• Wendy Ni

Word of Mouth Is Not Enough

Updated: Jul 27

Marketing? Is it Important?

Why should a business, let alone anyone that wants to be known, even bother with marketing? Simple: raise awareness, build a brand, and increase sales. Peter Drucker from Forbes commented that:

"Because the purpose of business is to create a customer, the business enterprise has two--and only two--basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business."

The Power of Word of Mouth

There was a company called Power 90 Extreme (P90X), the all time number one selling workout DVD tutorial. During its launch, it cost about $100 but spent $200 on marketing in order to acquire the customers. Here was the problem: they got one customer, that shared and told friends about P90X and through word of mouth they were able to lose money on the transaction and gain four without advertising. Some companies believe that they can have that success without marketing at all. Well, we’re sorry not sorry, to prove them wrong.

To measure word of mouth success, one needs to gauge two things:

1. Track the New Promoter Score

A net promoter score (NPS) is a simple survey that asks current customers one question: On a scale of 1-10, how likely are you to refer the product to a service or friend?

Those that leave ratings fall into three categories:

  • Detractors: those that leave ratings between 0-6, these people are considered as leaving bad comments and unfavorable reviews, aka the haters

  • Indifferent: these are the people that leave ratings between 7-8, their mindset is that there is nothing bad or nothing special about the product, they are passive so lucky or not if they even leave a review

  • Promoters: they leave ratings between 9-10, these are the "bless your souls", loyal, hyper enthusiastic kind of folks

To calculate the net promoter score, we will use the above equation and following example.

  • Total people = 20 people

  • Promoters = 9 people * rating of 9 = 81

  • Indifferent = 6 people (they do not count here, so equals to 0)

  • Detractors = 5 people * rating of 6 = 30

Using the equation in the above image, we take the sum promoters and subtract the sum detractors to get the NPS (81 - 30 = 51). If that all seems too much, here's a really easy, simple, free online NPS calculator. In order to generate sustainable and positive word of mouth, the company has to be around a score of 65-75. For context, the brand Chewy, a beloved pet eCommerce business that went public in 2019 had a net promoter score of 70 and they are considered a great business that generates a lot of word of mouth.

2. Product of Consistency

Having a product that is continuously and regularly used every day, helps keep it on top of our minds. People tend to share and recommend things that they use regularly, such as P90X because of high usage. If everyone takes a step back and look at what we are as a business are we a low usage business like any of the following:

  • Car mechanic

  • Roofer

  • Restaurant

How are we going to get people to use and think about the product or service more frequently, so it's on top of our minds? Jonah Berger a University of Pennsylvania professor and author calls this "triggers". If we say peanut butter, we other products comes to mind right now? Of course, we right away think of the other half of peanut butter, which is jelly. Now that is a trigger, we have to link our product to it.

Here's a Thought: Invest in Marketing

Pulling it all back together, word of mouth is not enough! Good word of mouth strategy is built on high usage and high review/net promoter score. But, here's the punch line - even if one has great reviews and people use the product everyday, it's still foolish not to invest into marketing. There is no successful company that doesn't spend money on marketing, which is essentially just communicating with potential customers and other important stakeholders about the company, the products, and the values/culture. Our CEO, Rayce Rollins comments, "We cringe when we clients say things like: "oh we don't believe in advertising. We depend on word of mouth"." Smart businesses will invest 8-10% of their revenues in marketing related activities.

The better question is "What systems do you have in place marketing to mince as effective at moving people through the funnel?". There are four questions that the traditional marketing funnel forces one to answer:

  1. How can you get people who don't care or know about the business, to pay attention?

  2. How can you differentiate your product/service from the other $1 million+ companies doing the same thing?

  3. How an you get people to take action and buy your products/services today "in the short term"?

  4. How do you generate repeat purchases and referrals from existing customers?

There are many answers to the above questions, but one answer that will never suffice is "Oh, we don't do that. We just do word of mouth". So, don’t just stop at word of mouth, it just simply doesn’t cut it. Some may keep thinking that they’ve owned their business for so long and believe that they don’t need it. Well, we’re here to say that word of mouth won’t go to the extent of being able to reach all of the target market and analyze the data that comes with marketing. Since, marketing is a prerequisite for success in a business, overall this is a tool that can really drive revenue and bring new clientele.

Here's a video with further explanation on why word of mouth isn't enough and how it can expand the growth of a business.

#wordofmouth #advertising #marketing #digital #important #increase #sales #revenue #clients #business #customers #nps #netpromoterscore #products #consistency #generate #purchases #referrals #smartbusinesses #triggers #ecommerce #detractors #indifferent #promoters #success #accounting #financialgps

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