The Power of Word-of-mouth Marketing: How to Harness Referrals to Grow Your Business?
Word-of-mouth marketing is one of the most effective yet overlooked ways to grow a business. Research shows that referred customers have a 16% higher lifetime value than non-referred customers. They also tend to be more loyal, with referral customers having a 37% higher retention rate.
With such impressive stats, it’s clear that focusing on word-of-mouth marketing should be a priority for business owners and marketers alike. But what exactly is word-of-mouth marketing and how can you successfully leverage it?
In this post, we’ll break down what word-of-mouth marketing is, why it’s so powerful, and actionable strategies you can start implementing right away to harness the power of referrals.
What is Word of Mouth Marketing?
Word-of-mouth marketing is exactly what it sounds like: leveraging personal recommendations and organic conversations to drive awareness and sales for your products or services. It relies on customer or brand advocates spreading the word to their network.
Unlike traditional outbound marketing, word of mouth is driven by customers and happens organically. You can encourage it, but you can’t force it.
For that reason, word-of-mouth marketing is considered an inbound strategy, where you aim to create advocates who want to talk about your brand, not paying people to do it.
Why is Word of Mouth Marketing So Effective?
- People trust personal recommendations. According to a Nielsen study, 92% of people trust recommendations from friends and family above all other forms of marketing. In comparison, under 50% said they trust ads on TV, magazines, or social media. When someone we know suggests something, we take that at face value.
- It taps into the power of social proof. Social proof is the psychological concept that people follow the crowd and imitate the behaviors of others. When a friend or family member is happy with a certain product or brand, we’re more likely to have a positive perception of it too.
- It scales rapidly. With traditional marketing, you have to continually put in effort and money to see results. But word of mouth is self-perpetuating once it gains momentum. A single advocate can easily influence dozens of new customers.
- It builds trust. Referrals reduce skepticism. If we’re considering a purchase but are on the fence, a recommendation from someone we trust may be the catalyst that makes us take action.
In summary, leveraging word of mouth is one of the most authentic ways to build awareness and trust in your brand. People are far more likely to buy when referred by someone they know, as opposed to traditional advertising.
Strategies to Increase Word-of-Mouth Referrals
Now that we’ve covered the power of word-of-mouth marketing, let’s dive into some actionable strategies you can implement to increase referrals for your small business or online store.
1. Focus on Creating a Remarkable Product
The first step to generating buzz is ensuring you have a product or service worth talking about. If your offering is forgettable or subpar, it will be difficult to create genuine advocates.
Take time to understand your target audience. Figure out their goals, pain points, and unmet needs. Then, focus on delivering an offering that goes above and beyond to impress them.
It must be useful, easy to use, perform well, and provide outstanding support. The more remarkable your product, the more likely satisfied customers will tell their friends about it.
2. Gather Testimonials and Reviews
Reviews and testimonials act as social proof, showcasing how much others love your product. The easiest way to get more is simply asking happy customers to leave an honest review. Many will be glad to help.
For in-depth testimonials, consider asking your most passionate customers for a quote or to record a quick video review describing their experience. Then, showcase the reviews prominently on your website and social media.
User-generated content is perceived as more authentic than material created by the brand. Leverage it to highlight your raving fans and boost conversions.
3. Create a Referral Program
Referral programs incentivize your existing customers to spread the word. There are many creative ways to structure them:
- Offer a discount code or cash credit for both the referrer and the referee
- Provide a free gift or bonus item to anyone who refers a new customer
- Implement a points system that builds toward rewards
- Hold contests for top referrers, with prizes for the winners
The incentive gives customers an extra nudge to tell their friends. The key is ensuring the reward is enticing enough to motivate referrals, but not so expensive it eats into your margins. Get creative!
You also want to remove any friction when it comes to sharing your brand. This may include:
- Having share buttons for social media on each product page
- Providing graphics, videos, or content customers can pass along
- Creating special landing pages to simplify sending referral offers
- Encouraging user-generated content that inherently gets shared
The easier you make it for happy customers to spread the word, the more likely they are to do so. Think through their journey and how you can facilitate referrals each step of the way.
5. WOW Your Customers
This one can’t be emphasized enough. Do everything you can to wow customers and create a remarkable experience. From outstanding products to top-notch service, you want interactions with your brand to be memorable.
Surprise customers by going above and beyond. Send a handwritten note or a small gift for big milestones. Make communication personalized and thoughtful. The goal is to create customers for life who can’t wait to refer family and friends.
6. Leverage Influencers and Partners
Influencer marketing is another powerful way to increase word of mouth. Partner with relevant influencers like bloggers or industry experts to get the word out.
You can also pursue co-marketing with complementary brands that serve your target audience. Try giving discounts for bundled purchases or cross-promotions.
The key is working with brands that are likely to generate high-quality leads. Make sure values and target markets align.
7. Host Events to Bring People Together
Hosting live or virtual events is a great way to get like-minded people interacting with your brand. Local networking events, workshops, webinars, and conferences all work.
Aim to create valuable, memorable experiences. The goal isn’t a hard product pitch, but facilitating authentic connections. Attendees who enjoy themselves are likely to refer friends to future events.
8. Monitor and Learn From Reviews
It’s important to monitor online reviews and feedback mentions across the web. This allows you to spot pain points and opportunities to improve.
Fixing issues that customers complain about will increase satisfaction. Replying publicly to negative feedback also shows you care and are listening.
Proactively improving based on reviews generates goodwill. It shows customers their voice matters, making them more likely to refer others.
9. Equip Your Team to Spot Referral Opportunities
Training your team to recognize and proactively convert happy customers into brand advocates is crucial.
Provide talking points and scripts for seamless conversations. Teach them how to spotlight referral programs and other ways customers can easily spread the word.
Empower every team member to take initiative in delighting customers. This compounds word of mouth over time.
10. Make it a Priority Across Marketing Channels
Referrals should factor into every marketing channel. For example:
- Email: Include links to share or forward offers in newsletters
- Social media: Run referral contests and highlight brand love
- Paid ads: Use referral codes on landing pages to track ROI
- Website: Prominently feature testimonials, reviews, and advocacy perks
No matter how customers engage with your brand, aim to inspire them to refer others. A multi-channel approach ensures consistency.
Measuring the ROI of Word of Mouth Marketing
As with any marketing initiative, it’s important to track the return on investment of your word-of-mouth efforts. Here are some key metrics to follow:
- Referral traffic and conversions: How many visits, leads, and sales come from referred sources?
- Referral program success: Monitor the uptake and effectiveness of any formal programs.
- Net Promoter Score: This measures customer loyalty and satisfaction on a scale of -100 to 100.
- Social media mentions: An increase in organic social media mentions is a good sign.
- Reviews: More positive reviews demonstrate growing brand sentiment.
- Repeat purchase rate: Referral customers have higher repeat purchase rates over time.
- Surveys: Ask customers how they heard about your brand to identify growth in word of mouth.
Pay attention both to quality and quantity. While more referrals are great, high-quality, high-lifetime-value customers are the ultimate goal.
Related Posts
Putting It All Together
Implementing a word-of-mouth marketing strategy takes work, but the payoff in growth and loyal customers is immense. To summarize:
- Deliver a remarkable product and experiences
- Make it easy for happy customers to refer others
- Create incentives and perks through a formal program
- Equip staff to spot and convert referral opportunities
- Monitor and improve based on customer feedback
- Promote advocacy consistently across marketing channels
- Track ROI using referral traffic, conversions, and more
Leaning into word-of-mouth marketing creates a snowball effect over time. Eventually, genuine referrals and brand love will drive a significant portion of your new business.
Just remember there are no shortcuts. You must wow customers every step of the way. Do that, and you’ll unlock explosive growth through referrals.
Now it’s your turn. Which word-of-mouth marketing strategies resonate most? Brainstorm how you can start harnessing the power of referrals today.
