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How Tesla, Zappos, And Costco Use Word Of Mouth Marketing To Dominate Their Marketplace

September 13, 2019

Let’s first start with answering: What is Word of Mouth Marketing?

It is a form of free promotion endorsed by a happy customer who shares the positive feedback about a business or its goods/services with their family or friends. 

A study by Nielson about the benefits of using word of mouth marketing found that 92% of consumers trust a family member or friend’s recommendation over all other methods of advertising. 

Below we will analyze companies that have been successful in pursuing a word of mouth marketing campaign exclusively

We will then analyze how word of mouth marketing can be utilized as a springboard to other marketing techniques.  


Tesla is a high-end car company that relies exclusively on word of mouth marketing. With no marketing budget, Tesla’s sales continue to skyrocket, with the company showing a 64% increase in sales from 2015 to 2016. Compare this data with Toyota, a company that had a budget of 4.6 million dollars for marketing, but experienced a 10% drop in sales. 

What causes the vast difference between these two companies? Primarily, the success of Tesla can be attributed to its referral program. Tesla uses a referral program to generate buzz about its cars. It encourages loyal customers to refer friends so that they too will become clients of Tesla’s growing customer base. Tesla then rewards customers that referred friends by offering countless benefits. 

Tesla relies on the concept of rewarding customers to maintain loyalty to their product. “Tesla does not need a marketing budget because their customers want to share their experience-especially if they will be rewarded for it.”

Furthermore, Tesla’s products are considered elite in its class. In addition to luxury and comfort, Tesla prides itself on being a completely electric vehicle. This helps to encourage a globally safe environment, causing people to prefer Tesla’s cars over other high-end car companies. Tesla continues to dominate the electric car market in the United States. 

Using only word of mouth marketing Tesla was able to become a world leader in the luxury car market.

Krispy Kreme 

Krispy Kreme, a widely popular donut shop known for having some of the most delicious donuts, used word of mouth marketing to build up its company. 

It began by focusing their time and effort on what they do best, donuts. They wanted to create an amazing product that people cannot resist, and indeed, the donuts are referred to as “melt-in-your-mouth donuts.” By focusing on word of mouth marketing and creating a valuable product that is elite in its class, Krispy Kreme formed an exceptionally successful brand. 

They collect and maintain customers by producing positive customer relationships with the Krispy Kreme employees. Dwayne Chambers, Chief Marketing Officer at Krispy Kreme, describes how Krispy Kreme focuses on empowering their franchisees and team members to help develop skills and abilities to foster good customer experiences. In addition, he mentions how proper training sessions facilitate communication between team members and employees that is genuine, favorable, and recommendation worthy.

With a company focusing on positive customer relations, consumers will happily share their experiences with their family and friends. The power of word of mouth marketing has helped Krispy Kreme expand internationally, making it the empire that it is today. 


Costco, a multinational retail corporation, relies on word of mouth marketing to dominate the wholesale marketplace. 

Robin Ross, the Senior Director of Corporate Marketing, explains that “Costco’s ability to generate word of mouth also has to do with offering unexpected surprises and instilling the sense of a ‘treasure hunt’ into every shopping visit.”

How does Costco initiate ‘unexpected surprises’ into the everyday shopping experience? Costco implements diverse products that would generate conversation. For example, a ring that costs over 2 million dollars, a 3,000-dollar toilet, and custom made men’s suits. Costco does not expect a lot of their members to purchase these items. But it helps create buzz, and their customers begin talking about these uncommon items. 

Robin Ross helps Costco understand how to create positive word of mouth. He believes that a customer who has either incentives, an anecdote to tell about their experience, or a chance to give over their personal experience about this multinational corporation, will happily share with family or friends, which helps to increase sales. 

Costco tries many methods to show how much they value their customers. They implemented an amazing return policy which helps to create positive relationships with loyal customers encouraging them to continue shopping at Costco. They also attempt to give their customers the best value for their money, which helps create that loyal Costco fan base.


Zappos, an online business that sells shoes and clothing, is known for their incredible customer service. This multi-million-dollar company’s secret is the value they put on customer experience. 

Customers can expect a devoted and caring Zappos team member on the other end of the phone line helping them with their inquiries and frequently offering special benefits to faithful customers. Through building positive customer relationships, Zappos increases its number of loyal customers. These satisfied customers will spread the word about the kindness and care that a Zappos team member showed them. 

Positive word of mouth has helped Zappos grow and build up its company. As Tony Hseih, CEO of said, “Our philosophy is to take most of the money we would have otherwise spent on paid advertising or paid marketing and invest it into customer service and the customer experience instead, and let our customers do the marketing for us through word of mouth.” 

This philosophy has led Zappos to become the success that it is today. 


Companies that focus on word of mouth marketing can take a business far, but eventually there comes a point of diminishing returns. 

These companies are currently dominating their marketplace, but if they want to continue expanding and continue bringing their brand to the forefront of people's minds, they need to implement additional marketing strategies. Competitors are popping up in every nook and cranny. Innovation and creativity are what make a business thrive. 

In the electric car industry, many car companies are hopping on the electric car train and trying their luck. Tesla must step up their game if they want to continue dominating the electric car industry. 

In the donut industry, America is rapidly leaning towards a health food craze- organic, vegan, and health-focused restaurants are popping up all over. If Krispy Kreme wants to remain relevant in these changing times, relying solely on word of mouth marketing may not help them in the long run. 

In an Amazon Era, Costco needs to hit the gas. To ensure they don’t lose customers to Amazon, they need to perfect what has been working. 

And in an eCommerce marketplace that is rapidly growing at a breakneck pace of 15% each year, Zappos must make sure they are able to keep up.

Word of mouth marketing can take you way past the finish line. But if you want to remain number one, you must look at advertising with a 360 approach. 

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