Out of the Box

Word-of-Mouth Marketing: How Loud?

By Menachem Lubinsky on November 23 2007

For the past 11 years, Alan, the company’s director of marketing, issues an annual report with an analysis of the cost effectiveness of the marketing program. The company, a mid-size insurance company, has the usual marketing mix that includes advertising, public relations, direct mail, the Internet, and word-of-mouth. Alan estimated that 30% of the company’s business in 2006 came from word-of-mouth, but he admitted that the number was “a bit soft.”

Many businesses would probably say that word-of-mouth accounts for a given percentage of their sales. I hear it sometimes from businesses that do almost no marketing and it, of course, makes sense. A restaurant owner told me recently that he relies totally on word-of-mouth about his great food and good service.

To have customers speak well of your business is, needless to say, an important objective of any business. But the extent to which it carries over to new business can vary, depending on how the business handles the word-of-mouth. Let me explain.

There are many businesses that are good at customer service and also recognize that a satisfied customer might be their best ticket to another satisfied customer. They don’t simply rely on the fact that the customer will automatically broadcast their satisfaction to others. Their sales people actually suggest that the customer acknowledge that they were served properly and that they would recommend the company to others. They might be as bold as to ask: “Were you satisfied with the way I served you today?” a question you might hear today even when calling to check your balance at the phone company.

Some even go a step further. After receiving a satisfactory answer from the customer, they actually suggest: “Would you recommend our company to a friend?” You will certainly receive a business card or even perhaps a flyer or brochure. One company even asked customers for names of friends in return for being part of a drawing for a free vacation. They then used those names to send out a letter which included the name of the person that recommended they use the company.

Other companies that will tell you that they too rely on word-of-mouth have no program in place to attract new customers. They simply rely on their reputation for quality products and good service. They may in the end have the same results as the more aggressive program mentioned above, but one must wonder if a little bit of intervention on their part might have possibly contributed to even more business.

To some companies word-of-mouth is not just a causal part of doing business. They are determined to keep track of exactly how many people come as a result of recommendations of satisfied customers. They program their staff to ask: “How did you hear of us?” or “Who recommended you?” When consistently followed, the results can offer a more scientific analysis of what word-of-mouth actually represents for a company.

A recent marketing article spoke of specific people that are planted in a store, for example, “to talk it up” about how good the store is. These plants are often the eyes and ears of management in receiving feedback about fellow employees and service at the store in general. In short, you might say that their job is to create the word-of-mouth.

In recent years, there has been a greater emphasis on consumer friendliness. Companies address customers by their names, ask you if there is anything else they can do for you, and sometimes quickly turn to salespeople as they attempt to sell you an upgrade. The research shows that even in such cases when a sales pitch is included, customers are thrilled that someone is talking to them and more importantly trying to help.

Word-of-mouth can be a very important source of business. People who have a good experience are likely to recommend others. Consistency is important so that the word-of-mouth is generally favorable. If the reviews are mixed, the word-of-mouth tends to cancel each other out. The conversation might go like this: “You should really try the ABC Company. They are really good.” The response might be: “Really? My friend was recently there and she waited an hour to speak to a sales manager.” The word-of-mouth in this case has quickly turned to a negative and the potential customer is likely to think twice before proceeding to the recommended business.

Alan knew that the 30% word-of-mouth that he included in his marketing report would be the best proof to management that customers are happy with the service. Management, however, has to question whether some of that word-of-mouth is actually related to many of their other marketing activities. Perhaps the goodwill comes from the ads showing happy families using their insurance services.

Should management care how exactly the word-of-mouth came to be? Should it make a difference if it came from a combination of good marketing and a good product and service. Definitely not. What does matter that customers constantly speak well of the company and that their experiences are positive. The rest will be taken care of by word-of-mouth.

Out of the Box is a collection of strategic marketing articles that Lubicom has published on various topics, trends and ideas in the marketing world. The articles have been published in the Hamodia weekly newspaper circulated on three continents to a readership of well over 100,000.

The name, "Out of the Box" is a term used frequently in business nowadays to describe creative thinking that is not the norm. It is meant to help a business pull away from the pack or separate oneself from the competition. It is to some extent fraught with risk, simply because it is not the run of the mill thinking, but it is at the same time the key to reaching the next opportunity.