Posted by John Todor on September 17th, 2007
A lot of companies try too hard to push their high-dollar customers to make a recommendation. Just because I spend a lot of money with you doesn’t mean I have the personality to talk about you to my friends. Andy Sernovitz, CEO of the Word of Mouth Marketing Association
The “ultimate question” that predicts future growth is whether the number of customers who recommend you is greater than the number that are neutral or negative. Fred Reichheld, author of The Ultimate Question
Word of Mouth is important to business—right?
But just how important?
- McKinsey & Company says it drives two-third of industries.
- The London School of Economics says strong customer advocacy on behalf of a company is one of the best predictor of top-line growth.
- Inc. magazine found that 82% of the fastest-growing private companies use strategies to stimulate Word-of-Mouth.
Recent research by the Keller Fay Group is producing some very interesting results about the dynamics of word of mouth. They use a single-day diary system called TrackTalk to collect data on word of mouth activities from consumers in the USA.
Here are three finding that will surprise some:
- 70% of word of mouth occurs “face-to-face” and only 8% occurs online.
- Overwhelmingly, consumers have positive things to say about brands by a margin of more than 6 to 1.
- 78% of consumers rank word of mouth as credible at a level of 7 or higher on a 10 point scale.
Here’s our spin on these findings.
Word of mouth is emotionally triggered and emotionally driven. Both the triggering and the emotional expression are harder to achieve online.
We like to help friends and associates have positive experiences and therefore are likely to passionately talk about them. Sure we like to vent about bad experiences but from a social interaction perspective, the negative is less appealing to the recipient.
We trust word of mouth because the person telling us puts the experience in a context that is meaningful to us. Since the peer-to-peer relationship is based on trust, the message is credible.
Word of mouth is a powerful source of influence. While businesses may not be able to manage it, they can stimulate, harness and amplify it.
But how does a company stimulate, harness and amplify it? The quotes above point two different strategies.
Sernovitz’s position is that “Recommendation behavior is not demographic, and it’s not based on purchase history. It’s a separate trait.” His suggestion, “Invite your most active talkers to participate in special events and forums.”
In essence, harness and amplify those customers who are prone to evangelize. In his best selling book, Tipping Point, Malcolm Gladwell described these people as Mavens and Connectors.
Reichheld’s stance is quite different. His Net Promoter Score comes from asking customers the ultimate question – How likely are you to recommend this company/product to others? Customers use a 10 points scale. The net promoter score is derived by subtracting the negative and neutral rating from the positive ratings.
Companies like General Electric & Intuit use Net Promoter scores because is focus attention on where they can improve.
Our take! In the long-haul, it is important to deliver customer experiences that bring customers back and nurture an increasingly positive and passionate customer base. We call this building Customer Equity.
In the short-run, leveraging your most vocal customers is powerful and expedient. However, if the value customer’s gain from interaction with your company is compelling, the impact will be short-lived.
This post is an excerpt from the latest issue of our newsletter Hooked:The Psychology of the Customer Experience. Click on the link to start receiving the newseletter.
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