Business owners tend to rank word of mouth marketing as their favorite form of “free advertising”. But like most things in life, you get what you pay for.

Here are five reasons why word of mouth marketing is the best and worst form of advertising.

Word of Mouth Marketing Establishes Credibility

Who do you believe more: the guy in the TV ad extolling the virtues of a product, or your best friend who tells you about another one?

Nearly everyone would answer: “my friend, of course”.

Hearing about a new product from a close friend carries more weight than an advertisement designed to make you to spend money. This is because we naturally trust the advice of someone we know over the seemingly manipulative messaging of a business.

The value of a personal recommendation cannot be understated. 90% of consumers believe the endorsement from a direct referral, which in turn increases the chances the person will buy. Harnessing the power of word of mouth marketing greatly improves the odds that a potential customer will choose your product over another.

Furthermore, if you are lucky enough to have thousands of brand loyalists doing your marketing for you, you stand a better chance of bringing in an exponentially larger share of new buyers without having to spend more money on advertising.

Word of Mouth Marketing Is NOT Free

This is probably the biggest misconception about word of mouth marketing. For starters, you most likely had to spend money to get your first buyers through the door. Your upfront costs have to be factored into whatever conversions come by way of word of mouth marketing. While that may lower the overall cost per acquisition, it still has a price tag associated with it.

Additionally, there are hidden costs associated with controlling the buying process so that the power of the recommendation does not disappear. Specifically, your company must engage with the new buyer in a way that lives up to the hype. More on that later, but imagine the effect a bad encounter would have on your reputation after a customer comes to you expecting a better buying experience. This brings up our next point.

Word of Mouth Marketing Is Risky

You can’t predict how people will promote your brand. Word of mouth marketing puts the advertising process in the hands (or mouths) of strangers. They can say whatever they like about your product… some of that may be good, some of that may be bad.

Your product can be presented in an unrealistic fashion, say for example if someone goes a little overboard hyping up your product. What happens when the buyer decides to purchase and doesn’t share the same feelings as the person referring the product? They’ll be unlikely to recommend it since the actual experience didn’t live up to their expectations.

Conversely, someone can talk negatively about your product if they experienced a defect or an incident that is outside of your control. An example of this might be when a part breaks or they misuse the product. These simple incidents can quickly break the chain of the word of mouth buzz.

Word of Mouth Marketing Is Uncontrollable

Whether we like it or not, the Internet has opened up a myriad of ways to spread the word, for better or worse, about your company. Review sites, social media, message boards, email, and private messages have become advertising channels where your product is being shared with other potential buyers.

To use a cliché, it’s the Wild West, and you can’t control it.

Although there are techniques available to managethis online “word of mouth” activity, ultimately, you’re at the mercy of strangers. One bad experience or one ill-worded tweet can cost you thousands of dollars or possibly your entire business.

Let’s break down the numbers here…

97% of people read online reviews about local companies.

90% of people will visit a company with positive reviews, and 86% of people said they were influenced by negative reviews.

80% of buyers have changed their minds about buying something after reading a review online.

A single negative review can cost you 30 potential customers.

What do we know about negative reviews? Many times, it’s a disgruntled person with unrealistic expectations or it’s a person who takes to the Internet to trash your company in revenge for not complying with their demands. Additionally, people are more likely to say negative things online that they’d never say in person, which guarantees that your review will include unfair or exaggerated descriptions from the reviewer’s perspective.

Unfortunately, most people read negative reviews as a balance to the 4-star and (possibly fake) 5-star reviews they see online. Although these people may not believe the entire story as written, the negative review still has an impact. It colors the perception of your product or company, and it tarnishes your brand regardless of its veracity.

Word of Mouth Marketing Requires Work Before, During and After the Sale

In many ways, word of mouth marketing is the most difficult form of advertising. The buying experience must be solid. The product must be reliable and live up to the expectations of your customers. The service after the sale and warranty process must be top notch. If anything breaks down during this cycle, you can expect word of mouth marketing to work against you.

If all of your conversions and servicing happen online, your website better have a user experience that easily leads the buyer into the funnel while giving them all of the information they need to make an informed purchase. For returns or questions, communication with you must be responsive and satisfy the client to the best of your ability.

If your company operates with a brick-and-mortar location or provides direct service to the customer, the entire client-facing side of the business must be in order. The sales team must be friendly and helpful. The fulfillment process should be efficient with as few delays as possible. Your ability to issue refunds, replacements or credits needs to be gracious, fast, and polite.

In the two scenarios above, if anything is amiss, you can expect your word of mouth marketing to suffer.

A Well-Rounded Approach

Should you take advantage of word of mouth marketing? Absolutely.

Should you go above and beyond to manage the risk and your reputation? Yes, definitely.

Should you put all of your eggs into the word of mouth basket? No.

Most companies would never think to do business solely with word of mouth marketing. There’s no guaranteed path to success for the reasons listed above, and you’d likely go bankrupt by the time you achieve the results you need. A comprehensive marketing plan is necessary to generate revenue that grows your business and expands your reach.

Word of mouth marketing is one tool in a large toolbox. It just happens to be incredibly powerful. When done correctly it can have an amazing impact on your bottom line. When done haphazardly, or if it’s ignored, it can shut you down for good.

Our advice is to think very carefully about your brand’s purpose, your unique value, and all of the steps in your process that touch the client. Map out a comprehensive plan that engages the customer from first exposure all the way through to support. Insert methods along the way to manage customer expectations and deliver the best possible experience.

Create a plan for responding to online reviews – positive and negative. Develop a messaging strategy that builds on your strengths and the potential feelings buyers have after working with you. Run paid ads that play on your strengths and are consistent with customer feedback. Go from top to bottom and discover how you can build up your client engagement so that each buyer comes away as a hardcore brand loyalist.

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