I’ve been giving "word-of-mouth" a lot of thought lately. I recently had Ben McConnell speak to a group of my clients in Austin, TX about this. Ben is co-author of the book, Creating Customer Evangelists, and the popular blog, Church of the Customer, and I was really impressed with his thinking.
Ben talked about loyalty being the "willingness to make an investment or personal sacrifice to strengthen a relationship." When our customers reach that point where they are willing to invest time and personal sacrifice to spread the word about our company and/or products, that’s when WOM (word-of-mouth) really works.
I witnessed this first-hand yesterday while getting a haircut at The Hair Lounge. Marv Smith was espousing his experiences with Zappos.com to all within earshot. He was absolutely sold on Zappos and said we should all shop there. Marv is a customer evangelist.
So it would make sense that if we could have evangelists, like Marv, spreading the word, we would work hard to find those people. I was curious about whether this was working for my own readers, so I set up a "10-Second Survey," on SurveyMonkey. I asked one question — What percentage of your business would you estimate comes from referrals and word-of-mouth?
258 people responded to my question and, surprisingly, 50% of them said that less than 40% of their business comes from referrals and WOM. Only 14.3% rated WOM customers hitting 80% or higher.
What does this mean? That we’re not very good at generating WOM? That we don’t know how to generate WOM? That we aren’t good enough for people to talk about us? What is going on here?
Maybe you’ve got some ideas on this. I’d sure like to hear them.
In the meantime, I’m going to do some more 10-Second Surveys and see what I can come up with. I’ll keep you posted.
I can’t remember where I came across this recently but — oh yes it was a Nolo Press book that I have since added to the reading pile after reading through the first sample chapter.
Here’s the excerpt relevant to my point (which follows it) and your post:
“One giant aircraft manufacturing company, to look at the effectiveness of heavily advertising an in-house computer service through one of its subsidiaries, conducted a survey to find out how its 100 newest customers had found out about it. The results: 13% of these new customers came because of the advertising campaign, 23% because of sales calls, 56% signed up because of recommendations from other satisfied customers and professionals in the field, and 8% weren’t sure why they had chosen that computer service.”
“This is actually a fairly common survey result. Yet, as we can see from their bloated advertising budgets, very few companies act on the information. If they did, they would obviously budget funds for promoting personal recommendations. Indeed, some businesses are apparently so unwilling to believe what market research tells them — that personal recommendations work and advertising doesn’t — that they spend money on ads like the one on the following page.”
You can read the sample first chapter on-line here: http://www.nolo.com/product.cfm/ObjectID/5E5BFB9E-A33A-43DB-9D162A6460AA646A/111/277/
So another question to ponder is whether the survey reflects what folks simply perceive are the major sources of new customers or whether it’s the actual source? It’s not like successful businesses haven’t spent mega bucks on ineffective advertising before and survived DESPITE it. 🙂
40% of business comes from referrals – and that means that we’re bad at it. Surely that means that we’re GOOD at it!
The problem with customer survey information like this is that no one factors in ‘I bought because of the hot girl behind the counter’ and ‘I bought because I am on credit hold with the other guys’.
Referrals have an effect at purchase point and initial contact – but at purchasing it is a confidence booster to CONFIRM the rational / emotional decision you have just made to purchase.
In terms of the initial contact then referrals boost what other marketing you are doing. The initial contact may have been advertising but the movement to contact comes when you mention it and your buddy says ‘Yeah, I use them and they’re good’.
NB this information was deduced after a 10 second survey of my brain and gut-reaction (-:
Steve – I wonder if those who responded to your survey worked in the service oriented industry or otherwise. In my business (providing consulting to litigators), word of mouth is vital. The majority of my business comes from word of mouth and positive client references.
During our annual conference last week, a panel suggested that 80% of their business was from word of mouth, which seems consistent with my experience. Our firm has mostly abandoned “traditional” advertising in publications or via direct mail and focused on specific client touchpoints and cultivating deeper relationships with the clients we have.
For many years, I spent time trying pursing a large number of new clients to fill my calendar. I don’t believe that is the most efficient approach anymore; instead I network using my current clients and make in-roads with other attorneys in the same firm. Who better to champion hiring me? The obvious choice is someone within the same firm who has experience using my services in the past. My goal these days is wowing my current clients so they come back and send others my way!
In my biz, word of mouth isn’t limited to generating the initial contact either. I rely heavily on glowing client references about my performance in past work; these are vital to securing future work with a new client.
Thanks Josh, Ian, and Theresa for you well thought out comments.
To be honest, I’m not sure how to analyze the responses. Obviously, there’s more questions to be asked.
I personally generate over 90% of my new business from referrals, so it’s really important. And I’m very proactive encouraging my clients and everybody else in my network loop to keep me top of mind.
I think every business should have an aggressive WOM strategy, so I’m puzzled about the survey results. Are they just not very good at generating referrals? Are they unaware of referrals they’re receiving? Are they unaware of the importance of WOM? Maybe they don’t know how to develop a WOM strategy?
I think this makes a great conversation!
Great post, and what food for thought. Loved all the comments.
I don’t think there is one answer that will fit all… in my experience, it depends on the industry/market, and the time, e.g. with the power of the net now, WOM just got a whole lot bigger and faster (for good or bad).
One recent incident that demonstrates WOM marketing was at Starbucks. A customer’s drink was late a couple of minutes. Customers that came after this man were served before him, and he soon realized his drink was forgotten. He very pleasantly mentioned this to the barista.
The barista’s response within seconds… with absolutely no hesitation, was to apologize, immediately get the man his hot drink, and give him a voucher for any free drink on his next visit. The man’s response was interesting to watch too. He was surprised, pleasantly.
Of course, not all businesses can or hold this perspective. Often, even when they can afford it, they look at that voucher as money out of their pocket, not seeing the long term vision.
Try going in for a cup of coffee only to find out that it’s being brewed and not hot and ready for you… See what the response is then!
The effect of this gesture on the customer or client is huge. It turns a mere paying customer into a “raving fan”. With customer service like this, even if the product is not the absolute best, I’m more like to go back again and again because I know I will be treated like a “valued” client.
In my experience, customer service is essential to creating WOM, and getting those raving fans. Being treated as an individual, and having that personal touch goes such a long long way.
What a fantastic dialogue you created here. Thanks for the insights.
Like you and Theresa, I get all most all of my business via WOM. The only paid advertising I do is to support the local Charities and Sports Leagues. The power of WOM is huge. I agree too with all the comments that customer service is essential.
I am amazed at all the folks who recognize this yet their plans are focused on their business and not on the wants and needs of the customers.
Business is about people, not products or even marketing. It is about filling a need for an individual or group. If we want to be successful at WOM, we need to know what need we are trying to fill for whom.
We need to make sure as well that we help our satisfied customers express their satisfaction, by asking not for referrals but for testimonials. We can even help them write them.
This also reinforces the clients buying decision and helps eliminate any buyers remorse.
There are stats that say something like the average person will promote you to 4 people if they like you. But if they are dissatisfied they are going to tell on average 25 people–sorry I don’t remember the source of these stats.
Great post! I enjoyed it and all the comments.