Word Of Mouth Marketing

As a direct marketer I like everyone else is trying to find new and innovative ways everyday to acquire and retain customers. I keep hearing "Word-Of-Mouth" marketing is the best way to do this. Is it though? Will "word-of-mouth" really keep your business alive? Is it generation specific? Does it work for the gen Y'ers and X'ers alike? And what about companies whose main customer base is senior citizens? How much emphasis do individuals put on what they hear from their friends? Is it more important that your friends and family members like a brand or is it quality and price that really matters?