When Customer Loyalty Isn't Enough, Turn to Word-of-Mouth

By Nicole Fallon, Business News Daily Assistant Editor, 29-07-2014

There's no question that customer loyalty matters. According to a recent survey by digital business solutions provider Huzzah Media, repeat customers and word-of-mouth referrals are the best sources of revenue for 80 percent of small businesses. But are you focusing enough on the latter to sustain business growth?

While investing in remarketing campaigns and loyalty programs is certainly a good strategy, you need to place just as much emphasis on capturing the customers you don't have yet, and these prospective customers are often obtained by word of mouth, experts say.

"In today's always-on world, consumers are constantly talking about their personal experiences with stores, brands or products, and they make a big impact on whether they will shop with you in the future," said Lance Brown, vice president of product development at Huzzah Media. "Personal anecdotes are generally what resonate with new customers, since direct feedback is viewed as more reliable. Businesses that implement a referral program are encouraging their customers to 'share the love' and, therefore, can help drive more business."

When it comes to acquiring new customers, it seems fairly obvious that reaching out to a word-of-mouth referral — especially via social media — is easier than chasing down brand-new leads.

"The average Facebook user has 150 friends, and the average millennial has 200 to 500 friends on Facebook," said Sastry Penumarthy, co-founder of mobile customer relationship management company Punchh. "Friends are more likely to not only purchase from brands their friends have recommended, but also to keep coming back. So when the right rewards are in place for loyal customers to spread the word using social media, email addresses, phone contacts, etc., the ROI of referrals-based campaigns tends to be far more cost-effective than traditional marketing campaigns to reach new potential customers."

Brown and Penumarthy shared their best advice for encouraging word-of-mouth referrals from existing customers, and turning those referrals into loyal customers themselves.[Word of Mouth Still Rules for Brand Advocacy]

Focus on the customer experience

No matter what product or service you provide, your top priority should be to ensure that your customers have a great experience with your brand. Customer loyalty — and, by extension, referrals — will follow naturally from there.

"Customers who have positive experiences become loyal customers," Penumarthy said. "Loyal customers are more likely to spread the word of mouth about their favorite brands and also refer their friends. So, to encourage word-of-mouth referrals, brands need to focus on positive customer experiences."

Offer rewards for referrals

Customer loyalty programs are often based on a system of rewards for making purchases. Offering customers an additional incentive for referring a friend is a simple but effective way to capture the potential word-of-mouth market.

"Give a specific discount or offer to both parties," Brown told Business News Daily. "This incentivizes your regular customer to talk to their friends about your business or service, and their friend a reason to shop with that business."

Listen to feedback

In today's world of instant communication and social media updates, customers are more likely than ever to post about a brand experience and share it will their followers across their various networks, whether it's good or bad. Keep a close eye on what customers are saying about your brand so you can respond appropriately.

"It is crucial for brands to listen to and address customer feedback, so that when they have a bad customer experience, the right action is taken to rectify their experience or to compensate them appropriately," Penumarthy said. "At the same time, consumers are also equally likely to share a positive customer experience. This approach typically starts a virtuous cycle."

Source: http://www.businessnewsdaily.com/6874-word-of-mouth-referrals.html

Originally published on Business News Daily.