We recently discussed the eight items that go into your Digital Dialtone. Today we’re going to talk specifically about Word of Mouth Marketing. I find this topic to be the most interesting and surprisingly, controversial. Most small business owners put word-of-mouth marketing at the very top of their most effective marketing strategies. Many small businesses get more than 75% of their business from referrals. Ironically, many of these same people do very little online to increase their referral reach.
I had a conversation with a small business owner about this that went something like this:
Q: What percentage of your new business comes from referrals?
A: Probably more than 75%, but I’m not sure.
Q: When you satisfy a customer, how many people do you think she tells about you?
A: I have no idea. Let’s say 20
Q: Great. Of that 20, how many do you think need the product/service you supply?
A: I have no idea. Let’s say 5
Q: And of the 5, how many do you think become customers of yours
A: I have no idea. Maybe 1 or 2.
There are two really outstanding data points that come from this conversation. The first is that this small business owner really doesn’t have any idea how effective his word-of-mouth marketing is working for him. That means he can’t effectively increase it, since he doesn’t know where to focus. The second is that assuming his numbers are close to correct, he’s batting anywhere between .050 and .100 (1/20 or 2/20) in terms of results from his word of mouth marketing, his #1 marketing strategy!
My next question to him was “what do you think would happen if you leveraged on-line channels so this person could effectively reach 200 people instead of 20?” His immediate reaction was “it won’t be nearly as effective as in-person word of mouth”. Given that this is likely true, we did some quick math and determined that his effectiveness could drop to .010 and still generate the same number of new customers that his current strategy gives him.
Marketing is nothing more than a numbers game. You have a bunch of potential customers come in at the “top” of your sales funnel and as they go through the sales process, some percentage of those will come out the “bottom” as paying customers. Your job is to (a) maximize how many go into the top, and (b) increase the likelihood that the ones that come into the top get all the way to the bottom. By duplicating your word-of-mouth efforts online, you are guaranteeing (a), and with tools such as Bizyhood and other Marketing tools you can increase (b) as well.
Our last point of discussion had to do with negative word-of-mouth. This is where a customer has a bad experience and bad mouths your business to many people. My small business friend made two observations that were prescient:
- That person will tell a LOT more people about their negative experience than the person who had a positive one.
- He will likely never know that the person had a negative experience, so there’s very little he can do to address her concern or to communicate with the people she’s complaining to.
My suggestion is to allow those customers to give public feedback as well so that the business knows about it and can respond to it. Customers that have a bad experience want to be heard. Ironically, your most loyal customers are often those that had a problem early on in the relationship that you effectively addressed. People like being taken care of. So, why not let those people tell you what they were unhappy about? Now you have a chance to address it AND tell the people that heard about their issues why they should still consider your business.
Bottom line – expanding your word-of-mouth efforts online will allow your current customers to spread the word to many more people – which increases the size of your funnel at a minimum. And what’s the downside of that?