When Anne Day launched her business, Company of Women, five years ago, she admits she spent a "fortune" on advertising and promotion. In fact, about 50 per cent of her budget went to newspaper ads, and promotional items, such as post it notes bearing the company logo, as well as gifts for renewing members. Then she discovered something: "If women like something, they tell their friends about it."
So instead of spending all her marketing money on advertising, she began to focus on connecting with other women's networks to promote her business, and on delivering a "quality experience, one they'll remember.
"Then they tell their friends, who tell other people," she says, likening it to the famous Breck hair shampoo commercial, "I told two friends, and they told two friends, and so on, and so on, and…"
In fact, Day believes word of mouth is responsible for 75 per cent of her company's growth, which now has 360 annual members, with many more attending a much-expanded roster of breakfast, lunch and dinner meetings held in Toronto, Mississauga, Oakville and Burlington.
"By maintaining your standards and constantly asking what your customers want — and listening to them," you can deliver a product that your customers will talk about, she says. And the value of that is apparently priceless, in the advertising world.
"Word of mouth," is "the most powerful stimulus for marketing. It beats just about everything else," says Knud Jensen, a professor specializing in small business strategies at Ryerson University's Ted Rogers School of Management.
That's because it's not paid for like an advertisement, so there is more of a trust level with it, he says. "For small companies" — with small budgets — "this is even more important," he says.
So how do you get the word out?
One way is to follow the "old adage" that everyone in your company is a "marketing person," says Jensen. "Think about an accounting person who doesn't see their role as a marketer, but they can still create issues with the suppliers or customers by not being nice or being curt."
Second is managing your reputation," he says. "We buy from companies that we trust."
But how do you get the process started?
"If you're a small company, your financial resources are small," notes Jensen. "You can't blow a million on communications." Which doesn't mean word-of-mouth advertising should be anything less than a well-planned advertising campaign, says Marvin Ryder, who teaches marketing at McMaster's DeGroote School of Business. "Word of mouth is simply relying on consumers to spread the word," he says. But unlike in paid advertising, "a business has no control over the message — consumers can spread the wrong word — or the medium," he points out.
Which is why he suggests it be tied to a specific campaign. "A campaign which rewards someone if they can get a neighbour to enroll in a program, is an acceptable word-of-mouth advertising program. Something casual, like a salesclerk saying to a customer: 'Be sure and tell a friend,' is not much of a program at all," he says.
"You have to do something that causes people to speak about you. If you wait for them to randomly share the information with others, you can't go to the bank."
One of the ways to control the message is by using incentives, he says. Offer a free T-shirt to members of your gym if they bring in a friend for a workout. "Now people will go out and tell your story because they have an incentive," he says.
Another way to control the message is to deliver it directly, he says. "Entrepreneurs can talk about how good they are at the Rotary Club or to church groups." If you're a small entrepreneur, this type of advertising is "the first and foremost tool you have," he says. "Then, if you can, find a way to create a loyalty program" for your first customers, so they become "apostles or evangelists," about your business, he says.
