Word of mouth marketing has evolved significantly, especially with the rise of social media and influencers who can drive brand awareness on a massive scale. Originally, word of mouth marketing referred to organic, unpaid recommendations, where individuals shared their personal experiences about a product with friends or family. Today, social media has transformed this strategy by blending organic and paid content, allowing trusted voices and relatable personalities to reach global audiences almost instantly. This shift raises new legal considerations, especially in ensuring transparency when declaring paid partnerships and sponsorships.

Word of mouth marketing is a highly effective strategy that has grown since this article was written almost 10 years ago with the proliferation of social media. Patrick Thoburn, the co-founder of Matchstick Inc., a Toronto-based company is a proponent of this form of marketing being highly effective. 

Word of mouth marketing works by putting a product or service in the hands of an individual and gets them talking about the product or service to others to create 'buzz' about the product or service. 

According to Malcolm Gladwell says in his book,The Tipping Point,"Word of mouth appeals have becomes the only kind of persuasion that most of us respond to". He asks how else can you explain how a few East Village kids helped start the Hush Puppy epidemic. Gladwell explains that most phenomena are caused by a few individuals, supporting his theory of 'power in the few'. It's the reason that marketing companies across the country are refocusing their efforts on giving new products to trendsetters to create excitement and buzz.

What caused this power shift?  

Technology has given the consumer a voice where emails, blogs and websites allow a consumer to spread a message quickly and efficiently. The basic premise underlying word of mouth marketing is that the product or service is placed in the hands of certain individuals who have the power and ability to shape public opinion. 

The individuals are who are targeted as influencers depend on the product or service and market for that particular product or service -whether it is trying to sell new digital cameras, promoting a new band or introducing a new luxury vehicle. These individuals spreading the news are hand picked because they have the ability to shape the opinion of their peers.  

Word of mouth marketing is effective because the message is more believable when it comes from a testimonial of an individual who is not paid or asked to do so by the company selling the product. It is a more credible way to communicate the truth about a product or service.

Thoburn says, "76% of consumers don't believe advertisers.  The most powerful endorsement of a product is the consumer. It can't be faked."   When a consumer gets an objective unbiased opinion - whether positive or negative - others are more likely to believe that a product or service will deliver on its promise - because it is coming from an objective source who has no stake in the outcome.

The reason for the resurgence of word of mouth marketing is due to a shift from the power in the advertiser to power in the consumer in delivering powerful marketing messages - resulting in more honest and truthful advertising - great news for consumers.  

The Evolution of Word of Mouth Marketing

As marketing expert Patrick Thoburn, co-founder of Matchstick Inc., explained, word of mouth marketing leverages influential voices to create ‘buzz’ about a product. It is particularly effective because consumers tend to trust recommendations from individuals they admire or relate to. This approach has become more powerful than traditional advertising campaigns, as it often feels more genuine and credible to consumers.

Marketing techniques that rely on word of mouth include:

• Brand Blogging: Writing authentic product reviews and sharing brand content on personal blogs.

• Buzz Marketing: Leveraging high-profile moments or news stories to generate interest.

• Influencer Marketing: Engaging influencers to recommend products within their communities.

• Product Seeding: Providing samples to influential individuals at the right time.

• Viral Marketing: Designing shareable content that can spread quickly across social media channels.

• Conversation creation: Interesting or fun advertising, e-mails, catchphrases, entertainment, or promotions designed to start word of mouth activity.

• A 'street rep' is an agent who hands out flyers and goodies for a particular event, and a 'tastemaker' is a trendsetter whom people look to or listen to in terms of what's in fashion.

   

This evolution in marketing reflects a shift in power from advertisers to consumers. Malcolm Gladwell's insights in The Tipping Point resonate strongly here: he explains that many trends are driven by influential individuals, or “tastemakers,” whose endorsements carry weight within their communities. This has become especially relevant as technology allows messages to spread rapidly via email, blogs, and social media.

Legal Requirements for Paid Partnerships and Sponsorships

In today’s landscape, social media influencers engaging in word of mouth marketing must comply with specific regulations, especially when they receive compensation from brands.

A marketer using word of mouth marketing has to abide by statutes such as the Ontario Consumer Protection Act, privacy laws, the Competition Act, and the Criminal Code. The Ontario Consumer Protection Act prohibits any representation that misrepresents or exaggerates the benefits that are likely to flow to a consumer if the consumer helps a person obtain new or potential customers. The Act also makes it an unfair practice to make a false, misleading or deceptive representation. Privacy laws would also apply in the collection of consumer personal information.

A marketer should also be aware and comply with the Competition Act and the Criminal Code.  These include provisions on misleading advertising, performance claims and promotional contests. An advertiser would also have to take into account any special consideration for Quebec residents and advertising to children.In Canada, the main laws governing these activities are:

1. Disclosure Requirements

Under the Competition Act, influencers must clearly disclose any paid partnerships, sponsorships, or gifts they receive. Terms like "ad," "sponsored," or "#partner" should appear prominently at the beginning of posts, making it immediately clear to followers that the content is an endorsement. Disclosures should be visible on all devices, and influencers should use platform-specific features, such as Instagram’s “Paid Partnership” tag, to comply with each platform’s standards. 

2. Truthful and Accurate Representations

Influencers are responsible for providing honest opinions. Exaggerated claims, misleading endorsements, or unverified performance claims can violate both the Competition Act and the Criminal Code. Influencers must have actual experience with a product before recommending it, as misrepresentations could result in liability for both the influencer and the brand.

3. Canadian Code of Advertising Standards

The Canadian Code of Advertising Standards establishes ethical advertising principles, emphasizing honesty and transparency. Influencers must follow these guidelines to avoid misrepresentation and maintain a clear relationship between brand and endorser.

4. Special Considerations for Minors

When marketing to minors, influencers must proceed with extra caution. Codes like the Word of Mouth Marketing Association (WOMMA) code of ethics discourage marketing to children under 13 without parental consent. Even for those over 13 but under the age of majority, it is advisable to seek parental approval.

Word of mouth marketing is independently regulated by the Word of Mouth Marketing Association (WOMMA), the self- regulating body for word of mouth advertising. It ensures that trust is created between the marketer and the consumer and that ethical and fair practices are followed by marketers. Its members follow a code of ethics to ensure the integrity of word of mouth campaigns, which includes such principles as consumer protection being paramount, honesty of relationship, opinion and identity, respecting the rules of the venue, managing relationships with minors responsibly, promoting honest downstream communications and protecting the privacy of individuals.

Best Practices for Influencers Engaging in Paid Partnerships

To ensure compliance and build trust with audiences, influencers should:

• Use Clear Language: Terms like "ad," "sponsored," or "paid partnership" should be clearly displayed in posts.

• Leverage Platform-Specific Tools: Platforms like Instagram have dedicated features for paid partnerships. Use these tools to ensure disclosures meet each platform’s standards.

• Stay Transparent About Relationships: Any material connection, whether cash, free products, or other benefits, must be disclosed.  Influencers should identify their connection with the advertiser and product in any communications with marketers or consumers.

• Create Formal Agreements with Brands: Written agreements with brands can clarify expectations around content, disclosures, and liabilities, ensuring influencers understand their obligations.  A written agreement with the 'influencers' should set out the parameters of what they can and cannot say or do in connection with the product or service is advisable.

• Truthful and Independent Opinions:  It is important to ensure that it is clear to consumers that the 'influencers' are speaking completely independently and sharing their opinion without any compensation of any kind. They should not viewed as speaking on behalf of the advertiser or as an agent or rep.  They should also disclose whether they are an independent third party and whether they but are being paid by the firm to sell the product. Also, one has to be careful where the 'influencer' shares their information. 

• Product Claims: If an advertiser does hire or compensate an 'influencer" in any way, the advertiser may be liable for claims, misrepresentations or any defamatory remarks by the"influencer'.  An advertiser should ensure that any 'influencer' be fully aware of all product claim, product representations and company claims and sign an agreement to that effect.

• Publicity Releases for Future Campaigns:  An individual independently lost a lot of weight by regularly eating Subway subs, and then wrote to Subway to provide his testimonial. Subway decided to hire him as its rep after the fact. Therefore, a written release of publicity and rights from the influencer to use their testimonial in future media campaigns should be obtained.  

   

Evolving Legal Considerations

As the landscape of influencer marketing expands, it is critical for influencers to stay informed on regulatory standards.  Influencers and brands document all terms of engagement, including parameters for content and disclosure. Brands might also seek written permission from influencers if they plan to use their testimonials in future campaigns. For example, Subway famously hired an individual who independently lost weight eating Subway subs after he voluntarily shared his story with the brand.

Word of mouth marketing continues to resonate with consumers, as it often feels more genuine than traditional advertising. However, transparency remains essential. By adhering to these legal guidelines and ethical standards, influencers can protect their audiences' trust while leveraging the power of word of mouth marketing in 2024.