The Treatment of People Around You
Having positive relationships with customers is key to success - but businesses often overlook the importance of ensuring that others who are involved in delivering the service experience (suppliers and employees) assist in providing good service, as well as accommodating other individuals associated with the customer (the children who are in tow when a woman visits a store), not to mention the perception of the business by the customer in other situations.
The Grapevine Effect
There is a grapevine effect in word-of-mouth marketing: a person who needs a lawyer may ask a friend - and the friend may not know of a good lawyer, but knows someone else who might now - so the word-of-mouth travels through a number of people.
The author suggests that any link in this chain can break down: if the ultimate person making the recommendation names a company, but someone along the way had a bad experience with them that may be unrelated to service (one of their delivery vehicles ran over their cat), the recommendation won't make it through the chain.
My sense is the author makes a bit too much of this: I wonder how much effort a person will make to get a recommendation from the daughter of a friend's sister's hairdresser's brother's pool boy before they either ask someone else or go about finding one themselves.
How Employees Spread the Word
Aside of their conduct while they are on the job, employees can negatively impact a business by their behavior and remarks outside the workplace.
There are comments they make about the business itself, leaking information that is unflattering (the condition of the kitchen in a restaurant), comments made about "work" as a part of their own lives (being unsure if they can repay a debt because their hours are being cut due to slow sales), or behavior they exhibit in front of people who know them to be employees (a retail clerk who acts rudely to a customer who sees him in public).
Except in cases where their conduct is in violation of their employment agreement, or the information they disclose to others is libelous, there's not much an employer can do about this after the fact. Even then, it's punishment of an individual, but does not undo the damage.
The advice the author provides is to be cautious in the selection of employees, careful in their training, and attentive to their general morale. Happy employees work harder to protect the interests of their company, both on and off the clock.
Another note is made about the way a company treats job applicants, even if they aren't hired. Being dismissive of applicants can be bad PR, as they will have a lower opinion of the company. It's worth the effort to be courteous to rejected applicants.
Suppliers
Suppliers to a business are also critical to its own success: consider whether it would be possible to provide the same level of service to customers if a supplier failed to deliver his goods on time, or at all.
For that reason, it's important to promote good relations with your vendor. Pay bills promptly, negotiate fairly, and treat their employees respectfully, to make sure that their support for your own business is consistent.
Any difficulty with suppliers can also affect your reputation: recall that the employees of a supplier also see your actions and have an opinion of your company that they may express to your potential customers.
Business Friends and Acquaintances
Networking is important, especially to a small business that serves a specific geographical area: the people you meet in your daily life, in and out of business situations, know about you and the business you run. That knowledge can help or harm you.
There's a bit of detail on this, but I'm skipping it, as it's not germane to the internet medium.
Individuals Who Spread Negative Word of Mouth
There will be individuals who speak negatively of your business, and you should have a strategy for dealing with them.
Primarily, the author cautions against retaliation. It only breeds further hostility, and may be seen by others as a character flaw on your part. The more fair and forgiving you seem of them, the less credible they seem to others.
If appropriate, try to mediate or arbitrate the disagreement - see if you can settle a legitimate gripe, or at least arrive at a place where the other party feels placated.
It also helps to keep third parties informed of your side of the story, though you must be careful to avoid seeming insincere or divisive in doing so.
Your Behavior in Public
Finally, your own behavior will affect the way in which people perceive you as a businessman, and the way they perceive your business.