When it comes to bringing prospective buyers to your door, your customers can be your most valuable, and untapped, resource.

Word-of-mouth marketing, as the name suggests, is promotion carried out by individuals who endorse a product or service. Most commonly it occurs when one of your customers recommend your solutions to other potential purchasers.

Why word-of-mouth marketing is an important marketing tool

Today's consumers are smart. We're surrounded by marketing all day, and have become highly sceptical of its messages. Rather than believe what a company says about their products or services, we are more likely to take notice of someone who has had direct dealings with an organisation. Your customers are not only a more credible source of information, but they can provide insights into the best ways to deal with your organisation to extract maximum value from the transaction.

There are also specific situations where the risk of making the wrong decision is high and can have long-term consequences. In these situations it is often easier to ask for a recommendation from a trusted source than to do all the research yourself. Hiring new staff is an example of where the risk and cost of making the wrong decision can be far reaching. Asking those who have experience working with people if they know of some one they would recommend for a role helps to reduce the chance of making a wrong decision. In this way, word of mouth marketing is used to benefit from the experience of others.

The value of effective word-of-mouth marketing

Word-of-mouth marketing is particularly effective in attracting qualified leads, that is, people who are actively seeking your type of product or service. These prospects are more likely to buy when they make contact with your organisation, than people who are not "in the market". In this way, word-of-mouth marketing can be more targeted than other forms of marketing as it is directed at those who are at the point of making a purchasing decision.

Another advantage word-of-mouth marketing has over other forms of promotion is its ability to reach potential customers. No matter how large an advertising budget is, it's never going to be in all places at all times. It won't be at a friend's barbeque as two people stand, turning sausages on the grill discussing which model of new car is best. Where your promotional budget may confine your reach to certain broad groups of potential clients, word-of-mouth marketing provides a whole army of customers, carrying out a grass roots campaign promoting your business.

Looking at its value from a different angle, when word-of-mouth marketing is positive, it can be the most cost effective promotion you can undertake. That's because your customers don't charge you for their opinion or recommendation and their referral is free of charge.

How to make word-of-mouth marketing work for your business

The most effective way of making word-of-mouth marketing work for your business is to provide exceptionally good service to each and every one of your customers. This marketing is based purely on customer experience, so every interaction with customers is crucial to generating a positive result.

Customer loyalty programs that reward customers for referrals that result in sales have been used effectively in many industries, however, they are not suitable in every situation. If you are considering introducing a referral program, you should engage the services of a firm that specialises in these types of programs, as they can be costly to implement, and you need to have measurement tools in place to evaluate their effectiveness as part of your overall marketing spend.

Public relations firms are another specialist source of skills that can be used to influence the word-of-mouth about your firm in the media. Many organisations choose to take this role in-house, and have a dedicated resource focused on managing an organisation's relationship with the various media outlets.

Word-of-mouth marketing is a powerful tool that can add significant value to your bottom line. Along with referring new business and qualified leads, you can use its underlying principle to focus your employee's attention on your customers, and ensuring each and every transaction your customers have meets or exceeds their expectations.

Useful links

The Australian Direct Marketing Association (ADMA) is the body for direct marketing service suppliers and organisations that conduct direct marketing activities. ADMA publishes details of its member organisations, including direct market service providers on its website.
http://www.adma.com.au

The Public Relations Institute of Australia (PRIA) represents public relations and communications professionals. PRIA publishes PR related articles and other resources and a register of PR consultants on its website.
http://www.pria.com.au/