Updated: Oct 23, 2018
Yes, #wordofmouth or referral marketing can be a powerful way to attract new business. In fact, it is the *primary factor between 20 to 50 percent of all purchasing decisions. As a small business owner there’s no greater validation than when a customer loves our products or services so much that they tell someone else about it. However, though powerful in the right context, this type of marketing can be a very unreliable and slow way of building a business. Even when it’s done right it can take years to build a profitable business using word of mouth alone.
Free publicity and word of mouth is probably the best and cheapest form of advertising. Learn to use it to your advantage. - Richard Branson
Why Can It Take Years?
Because it’s basically relying on others to like you, remember you, and decide to promote you often enough to send a steady flow of new business your way. In a perfect world this might work but we don’t live in a perfect world. What happens if no one refers someone to your business next month or the month after that. What happens if they just don’t remember to or who they refer wasn’t ready or interested? Putting the fate of your business in the hands of others and hoping it will bring success is a recipe for frustration and slow growth at best. So what’s a better, more reliable way to build a successful business and still make word of mouth work for you?
Have more than one way to bring in new business.
Relying on one source of new leads and customers makes your business extremely vulnerable to failure. This increases exponentially when you have no control over that source. It’s much better to have at least 5 or 6 sources of acquiring new customers, including paid media. Investing in your marketing mediums helps you to focus on what works and also gives you the ability to measure return on investment. As the saying goes… what gets measured gets managed and can therefore be improved.
Don’t hope they’ll refer you, encourage it!
Like I said above, word of mouth is powerful when done right. Instead of hoping your customers will talk about you, deliberately encourage it. First give them something they would naturally want to talk about i.e. Wow them! Then, once you know you have delivered top notch service or products, simply ask them to refer you to others they think would also benefit, and make them feel good about doing it.
*Source: Jonah Berger, author of "Contagious: Why Things Catch On".