Word-of-Mouth: The Best Form of Advertising

John Tabita
This entry is part 2 of 3 in the series Word-of-Mouth

Word-of-Mouth

Last week, I talked about talked about the “myth” that good service will cause people to refer you to others. The misguided notion that happy customers drives word-of-mouth is summed up in this ClickZ article:

Word of mouth relies on exceeded expectations. Manage your customers’ expectations. You’ll be rewarded with their loyalty and the power of their word.

The problem with this philosophy is that “exceeding expectations” is a function of customer service; whereas “word-of-mouth” is a function of marketing. Everything the article mentioned are important things to do, but to say that “word-of-mouth relies on exceeded expectations” is to confuse the purpose of customer service with that of sales and marketing.

Ivan Misner, author of 16 books on word-of-mouth marketing says that “… if you expect happy customers to talk about you a lot, think again.”

If you’ve ever sold advertising, a common objection you’ll hear as to why some businesses don’t advertise is “all my business comes from word-of-mouth,” followed closely by, “everyone in town knows me.” If any company could rely solely on word-of-mouth and claim “everyone knows me,” it would be McDonalds, America’s most popular fast-food restaurant. Yet they spend an estimated $2 billion annually on advertising. Why do you suppose that is?

Word of mouth doesn’t replace great advertising, it just helps great advertising perform better. — Dave Balter, author of The Word of Mouth Manual, Volume II

Likewise, when people claim that they never have to prospect for business because it all comes from word-of-mouth, I can guarantee one of two things:

  1. They didn’t start out that way
  2. They are the exception, not the rule

They Didn’t Start out that Way

I once spoke to a local attorney about how he gets clients. He explained to me that there are three types of attorneys:

  1. The Well-Established: Firms everyone knows because they’ve been around for years and no longer need to advertise and market as aggressively
  2. The Up and Coming: Those who’ve been around long enough to begin to develop a good reputation and gain some prominence
  3. The Newbies: Those fresh out of law school looking to get a foothold

Being in Category Number Two meant he needed to advertise in both the Yellow Page and online so that, one day, he’d become so well-known and move up to the next category. He understood that in a highly-competitive field like law (or web design), building sufficient word-of-mouth to sustain him was going to take time, energy, and effort.

It’s possible to generate enough marketing gravity to eliminate the need for prospecting. But those who enjoy this level of success have spent months and years building their reputation, credibility, and client base. Even so, most continue to prospect. That’s why McDonalds continues to advertise.

They are the Exception, not the Rule

Your chances of being struck by lightening, attacked by a shark, or mauled by a cow are greater than winning the lottery; yet millions of people buy a ticket each week, hoping to beat the odds.

You’ll always hear about someone winning the lottery for the fourth time or who built a wildly successful business entirely through word-of-mouth. You’ve probably also heard stories of people who died in a car accident because they couldn’t get their seat belt unfastened. Yet, statistically, your chances of surviving a crash are 70 percent greater if you’re wearing one.

I don’t know about you, but I’m not betting my livelihood or my life on being the exception.

Word-of-Mouth Marketing takes Work

The problem with depending on word-of-mouth when you’re first starting out is that it requires a significant pool of people who know and trust you enough to refer you to their business associates. People are reluctant to do so if they don’t know first-hand what it’s like to work with you. You may be Uncle Fred’s favorite niece, but does he really know how professionally you’ll handle yourself if he recommends you to his best client?

In case I haven’t overstated my point, when I say word-of-mouth is the worst form of advertising, I’m referring to passive word-of-mouth. Just like cold-calling done wrong, passively relying on others to talk about you is not “the best” form of anything. But active, intentional, and deliberate word-of-mouth marketing can be a boon for your business. Here’s why:

  1. Word-of-mouth prospects are further along in the buying process because are already looking for information about your product or service. In other words, they have a need are are “ready to buy.”
  2. Word-of-Mouth prospects are predisposed to like and trust you, based on the level of trust they have for the person who referred them to you. In all likelihood, you’re the only firm they’re considering.
  3. Unlike cold-calling and other hunter prospecting methods, at a certain point, gravity takes over and a certain amount of leads will flow into your sales funnel with minimal effort on your part.

Word-of-mouth does just “happen,” however. It takes as much work—if not more—than cold-calling. But take heart; there’s a lot you can do to make it happen—beyond giving away free samples, that is.

Next week: How to Make Word-of-Mouth Marketing Work.

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  • http://www.sirbudproductions.com/ Mike Becvar

    I think that “repeat business” goes into the same category as “word of mouth”. I have met people who have been in business for 20-30 years, or maybe longer, who say that they don’t need to advertise or build a website because their repeat business keeps them busy. They have built up their reputation and feel that everyone knows about their business. But, more often that not, they will also comment how the current economy has left them with less work than in the past. I don’t think they understand that their lack of marketing might actually be part of the reason their business is down. Loosing 1 or 2 good customers each year without finding new customers will slowly kill any business.

    Repeat business is a good source of future work. But, you can’t count on all of your customers coming back for more, even if they really loved the job you do. One thing that can happen is turnover within a customer’s organization. Suddenly that loyal customer who has called year after year is replaced by a new employee. That new employee doesn’t know of your relationship and will either rely on someone they have worked with in the past or look for someone new. Without proper advertising and a website, they will have a hard time finding your business and will likely select your competition.

    A successful business strategy will include both retaining existing customers and finding new customers. Finding new customers also means making sure new customers can find you.

    • http://smallbusinessmarketingsucks.com/ John Tabita

      You’re right. Small business owners often cannot connect the dots between why business is down and their lack of advertising. Even if it were true that “everyone in town knows me,” the mobility rate means many of those who “know you” move away every year, and new people move in who don’t “know you.”

      A national study of retail merchants revealed that 81 out of 100 customers are lost in a ten-year period of time. Half are lost in the first three years. Many businesses don’t realize they need to replace those lost customers and instead, wind up blaming the economy.

      Not so long ago, it was like pulling teeth to convince small business owners that they needed a website. Now they’re saying “All my business comes from my website.” No optimization, no search marketing, yet somehow, everyone seems to miraculously find them online. (Pardon me if I’m not convinced.) I’m sure if you asked how is it that customers can find them online, they’d respond, “Why, because everyone in town knows me!” It’s the Web 2.0 version of the same old mentality.