Word of mouth business is often talked about as the pinnacle of business. People wear it like a badge of honour.
‘All my business comes from word of mouth’ they say.
Now let me be clear, I think good ‘word of mouth’ is a positive thing for any business.
However, as a marketing strategy, it can be very damaging.
For me, there are four main issues with ‘word of mouth’
- It breeds complacency
- You can’t rely on it
- You can’t scale it
- It makes it more difficult to increase your prices
Let’s tackle these one by one.
It breeds complacency
I’ve spoken before about how important it is to have more than one marketing tactic at your disposal.
One of the main problems I see with people who boast about all their work coming from word of mouth is that it becomes their one and only tool in their marketing strategy.
If you could even call it a marketing strategy.
You’ve seen the comments on social media.
‘I don’t have to advertise; all my work comes from word of mouth’
This might sound like the holy grail for a lot of people but trust me it isn’t.
For example, if you are wholly reliant on referrals and loyal customers coming back to you what happens if the phone just stops ringing? What happens if the phone doesn’t ring for a week, or a month?
It can happen. It often does over the Christmas/New year period.
When this happens, people start to panic. They’ve not had to advertise in a long time. They have forgotten how to generate new work for themselves.
What about if you have to move to a new town where you don’t know anyone?
Suddenly you have no ‘word of mouth’ business to fall back on and you’ve become very rusty on generating new customers.
The point is, too many people think that the pinnacle of business is to not have to advertise any more. This shouldn’t be the case. If you are serious about growing a strong and stable company, you need to have strategies in place to generate leads on a consistent basis.
Remember, if you ever want to sell your business then you need to be able to take yourself out of the company and know that it will still run at the same level.
If your name and personal reputation is all that generates business for the company then when you leave, the company dies. Meaning the business is not worth anything.
But what if you have no interest in selling your business?
Well, being able to take yourself out of the business has other benefits. For example, you could take on staff and work fewer hours. Or just take more holidays.
You could come off the tools completely if you feel like your body is starting to give up.
Trust me, I’ve spoken to enough painters and decorators to know you all have bad knees, shoulders and backs.
Perhaps most importantly, it means that if anything ever happened where you needed to take an extended period of time off work, the business could survive without you. Meaning you can still generate an income.
You can’t rely on it
As I mentioned earlier, ‘word of mouth’ is great, until the phone stops ringing. It is this unreliability and unpredictability that makes it so dangerous.
If you’ve ever said to yourself the following words:
‘I don’t know where my next job is coming from’
Then you know how unpredictable work can be when you don’t have a solid marketing strategy.
Most people will tell you that it’s just one of the stresses of being self-employed.
‘Something will come up, it always does’ they say.
‘Have faith’ they tell you.
Well forgive me on this one, but I don’t believe simply waiting for the phone to ring and having ‘faith’ is a solid business plan. And for any business that is solely reliant on ‘word of mouth’ then this is essentially your whole business plan and marketing strategy.
It is simply not reliable enough to build a stable business.
So, make sure you always have other ways of generating business. Or else someday you’ll be sat staring at the phone, praying that it rings.
You can’t scale it
If I spend £100 per month on Facebook ads and on average it generates me 10 enquiries a month, 5 of which turn into actual jobs then I have a marketing strategy I can scale.
I know that if I double the money, I put in at the top to £200, I will likely get double the amount of work out at the other end. 10 paying contracts.
It’s not an exact science but it’s reasonably reliable. Especially on a smaller scale like this.
This gives me the foundations to grow a business.
Something you simply can’t do when you rely on ‘word of mouth’.
Ever heard people say they don’t want the stress of taking on staff? Because they can’t always guarantee them enough work?
This is because they don’t have a scalable marketing strategy.
It’s more difficult to increase your prices
Remember how you said you’d do a good price for your mate because you were a bit quiet? Or because you were just starting up your company?
Remember how that led on to the next job as you were recommended as doing a great job for a very reasonable price?
Then before you knew what was happening, most people you were pricing jobs for already had a rough idea of what you’d charged your other customers?
This is a trap all too many painters and decorators fall into. You rely on word of mouth as your marketing strategy, but because every customer tells the next customer what they paid, it is almost impossible to put your prices up without someone thinking you’re ripping them off.
In the worst cases, you end up doing ‘mates rates’ for so long it just becomes your normal rates. Then you get to the end of the year, and realise you’ve been nothing but a busy fool. Working 6 or 7 days a week just to break even. Not even thinking about making a proper profit.
There is of course a place for ‘word of mouth’ in any good marketing strategy, but you must not become reliant on it. Amongst other things, when you rely on word of mouth you are not in a strong negotiating position. You’ll struggle to put your prices up, because when you do, you are told you are ripping people off. Plus, you can’t afford to turn down work, because you don’t have a clear idea of where your next customer is going to come from.