Referrals vs. word-of-mouth marketing

Referrals vs. word-of-mouth marketing

Although both referral marketing and word-of-mouth appear the same, the concepts are anything but. Internet, social media and the growing adoption of smartphones have significantly altered the ways in which customers are marketed to – but the core marketing strategies have remained the same.

Word-of-mouth marketing is about creating a buzz for your product or service. Imagine a house in your neighborhood burning down in the middle of the night (they made it out). You, your family, Bob the accountant, old Irene, that jogger guy, heck even the village idiot gather around to talk about the glowing inferno. The next day the discussions travel to the office, gym, hair salon, you name it.

Companies involved in word-of-mouth marketing are those lighting the fires (which in this case is arson, whoops). They are active on social media, in the community, television, radio, and so on finding creative ways to get people talking. (check out this post on Forbes, 4 Tactics To Build Your Word of Mouth)

But chatter isn’t the same as direct referrals. Take for example Oreo’s Super Bowl tweet. Witty, creative, and timely. They captured the attention of millions of tweeters and lots of press to boot. And I am sure their sales benefited as a result – after all 3 out of 4 grocery purchase decisions are made in-store. Creating a buzz improves brand recognition is perfect for cookies. But what about more serious purchase decisions, like those in service-related industries?

With financial services, for instance, 87 percent of buyers turn to friends or colleagues first for referrals – while only about 1 out of every 10 shoppers start with independent research. The same holds true for most insurance, health care, veterinarians, salons, etc.

This is where referrals are the most effective. Contrary to popular belief, referral marketing is not always about asking for recommendations or offering incentives for names. (Asking doesn’t usually work, anyway)

Referral marketing is identifying your loyal customer base and targeting them with specific communication which encourages them to provide referrals to their friends and family. It is setting a referral mindset for your customers and using personal touchpoints the improve the frequency of turning smiling customers into active ambassadors.

Leveraging an active and loyal customer base is a powerful way of not only getting people talking but getting the right people to talking to the right people via referrals.

Want to know one question you can ask to get more referrals?

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