Word of mouth boosts sales

Growing businesses are overlooking the most cost-effective way of increasing awareness of their product and thereby losing out on a great deal of sales, according to business growth consultancy The Quantum Organization.

Research from Quantum found that four out of five enterprises are not taking advantage of word of mouth referrals, despite the same proportion believing it to be the most important way of gaining new customers. Having an existing customer recommend a product or service to a friend or acquaintance gives it credibility and means the prospective customer is more receptive.

‘Sadly the results of this survey illustrate my experience that many businesses are missing out on a low-cost way of boosting sales by ignoring the power of word of mouth,’ laments Andy Lopata, managing director of networking group Business Referral Exchange. ‘Much time and money is spent on mainstream marketing strategies but many businesses still leave referrals to chance.’

‘Companies of all types and sizes can easily implement systems to encourage referral business from existing customers and contacts,’ believes Quantum marketing manager Vince Golder, who reckons three-quarters of new business can come through word of mouth, but most businesses only get about 20 per cent of the referrals they should be getting.

He advocates a structured approach to gaining referrals. ‘Spontaneous word of mouth is unpredictable and uncontrollable, whereas a structured referral system is proactive, predicable, measurable and manageable.’

The most effective method of boosting referrals is by offering an incentive to existing customers, such as rewards or discounts for referring new customers. And offering staff an incentive, such as a small bonus or gift or extra time off can encourage them to invite friends and family to investigate your product or service.

Marc Barber

Marc Barber

Marc was editor of GrowthBusiness from 2006 to 2010. He specialised in writing about entrepreneurs, private equity and venture capital, mid-market M&A, small caps and high-growth businesses.

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