WOLFBITES - Issue 43

What every small business owner needs to know about
the downside of word of mouth advertising

Myths versus Facts, the subject of a small business marketing blog by copywriter Wolfgang Franke, who is also President of Words at Work, among the best ad agencies in Toronto for small business advertising and marketing, including social media advertising and video marketing.

Are you ready to hear the dirty, rotten truth about word of mouth advertising?

You had better sit down first, especially if you are among the majority of small business owners who say word of mouth advertising is their number one source of new business.   

I know, I know. You love word of mouth advertising because it is the one form of new business generation that costs nothing. You just do a good job and the new business comes flooding in year after year.    

At least that is the myth. The truth is much less appealing: word of mouth advertising is not sustainable for two reasons:

  • The typical referral network, comprised mostly of friends, family and neighbors, shrinks over time (even with the amplifying potential of social media)
  • Many of your referral sources are good for only one referral

The fruits of word of mouth advertising are sweetest in year one. Year two? Big drop off. Year three?  An even bigger drop off or – worse still – the out of business sign goes up.

In my mind, you do not have a legitimate business until you can attract a sale from someone who is outside your referral network (not a neighbor, friend or family member). To do that, you need to advertise over a sustained period (months), a necessary commitment because the average first-time sale requires about seven touches (views or interactions). No single-shot advertising, where your blow your entire budget on a single placement.

Don't get me wrong. Word of Mouth advertising is a good source of new business.  But it should never be your only source of new business.  

Why? You need multiple media to reach your entire target market. At a minimum, you should be active on three different media, selected to reach your best prospects at least cost. Relying on just one option (Word of Mouth) could mean you are missing out on 50-75% of your potential sales.

Still not convinced? Here is another dose of reality: for every effective Word of Mouth referral, there are three that were forgotten in a moment, or worse still, not even noticed because the person delivering the referral lacked the sales skills required to deliver the right message at the right time.  

Remember: to reach your entire target market (a necessary step to maximize sales), you need a multi-channel strategy and a budget to execute that plan. There are no free rides.


Wolfgang Franke is President & Creative Director of Words at Work Advertising & Marketing, a full service communications company established in 1988. Our growing list of valued clients are found throughout our local market, Markham and the Greater Toronto area, across Canada in cities such as London, Ontario, and Edmonton, Alberta, and an expanding list of international locations ranging from The Big Apple in New York to Kanturk, Ireland.




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