Personal Recommendations
Personal recommendations form your existing customers is a far more effective method in attracting new customers who will also become regular customers.
Cost-Effectiveness
Unsolicited personal recommendations cost you nothing in and of themselves, though obtaining them requires a high level of dedication to customer satisfaction. A quote: "If you are performing by a standard of excellence, you don't have to advertise. People know and they'll tell your friends."
In some instances, businesses have eschewed advertising altogether, and don't even make an effort to make themselves know n to the public, on the belief that being promoted by recommendation alone gives their business an aura of exclusivity (the business is a secret among people who are in the know).
Overcoming Established Buying Habits
Consumers are creatures of habit. Unless given an incentive to change their behavior, they tend to buy the same services from the same vendors. Advertising allegedly brings a business to their attention, but it does so at a time at which they may not be seeking it.
However, a person who has a bad experience may seek a new vendor, and generally seeks out the advice of others. Alternately, a customer who has a very good experience is often eager to share it with others, enthusiastically and often.
Basing Your Marketing Plan on Personal Recommendations
Excellence is not an accident, and to earn the recommendations of customers, a business must plan to do specific things as part of its ongoing operations:
- To run the business smoothly on a day-to-day basis (as opposed to being constantly in crisis mode)
- Having enthusiastic and knowledgeable employees
- Offering a product or service that is truly top-rate
- Stand behind your product should anything go wrong
In that way, the concerns of marketing are married to day-to-day business operations, and should have weight in the decision-making process. Most of all, they should be defended when achieving an alternative goal (growth, profit, efficiency) could undermine them.
Effective Recommendations
Trust is a key factor: people accept the recommendations of others whom they trust. This seems axiomatic, but is of concern when a company actively seeks to promote itself by word-of-mouth.
Providing incentives for individuals to endorse your company to others (a discount or premium for recommending others) can be counterproductive, for all of the reasons above: having the wrong kind of person recommend your company, for mercenary reasons, can be damaging.
Recommendations must also be backed by expertise: the person making the recommendation must be perceived as someone who knows more than the person receiving it, or at least knows more about the subject in question.
Ineffective Recommendations
It is counterproductive to have word-of-mouth recommendations from individuals who do not understand the nature of your business, or your products, or your target market. It may be recommended to the wrong customers, for the wrong reasons.
Also, be aware that one who recommends a company bears some responsibility for having made the recommendation: if the quality of your service is poor, it reflects upon their judgment and can affect their esteem. And so, people are reluctant to make recommendations to others unless they are confident.
When Not to Rely on Word of Mouth for Marketing
Word of mouth is only effective for companies that provide a best-in-class product or service to their customer base. In some instances, companies are well aware that their product is substandard: they often offer a product of inferior quality at a discount price. The only thing that people will say about them is that they are "cheap."
Or, especially in businesses of convenience (restaurants in airports r near tourist attractions), the primary value proposition is convenience rather than price or quality. Word-of-mouth is of limited value to such businesses, as they rely on a captive audience (nobody's going to book a flight just to dine at an airport restaurant).
Even for businesses that offer genuine quality, they should be reluctant to promote themselves if additional volume will require them to sacrifice quality in order to produce in quantity. This creates a short-term increase in revenue, but a long-term damage to the reputation of the business.