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Spread The Word

When your customers talk...people listen. So why aren't more business owners using the cheapest and easiest form of advertising?
February 1, 1998
URL: http://www.entrepreneur.com/article/15096

Trucks, shovels and flats of flowers are Fred Anderson's tools for designing and installing custom landscaping. But when it comes to marketing, he has only one tool: the human mouth.

One hundred percent of Anderson Landscape Construction Inc.'s clients come from referrals, either from professional architects and builders or from former clients. That makes the five-person Lancaster, Massachusetts, firm an extreme example of what marketers have always known but are beginning to rediscover and re-emphasize--that word-of-mouth is one of the best tools in any marketer's arsenal.

"It's the most effective form of advertising any business can have," says Murray Raphel, president of Raphel Marketing in Atlantic City, New Jersey, and co-author of the marketing guide, Up the Loyalty Ladder (HarperBusiness). "You have unpaid salespeople selling to others, encouraging them to use your goods and services because of their pleasure with your service."

Word-of-mouth not only works, it's inexpensive. Walla Walla, Washington, word-of-mouth marketing specialist Michael Cafferky wrote a manual called Let Your Customers Do the Talking (Upstart) because his small-business clients couldn't afford anything else. "I was forced to find marketing tactics with zero budget," says Cafferky. "Word-of-mouth is one of the most natural."

For some entrepreneurs, word-of-mouth may not merely be the best or most efficient marketing tool: It may be the only one. The wealthy estate owners Anderson sells to, for instance, don't base their buying decisions on TV commercials, billboards or phone book ads, he explains. "They choose the people they want based on other people's references. And they won't find those people in the Yellow Pages."

Word Up

To a marketer, word-of-mouth is what people say about your business as they go about their daily lives. It happens when one friend tells another, "You should check out that new restaurant downtown. The food's great!" It happens in a negative way when another diner complains, "Stay away from that new place on a Friday. You'll never get a seat!"

Though it may seem inconsequential, word-of-mouth can make or break your business. "Word-of-mouth carries an implied endorsement by the person who said it," says Art Davies, president of Impact Solutions Inc., a two-person Cincinnati sales agency that relies heavily on word-of-mouth. "When you have other people talking about you, it carries weight."

Another name for word-of-mouth marketing is opinion leadership, and today, everyone's a leader, according to Keith Tudor, chair of the marketing department and an associate professor of marketing at Kennesaw State University in Kennesaw, Georgia. "Everyone is an expert in some area," explains Tudor. "And that's one of the strongest influences on consumer behavior."

As a marketing form, word-of-mouth is distinct from any other. Unlike print advertising or direct mail, it primarily uses the spoken word--although the Internet has made e-mail a potent word-of-mouth medium. Unlike mass media, word-of-mouth is typically dispersed one-on-one from person to person. And unlike discounts, coupons or other cost-based appeals, its appeal is based on one person's respect for another person's judgment.

Even testimonials, word-of-mouth's closest marketing relation, are different in several ways. Testimonials are usually used in paid advertising, says Raphel. Word-of-mouth is unpaid and hence, more believable, he says.

It's also different from networking, where your primary goal is to develop referrals from a group of people with a common interest, such as chamber of commerce members or crafts hobbyists. Networking, says Cafferky, is part of word-of-mouth marketing, but word-of-mouth marketing is concerned with a broader market.

Perhaps the most distinctive trait of word-of-mouth marketing is that, compared to other media, it is poorly understood. While a great deal of research has been done on such arcane marketing techniques as psychodemographics, word-of-mouth marketing has been neglected, says Jerry Wilson, an Indianapolis speaker and marketing consultant who wrote Word of Mouth Marketing (Wiley).

"Very few researchers have tried to do anything formally on word-of-mouth," says Wilson. "As a result, people feel like it's a giant, but it's nebulous and they don't know how to conquer it."

Few things are known about word-of-mouth, besides the fact that everybody can do it and it can be very powerful. With a little thought and some patience, nearly any entrepreneur can put this often-overlooked, one-of-a-kind marketing tool to work.

Mouth Manipulation

The first rule of word-of-mouth marketing is to do what you would like people to say you do. In other words, good word-of-mouth marketing starts with good products and good service.

Anderson makes sure people have good things to say about his landscaping company by performing extraordinary follow-up service. If a customer is unhappy with some aspect of a completed job, he goes back and redoes it at his own expense.

"People are taken aback that I would come back to do that at no cost," he says. "But I use a budget others would use for advertising and spend it on making things right."

Next, generate positive word-of-mouth by finding out who is already saying good things about you. "If you can identify a person who has sent you business in the past, then most likely they will send you business in the future," explains Cafferky, who calls such opinion-leading customers "champions."

Champions are the low-hanging fruit of word-of-mouth marketing: They produce the biggest results for the least effort. Locate champions by asking new customers how they heard about you. When a name crops up, roll out the red carpet for that customer with a discount, freebie or special service to make sure this influential individual remains positive about you and your business.

You can also go out looking for influential customers in hopes of turning them into champions. Cafferky suggests trying to find people who have recognized expertise in your area and aren't shy about spreading their opinions. For example, the president of a local wine-tasting club would be a strong champion for a wine seller. Once found, these people become your targets for exemplary treatment.

It's hard to employ word-of-mouth marketing when the whole world is your intended target. Identifying champions or potential champions narrows the playing field enough so you can get a handle on it. To start, create a list of names and addresses of opinion leaders you have or would like to have on your side, Cafferky suggests. Then ply them with newsletters, special sale announcements, coupons and other treatment to help build a positive impression. "Companies that don't make a list of names," says Cafferky, "can't get themselves organized to do word-of-mouth marketing."

Another reason to identify influential word spreaders is, if necessary, to control and reduce negative word-of-mouth. Raphel says a talkative, dissatisfied customer is actually a great opportunity for a savvy word-of-mouth marketer. That's because a vocal complainer can quickly become a vocal champion if you handle it right.

"Listen to what they have to say, then look them straight in the eye and say 'Tell me what you want, and the answer is yes,' " advises Raphel. "This is a great way to generate positive word-of-mouth."

Special Words

Word-of-mouth marketing is most often relied on when budgets are a marketer's chief constraint. It is, in fact, one of the few forms of marketing you can employ without writing a check to anyone.

Even when funds are plentiful, there are other situations that call for word-of-mouth. "At the beginning of a business is one situation because you have no reputation and there is no word circulating, so you have to start from scratch," says Ilise Benun, publisher of The Art of Self Promotion, a quarterly newsletter for small-business marketing based in Hoboken, New Jersey. "Word-of-mouth provides an opportunity to begin a reputation, and you're in control."

For certain markets, word-of-mouth may always be the prime marketing mechanism. Doctors and lawyers, of course, rely heavily on word-of-mouth, partly because these professions have long frowned on advertising but also because consumers tend to select professionals based on personal references. The same is true of hairstylists, housekeeping services and other personal-service providers.

Other industries use word-of-mouth for different reasons. Movies live or die by what people say about them, despite multimillion-dollar advertising budgets; the same is true of other entertainment-related products, such as nightclubs, restaurants and catering companies. "There are certain things people tend to talk about more," Wilson explains.

Word-of-mouth marketing expertise may be essential for entrepreneurs who sell their goods and services in other countries. Many of the most rapidly growing markets worldwide are in societies where the mass media is not as well-developed as in industrialized countries, says Cafferky.

For instance, Cafferky has had extensive experience marketing in Romania, where broadcast television is not nearly the force it is in the United States. An effective word-of-mouth campaign in that country takes on extreme importance.

"Any person or organization involved with international marketing had better understand word-of-mouth," Cafferky warns, "because that may be all they have to use."

Language Limits

Word-of-mouth isn't the solution to every marketing problem, however. Speed is perhaps its biggest limitation. Compared to other marketing tools, word-of-mouth takes a long time to work. If you want to reach the whole nation really fast, says Cafferky, this isn't the answer.

Quite a while may go by before even a highly effective word-of-mouth campaign begins to bear major fruit. Anderson says entrepreneurs can generate half their new business from word-of-mouth in three years, all of it within five years. "It will help before five years," he says, "but it won't provide a total source of new jobs."

Word-of-mouth also offers very limited control. "When you buy an ad in the newspaper, you can control exactly what is said, when it is said and, to some degree, to whom it is said," says Cafferky. "But the fact is, you just cannot control what and when a consumer says something about your product."

And if your marketing goal is to point out a competitor's faults, word-of-mouth will be of little use. "You can't be negative with it against a competitor," says Davies. "You need to stay positive."

Finally, word-of-mouth is likely to be of limited value in some industries and with some products simply because they're not frequent topics of conversation. "When was the last time somebody told you about some great shoestrings they bought?" asks Wilson. "The mundane things people buy, we don't talk about."

Mixed Message

Just as the right word in the right place can work wonders, the wrong word in the wrong place can wreak havoc. For instance, word-of-mouth marketing can be very risky if the message being spread is inconsistent with your other marketing messages.

One example of this might be if the word-of-mouth message is that your company is set up for professional or business clients only, but your newspaper ads are aimed at the general public. "Consumers can smell that stuff a mile away, and it makes your paid advertising totally ineffective," warns Cafferky. "And if it is effective, it brings in new customers only to make them upset."

You can also make a mistake by relying too much on word-of-mouth. As powerful as it is, it's not the only solution to most businesses' marketing needs. Some products and services need to be marketed through the standard advertising channels. "Distributors won't touch some products unless you show you have an advertising budget," says Cafferky.

Perhaps the biggest mistake may be to ignore word-of-mouth marketing entirely. Even in a well-crafted traditional marketing campaign, what people say about your product or service can have an effect. Negative word-of-mouth can be devastating, says Raphel; the best way to fight it is with positive word-of-mouth.

The mainstream marketing community may not have embraced word-of-mouth marketing, but there are numerous marketing experts who have recognized its value. Benun suggests the writings of Jay Conrad Levinson, author of the Guerrilla Marketing series (Houghton Mifflin) and a regular Entrepreneur columnist. Raphel also recommends the books of master marketers such as Stanley Marcus and David Ogilvy.

One thing all expert marketers realize is that although it may be called word-of-mouth, this form of marketing gets its real strength because that's not its real source. Word-of-mouth carries a special freight of honesty and conviction because, unlike any other marketing message, says Anderson, "word-of-mouth is speaking from the heart."

Good Word

When bad word-of-mouth marketing about your business starts spreading, it can be devastating. If your company is a target of negative word-of-mouth, it's time for emergency measures. These five steps will cork up bad-mouthers quickly:

1. Generate positive word-of-mouth. Good comments are the best way to beat bad comments. Michael Cafferky, author of Let Your Customers Do the Talking (Upstart), says many customer complaints are related to employee behavior. Start your counteractive measures by training or, if necessary, retraining employees in good customer service skills, empowering them to handle problems immediately and communicating customer comments to everyone as quickly and completely as possible.

2. Gather complaints. Many businesspeople dislike dealing with complaints. But complainers are likely to spread negative word-of-mouth. Stop them by gathering and dealing with complaints shortly after the upset occurs. Set up toll-free complaint hotlines, suggestion boxes and customer survey cards; train employees to solicit complaints.

3. Survey opinion leaders. Opinion leaders can stop bad word-of-mouth as quickly as they can start it. Survey them by telephone, mail and in-store interviews to find out what they think of your business. Then, do something to make them like you more: Offer a freebie, give them special service, make them feel important.

4. Keep it simple. Complex explanations of why your business was not at fault sound like rationalizations to angry customers. Keep your fix basic: Admit your mistake, apologize, flatter customers by asking their opinions, and offer a solid fix like a refund or a gift certificate.

5. Plan for trouble. No business is immune to negative word-of-mouth, and forewarned is forearmed. So have plans for emergency public relations campaigns, customer service training, survey efforts and guarantees in place before you need them.