Which term refers to the spreading of messages about a firm's products or services, often perceived as cost-effective?

The term that best describes the spreading of messages about a firm's products or services in a way that is often perceived as cost-effective is word of mouth (WOM). This method relies on informal communication among customers and potential customers, where existing customers share their experiences and opinions about a product or service with others.

Word of mouth can significantly influence the buying decisions of others since recommendations from friends, family, or acquaintances are often regarded as more trustworthy than traditional advertising. Additionally, WOM marketing is cost-effective because it does not require substantial financial investments from the company. Rather, it can organically arise from consumer satisfaction, thus creating a powerful marketing effect without ongoing costs associated with conventional advertising methods.

In contrast, advertising typically involves paid media placements and can incur significant costs, while public relations focuses on managing the firm's reputation and communicating with various stakeholders, which may also involve spending. Sponsorship often means associating the brand with events or organizations and usually requires a monetary commitment as well. Hence, while all the options relate to promoting a product or service in different ways, word of mouth stands out as a grassroots, cost-effective approach to communicating with potential customers.