Spread The Word When your customers talk...people listen. So why aren't more business owners using the cheapest and easiest form of advertising?

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

One hundred percent of Anderson Landscape ConstructionInc.'s clients come from referrals, either from professionalarchitects and builders or from former clients. That makes thefive-person Lancaster, Massachusetts, firm an extreme example ofwhat marketers have always known but are beginning to rediscoverand re-emphasize--that word-of-mouth is one of the best tools inany marketer's arsenal.

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

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

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

Word Up

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

Though it may seem inconsequential, word-of-mouth can make orbreak your business. "Word-of-mouth carries an impliedendorsement by the person who said it," says Art Davies,president of Impact Solutions Inc., a two-person Cincinnati salesagency that relies heavily on word-of-mouth. "When you haveother 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, chairof the marketing department and an associate professor of marketingat Kennesaw State University in Kennesaw, Georgia. "Everyoneis an expert in some area," explains Tudor. "Andthat's one of the strongest influences on consumerbehavior."

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

Even testimonials, word-of-mouth's closest marketingrelation, are different in several ways. Testimonials are usuallyused in paid advertising, says Raphel. Word-of-mouth is unpaid andhence, more believable, he says.

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

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

"Very few researchers have tried to do anything formally onword-of-mouth," says Wilson. "As a result, people feellike it's a giant, but it's nebulous and they don'tknow how to conquer it."

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

Mouth Manipulation

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

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

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

Next, generate positive word-of-mouth by finding out who isalready saying good things about you. "If you can identify aperson who has sent you business in the past, then most likely theywill send you business in the future," explains Cafferky, whocalls 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. Locatechampions by asking new customers how they heard about you. When aname crops up, roll out the red carpet for that customer with adiscount, freebie or special service to make sure this influentialindividual remains positive about you and your business.

You can also go out looking for influential customers in hopesof turning them into champions. Cafferky suggests trying to findpeople who have recognized expertise in your area and aren'tshy about spreading their opinions. For example, the president of alocal wine-tasting club would be a strong champion for a wineseller. Once found, these people become your targets for exemplarytreatment.

It's hard to employ word-of-mouth marketing when the wholeworld is your intended target. Identifying champions or potentialchampions narrows the playing field enough so you can get a handleon it. To start, create a list of names and addresses of opinionleaders you have or would like to have on your side, Cafferkysuggests. Then ply them with newsletters, special saleannouncements, coupons and other treatment to help build a positiveimpression. "Companies that don't make a list ofnames," says Cafferky, "can't get themselvesorganized to do word-of-mouth marketing."

Another reason to identify influential word spreaders is, ifnecessary, to control and reduce negative word-of-mouth. Raphelsays a talkative, dissatisfied customer is actually a greatopportunity for a savvy word-of-mouth marketer. That's becausea vocal complainer can quickly become a vocal champion if youhandle it right.

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

Special Words

Word-of-mouth marketing is most often relied on when budgets area marketer's chief constraint. It is, in fact, one of the fewforms of marketing you can employ without writing a check toanyone.

Even when funds are plentiful, there are other situations thatcall for word-of-mouth. "At the beginning of a business is onesituation because you have no reputation and there is no wordcirculating, so you have to start from scratch," says IliseBenun, publisher of The Art of Self Promotion, a quarterlynewsletter for small-business marketing based in Hoboken, NewJersey. "Word-of-mouth provides an opportunity to begin areputation, and you're in control."

For certain markets, word-of-mouth may always be the primemarketing mechanism. Doctors and lawyers, of course, rely heavilyon word-of-mouth, partly because these professions have longfrowned on advertising but also because consumers tend to selectprofessionals based on personal references. The same is true ofhairstylists, housekeeping services and other personal-serviceproviders.

Other industries use word-of-mouth for different reasons. Movieslive or die by what people say about them, despitemultimillion-dollar advertising budgets; the same is true of otherentertainment-related products, such as nightclubs, restaurants andcatering companies. "There are certain things people tend totalk about more," Wilson explains.

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

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

"Any person or organization involved with internationalmarketing had better understand word-of-mouth," Cafferkywarns, "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 othermarketing tools, word-of-mouth takes a long time to work. If youwant to reach the whole nation really fast, says Cafferky, thisisn't the answer.

Quite a while may go by before even a highly effectiveword-of-mouth campaign begins to bear major fruit. Anderson saysentrepreneurs can generate half their new business fromword-of-mouth in three years, all of it within five years. "Itwill help before five years," he says, "but it won'tprovide a total source of new jobs."

Word-of-mouth also offers very limited control. "When youbuy 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," saysCafferky. "But the fact is, you just cannot control what andwhen a consumer says something about your product."

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

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

Mixed Message

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

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

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

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

The mainstream marketing community may not have embracedword-of-mouth marketing, but there are numerous marketing expertswho have recognized its value. Benun suggests the writings of JayConrad Levinson, author of the Guerrilla Marketing series (HoughtonMifflin) and a regular Entrepreneur columnist. Raphel alsorecommends the books of master marketers such as Stanley Marcus andDavid Ogilvy.

One thing all expert marketers realize is that although it maybe called word-of-mouth, this form of marketing gets its realstrength because that's not its real source. Word-of-mouthcarries a special freight of honesty and conviction because, unlikeany other marketing message, says Anderson, "word-of-mouth isspeaking from the heart."

Good Word

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

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

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

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

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

5. Plan for trouble. No business is immune tonegative word-of-mouth, and forewarned is forearmed. So have plansfor emergency public relations campaigns, customer servicetraining, survey efforts and guarantees in place before you needthem.