative online review or a friend warning another shopper.
• Chain the effect clearly: poor service leads to negative comments, which damage reputation, which reduces customer numbers or raises costs.
• For evaluation, weigh reputational damage against the cost and time needed to repair it, and consider how quickly negative comments can spread online.