Jan 30, 2014

The Downside of Word of Mouth Marketing

Every brand wants referrals. It’s a mark of excellence. There’s nothing more rewarding than clients that love you so much they sing your praises and refer you everywhere they can.

But there’s a downside. If the majority of your new business comes through referral your brand may not be living up to its potential. Your brand may be stunted.

There are five pitfalls of relying too heavily on word of mouth marketing.

1. Stuck on past successes

Your clients love you, because you delivered results. And they’re happy to tell their friends and colleagues what your firm did for them.

The challenge is that was the work you did previously. Have your products and services evolved over the past three years? Do you have new services to sell?

If so, your referrals may not be interested in what you can do today. They may only be interested in what you’ve done previously.

2. Harder to raise your rates

Inflation is part of any business. Our rates rise. Sometimes they rise to support market conditions. Sometimes they rise, because you acquire new skills and expertise. Sometimes they rise to change the brand’s positioning.

Client referrals are usually packed with a price expectation. People often share what services they purchased, and what it cost. They’ll reveal your past rates.

When it comes time to pitch your current rates you may face resistance. The new clients will ask for the old rates, and it’s hard to say “no.”

3. Perpetually small clients

It’s hard to move up market or increase your average size sale when you’re too dependent on word of mouth referrals.

Clients tend to refer to their peers and suppliers. These organizations may have similar needs, but in many cases they may need less.

It’s hard to chase higher value clients when you’re dependent on referrals.

4. Limited market reach

There’s only so far word of mouth marketing can take your brand. You’ll connect to prospects that are two to three degrees apart from your existing clients.

If you’re looking for more growth you need to engage new audiences. You need to reach beyond your client base and find new sources of customers.

5. Marketing capabilities atrophy

You can never predict when the referrals might dry up. Don’t place all your marketing eggs in one basket. Reach beyond word of mouth marketing, and create a portfolio of marketing initiatives that keep your sales funnel full and your brand vibrant.

Client referrals are gifts. They accelerate your business, and prove you’re doing great work.

But never stop marketing. Keep working to reach new markets, explore new channels of communication, and push to create a robust marketing engine.

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