Word-of-Mouth Marketing Is NOT Marketing

It’s often with pride that CEOs and business owners say their businesses have grown solely through referrals or what’s commonly called “word of mouth.” It happened again recently in a meeting with the CEO of a 2,400-employee, multinational technology services company.

Despite this firm’s success to date, word-of-mouth is not marketing.

Before you defend word-of-mouth as a “strategy,” hear me out. Word of mouth and referrals are an effective way to increase the sales of any business. It’s especially useful for start-ups with limited time, budget and staff to devote to true marketing. But it’s only one weapon among an arsenal of other more powerful methods that lead to long-term success.

For middle market companies—truly any companies beyond the start-up stage—to rely solely on word of mouth is a huge mistake. CEOs, senior management and business owners are literally putting the vital task of acquiring new customers into the hands of people who don’t work for them! This point is so important, I’m going to repeat it. You are putting the vital task of acquiring new customers into the hands of people who don’t work for you!

Here’s the counter argument given by CEOs and others: “Well, it’s worked for us so far.” Yes it has, but at what cost?

• With proactive marketing, could the company have built a greater percentage of marketshare?
• With proactive marketing accompanying word of mouth, how large would the company be right now?
• With more customers and a bigger pipeline of prospects, could the company have increased its fees or prices, and focused on more profitable clients?

“If you have good word of mouth, you don’t need proactive marketing,” said no one ever at Apple, Sony, McDonald’s, Microsoft or IBM. Apple has good word of mouth, right? There are thousands— tens of thousands – of Apple fans who are constantly chatting up Apple products. With all this word of mouth, Apple still believes it is necessary to promote themselves via public relations, advertising and a range of other marketing vehicles. Why? It’s not because its senior management is dumb, I’ll tell you that.

Companies market to either expand marketshare or to keep marketshare. Apple and all those big-name companies are marketing from positions of strength. They have good products—just like the CEO of the tech services company I met with recently. His firm doesn’t have the marketing budget of a Fortune 500 company, but he doesn’t need it to supersize his firms’ growth. He does, however, need to devote a certain percentage of his revenue to marketing.

Not convinced? Here are three reasons for committing to marketing initiatives that go beyond word of mouth:

1. It will proactively enhance a company’s word-of-mouth business development.
2. It can promote and build credibility for new products and services – where there is no word of mouth (because they are new)
3. It can help a company break into new markets or industries where there are few or no customers, and thus, no ability to leverage word of mouth

To provide an example of how this works, consider the company which decides to dip its toe into the public relations water. A story is secured about the firm’s services and expertise in an online news outlet. That story is emailed by the firm to its customers, and is posted on LinkedIn, where customers “follow” the company. These customers see the story, and it reminds them of how happy they are with the services they receive, and so they share the link (and the email) with business associates outside their firm. Viola! The company has jumpstarted its word of mouth “effort” via public relations. And when I say “jumpstarted,” I really mean “multiplied.”

And that’s just an example; the tip of the proverbial iceberg. An accounting firm client – one which already understood the power of marketing – realized that an IRS amnesty program for a specific type of investor was closing soon. The CPA firm asked if we could promote the firm’s ability to help these investors navigate the IRS amnesty arrangement. Obviously, word of mouth was not getting around – or at least not getting around fast enough – to help our accounting firm client before the amnesty program closed. Several well-placed stories in media read by these investors resulted in more than 80 leads, 36 of which were converted into clients.

This accounting firm knew what CEOs and business owners already instinctively know: If there’s an opportunity, it needs to be proactively pursued. Leaders don’t sit back and hope others mention their companies’ products and services to others, who may or may not act on this information. They do their job – which is to be their own most vocal advocate.