Repeat After Me: 'Word Of Mouth Marketing Really Works!'

I read an interesting article in the Journal of Marketing recently that confirmed what I've known for a long time: word of mouth (WOM) marketing really works.  WOM has taken a backseat to digital marketing efforts lately, but there's no reason why a marketer can't do both, and at the same time.

In my own experience, WOM (also known as referral marketing) drives a greater number of  customers and more valuable business than any other marketing source.  In fact, referrals account for more of our business than in-bound marketing, and often take only one phone call to close.  In the last half of 2010, a time of significant growth for my company, 60% of our new customers came from a referral. 

The Journal of Marketing article highlights a study conducted by the University of Pennsylvania and Goethe University of Frankfurt, which found that referred customers were both more profitable and loyal than other customers. In the study, referred customers had a higher contribution margin, a higher retention rate and were more valuable in both the short and long term.



While some experts believe that asking for a referral should take place face-to-face, email marketing is a very effective channel for WOM.  There are a few things to keep in mind when adding WOM to email campaigns: 

1.  Make sure to ask for the referral.  Don't assume that since your email service provider offers a "forward to a friend" feature that people will use it.  It's important to devise wording that encourages subscribers to refer your company to friends.  Also make referring easy by not requiring too many steps.  For example, include a referral link to a landing page with a short form asking for minimal information.

2.  Offer an incentive as thanks for an introduction.  Customers and followers are more likely to refer your company to friends when there's something in it for them.  Make the incentive appropriate for the potential value of the sale.  Some companies even have a tiered incentive to reward referrals based on their value.  Thank the referrer promptly with a note and the gift.

3.  Mention the referral incentive in all marketing channels.  Take an integrated approach to the referral program by including the offer in multiple channels, including advertising, public relations, social media, white papers, landing pages, and of course, email marketing.  Since new people will be exposed to your company via the referral program, include an email sign-up form on all these channels, including in all marketing emails.

4.  Track the source of referrals. It's impossible to thank someone for a referral if the source can't be tracked.  Check all links to ensure they are functional and review how people interact with your email.  Use all your email real estate.  For example, a logo can be linked to a referral landing page and tracked by your email service provider.  Integrating email service provider tracking with your company CRM system will allow you to keep tabs on where referrals come from, what happens to them in the pipeline and what their value is.

5.  Keep it fresh.  Eyes will glaze over if the same wording and incentive is used for months, and the results of the referral program will suffer.  Mix it up by including different phrases and keeping incentives current to what the market is demanding.  Offering an iPod Touch today isn't as attractive as it was a few years ago, but offering an iPad will get attention.  Give people a choice of incentives, such as an iPad or a VISA gift card. 

What's the best incentive program you've seen?

3 comments about "Repeat After Me: 'Word Of Mouth Marketing Really Works!'".
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  1. Al Klenk from Quinlan & Company, February 23, 2011 at 11:15 a.m.

    The "Switch and Win " social media driven campaign for Northwest Savings Bank. The very successful campaign was highlighted in AMA's Idea Bank, December 2010 issue. WOM turned into WOW!

  2. Rita from FreshAddress, Inc., February 23, 2011 at 11:20 a.m.

    Great recap of best referral practices...I would agree that when a client is excited about their positive experience, they are willing and eager to share what they have utilized. I have noted that inviting their referral support is most appreciated in terms of future discounts and the thank you note and end of year tangible remembrance is additional icing.

  3. Kristen Smith from WOMMA, February 23, 2011 at 3:53 p.m.

    WOM is extremely successful both offline and online has repeatedly proven. The article does not mention the importance of ethics/disclosure which is also imperative to leveraging WOM to the highest level and in general appropriate behavior in the space and what is in the best interest of consumers.

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