“Word of Mouth Marketing” is a phrase that all of us use. It’s used to describe the marketing impact of a great customer experience leading to referrals, which lead to more great customer experiences and more referrals, which lead to business growth. No advertising is involved so it’s inexpensive, although there is certainly work associated with providing consistent, great customer experiences.
However, word-of-mouth worthy businesses receive other benefits associated with customer loyalty. Those customers who are motivated to recommend you are the ones who are most likely to return to your business and they’re the most likely to spend more when they do return. Your most loyal customers are also the ones most likely to give you good feedback — what’s working and what’s not working with your business — and you can improve your products and services with this information. So in addition to the benefits of referrals, the customer loyalty associated with word of mouth will power your business growth.
By focusing on customer loyalty and generating positive word of mouth, businesses will also avoid the negative effects of critical word of mouth from dissatisfied customers. In Answering the Ultimate Question: How Net Promoter Can Transform Your Business, authors Richard Owen and Dr. Laura L. Brooks described a case study of ten enterprise software companies. Based on company financial data and surveys of customer loyalty, the authors found that positive word of mouth behaviors captured an additional $565,000 per loyal customer, but critical customers generated an average loss of $701,000 per detractor. By operating your business to improve the proportion of loyal customers and reduce the proportion of detractors, your business will enjoy sustained growth without increasing your spending on advertising.
It’s important to note that the word of mouth I’m referring to is associated with business performance and customer loyalty and is not associated with what’s often called buzz. Buzz can certainly impact marketing in a positive way to get people talking about your business, but it does not have the sustained impact to power long-term business growth.
