Marketing executives gasp when someone says marketing is not needed; BUT, in some companies, marketing success is achieved with little direct marketing investment. The key is word of mouth, which is not created by marketing, but by the end-to-end customer experience. Why should marketing want to pursue this? You achieve greater success with a lot less work and effort!
Buy customers with marketing or have them bring you new customers for free?
The traditional approach to getting new customers and filling the revenue bucket is to create awareness and pursue customers with your sales force. A problem is that most companies have leaks in the bucket caused by poor service and unpleasant surprises. Customers leave due to problems or sensitivity to price as illustrated in the figure below.
Word of mouth adds new customers with no additional marketing expenditure. Further, a great customer experience is usually less expensive (less cleaning up of messes) and creates customer willingness to pay a premium price. The Word of Mouth based marketing model is shown below.
My original research for The Coca-Cola Company in 1978 found that twice as many people hear about a bad experience as a good experience. CCMC’s 2013 National Rage Study found that it is now about three times as many are told. While social media is growing exponentially, it is still accounts for less than half the total number of people told about a poor experience.
Does this strategy really work? You bet!
Best experience companies like Chick fil A, USAA and Harley Davidson get 70 percent or more of their new customers via referrals from existing customers. The president of The Cheesecake Factory reported that his company’s marketing expense is less than 25 percent of that of its direct competitors in part due to positive word of mouth.
CCMC’s 2013 National Rage Study found that almost 20 percent of consumers regularly post reviews and almost 40 percent of consumers now use them for purchasing decisions in arenas like travel, restaurants and home services. One construction company I work with gets most of its new business (jobs of $100,000-$300,000 each) from Angie’s List ratings. Goodwill Industries of Washington DC (GWDC) has created a Goodwill Fashionista” to give practical, humorous advice on using “vintage” clothes from Goodwill. She has a following of over 5,000 and sales are up over 30 percent since GWDC enhanced both customer experience and the online community.
To get started:
1. Measure your current word of mouth
Ask a random sample of recent customers how many others they told about their experience and what they said
2. Create a remarkable customer experience
Start by eliminating the most prevalent customer problems and creating reasonable customer expectations
3. Aggressively solicit complaints so you can prevent negative word of mouth and turn around grumpy customers
Assure that problems get fixed — the best stories result from things gone wrong that are turned around
4. Compare what you spend to win a new customer to the cost of handling the average problem
It is usually at least five times as expensive to win a new customer
5. Facilitate word of mouth
Provide easy channels for customers to spread the word
About the Author
John Goodman is Vice Chairman of Customer Care Measurement & Consulting. For more, see his book Customer Experience 3.0 and my e-book on the Salesforce website, Using Service to Enhance the Bottom Line. Follow him on Twitter @jgoodman888. Get a care package of recent articles by emailing him at email@example.com.
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