Word of Mouth Drives Sales

This compelling social media research (click on the link to the report in the first paragraph) by ad agency Razorfish makes a terrific case for the impact that referrals from friends have on the ROI of marketing campaigns.
A couple of interesting stats jumped out at me not only because they're pretty eye opening in their own right but also because they confirm what we're seeing in the data our customers capture using the Meteor Tracker:

1. People that were referred by a friend were 4X more likely to download the free software than those that "discovered" it through advertising.
2. The same cohort of social referrals were also more likely to spend money on the client site and spent much more on average.

These figures strongly support the notion that word of mouth was, is, and will always be the most effective form of advertising. In a world where anyone with access to an online device (pc, phone, game console, other) can be instantly connected with a vast and individualized network of family, friends, and colleagues, word of mouth travels more quickly and more broadly than ever before. There is tremendous potential for marketing campaigns that deeply integrate social media and content sharing early on in the process when strategy, message, and creative are developed.
We're still in the days of early adopters and experimental budgets as it relates to social media and word of mouth but as with all disruptive technologies and transformative change, it's only a matter of time before the first thought of companies that want to create brand awareness or drive sales is how to create an experience that's worth of pass-along as opposed to where to "buy" a particular audience by demographics/psychographics.
At a time when the ROI of every dollar spent on marketing needs to be measured, facts like people that are referred from friends are 4x more likely to convert than folks who come in through an ad are reason enough to make the measurement and encouragement of sharing a top priority. More and more companies are beginning to catch on.