September 01, 2016

Healthy Business: Word of Mouth

The healthiest businesses I work with do an outstanding job of generating new customers via word-of-mouth.

Think about Betabrand ... they have a customer acquisition program designed to amplify word of mouth.

Of course, they're using discounts/promos to offer an incentive for you to refer a friend. But they also have those goofy glasses that provide word of mouth, they allow you to upload a photo while wearing the glasses to create word of mouth (and you earn a discount in the process).

Zara calls advertising a "pointless distraction" - they have more than ten million Instagram followers, and the imagery creates word-of-mouth that results in new customers at minimal cost. Not the quantity of new customers a catalog generates via a co-op, but that's not the point, because the cost is essentially zero.

Nordstrom has the legend of the person returning a tire to a store, earning a refund in the process. Word-of-mouth.

Every successful company I work with has some form of a word-of-mouth program.

I work with catalogers that have a 40% ad-to-sales ratio. Needless to say, they have no choice but to invest advertising dollars, because nobody is spreading the word on their behalf.

The healthiest companies have an enormous glut of new customers that they cannot possibly attribute back to paid marketing programs.

The least healthy companies obsess about attributing a meager number of new customers to expensive paid marketing programs.

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