Driving Word of Mouth Referrals: 5 Research Findings and 5 Tips

The Challenge: Companies rely on customer referrals to bring in new business. But, they continue to struggle to interact, listen, and respond in a manner that provides the engagement and motivation for customers to actually provide those referrals.

Online customer word of mouth interactions and reviews have always been a part of Google, which now has new rules in place that will boost business reviews to a greater degree of importance in 2014. For example businesses will now be able to feature a small 67 character review right under their PPC ad. Additionally, Google will gather and display photographs, comments, and reviews in organic search results if a prior related search had been commenced.

Five new findings regarding word of mouth marketing have emerged from thousands of hours of Voice of Customer research conducted by our firm, ERDM;

• Engaging and competitively differentiating customer experiences are the foundations of today’s customer relationships.

• Personalization of content, communications and experiences per customer's individual preferences are proof points that you care about your customers.

• Spray and pray blasts yield ever lower response rates and hurt your brand.

• It’s not about self-serve. It’s about providing customers with guidance and education which provides value and saves time.

• Authenticity, storytelling and emotion are the most powerful elements of marketing communications.

One especially innovative organization that has embraced deep customer engagement is Thrillist Media Group, the leading men's digital media company. They have focused on differentiating themselves through personalization across channels, to their savvy male audience. Per Ben Lerer, Co-Founder & CEO of Thrillist Media Group, "Word of Mouth Marketing has played a huge role in our growth... The key has always been to think about our content creation purposefully: why does someone need this information and how will they be better and have more fun as a result of it."

Examples of how Thrillist has engaged customers to buy and be brand advocates include;

» They refined their marketing lists to identify specific audiences for relevant “This is recommended for YOU” emails sent on selected products.

» They have taken the time to understand the personality as well as the purchasing history of their customers in order to present them with a humorous display of products portrayed to make them “disturbingly more handsome”.

» The company took measures to speak to their customers in a consistent tone and “be the brand” in every channel. And, though each medium was customized for its own unique experience, it presented a concerted and consistent personalized message for its consumers.

This resulted in;

» Increased traffic to the site
» Decreased “unsubscribes” by 50%
» Increased engagement by 15%.

5 Takeaways to Cultivate Customer Referrals:

1. Create methods of direct conversations. Give customers ample avenues to engage in conversations with your company through the touch points of their choice.

2. Develop strategies for active listening. Let customers know that you are listening and that you are giving them empowering levels of knowledge. Customers will not provide a referral if they do not understand the company, the products, or your company’s perceived value. Empower them with the knowledge to go forth and tell others what they’ve learned.

3. Provide a consistent value-driven customer experience. Customer’s own reputations are on the line when they recommend your company to others. By providing them with good customer support, it gives them confidence that others will have the same high quality customer experience.

4. Be humble. Acknowledge what you don’t know about how your customers truly define engagement. Ask for voice of customer insights from your customers and then trust their wisdom and act on their recommendations.

5. Achieve frictionless, high-value, engagement across every medium in the multichannel mix. And, select channels that serve the customer. For example, texting an offer is intrusive, but using text as a reminder for something they want is value.

3 Tips for Involving Customers With Your Brand

The Challenge: Companies need to involve customers with their brand by providing emotional connections that drive engagement and purchases.

Here are 3 tips to help you achieve greater brand engagement.

Tip #1: Customers project how they see themselves in your brand attributes.

In an, E-Score study on the Rankings of America’s Top Brands, it was noted that, “a… brand’s attributes and personality can be an extension of how the consumer wants to represent [themselves] and connects to what they expect to achieve from a product or service.”

Tip #2: A purchase is a viewed as a form of self-expression by consumers.

In a study from University of Geneva on Brand Value and the Respective Role of Brand Sensitivity, Situational Involvement and Enduring Involvement it concluded that there is a predominant role in how a customer views their self-expression as it relates to a brand purchase;

• Interaction is a predictor of purchase intent.

• Customers’ situational involvement (linked with anticipated usage) may have a higher impact on the brand purchase intention than the actual perceived value of the product.

Tip #3: There has to be an emotional component to engagement in order for involvement to take place.

It was noted in the International Review of Management and Business Research study, “Investigating the Role of Brand in Forming the Consumer Involvement” that in order to understand consumers’ behavior, knowing the structure of consumer involvement is highly important

• Brand reputation, loyalty, awareness popularity, and perceived quality all have a significant correlation with consumer involvement.

Online retailer, ModCloth has put these key facts into action by developing a customer base that is highly engaged and involved. They have come up with unique strategies for turning customer insights into innovative website features and relevant content;

• CEO Eric Kroger had this to say regarding customer involvement, “Our vision and where we believe the industry is heading is retailers who align behind distinct communities of customers, and those retailers understand those customers better than any other retailer.”

• From the moment that a customer arrives on the site they are invited to become a part of the ModCloth Community.

• ModCloth’s “selfie” gallery on their App (featuring shoppers wearing the company’s clothes) has increased in terms of involvement by 60 percent since it was launched.

• The company announced that it has surpassed  $100 million in annual revenue last year—well over 40% growth year over year—and it largely attributes this success to a focus on the customer and its fostering of a highly involved customer community.

3 Key Takeaways from the strategies ModCloth uses to involve customers:

• Individualized product recommendations based on actual visits and viewed items.

• To strengthen the connections, when shoppers arrive on site from social networks, the retailer displays the product or promotion that prompted the click, while also introducing these visitors to its overall brand. 

• The company makes sure it presents customers with personalized, yet fresh, relevant products and shopping features on every visit to give them a reason to keep coming back.

It's How They Want to Buy…Not How You Want to Sell

The Challenge: Companies that focus on what they want to sell — not how customers want to engage — miss the boat on opportunities to drive initial and ongoing sales.

Dunnhumby recently released results of its Customer Centricity Index (CCI) study which measured how well retailers are responding to the needs and wants of their customers — through the eyes of their customers.

The findings are important for all businesses wanting to better connect with customers:

• Companies with higher CCI scores tended to have higher long-term comparable sales growth over a two-year period.

• True understanding of what drives a customer to a brand is an insight that differentiates category leaders from competitors.

• A strong customer experience that meets customer needs had the strongest impact on customer centricity and highest CCI scores/rankings.

• Price was important to customers but was less about "lowest price" and more heavily tied to perceived value.

• Companies that provided the opportunity to give feedback and have interaction were rated higher.

One company that took on the challenge of developing a customer focused business strategy is United Airlines. Starting in 2010 during their merger with Continental they began to build richer customer profiles to increase sales opportunities.

United groups customers by behaviors, such as customers who have been price sensitive. They then use these insights to create more relevant offers such as sending frequent business travelers an offer to purchase an airport day lounge pass, etc.

The company overlays demographic and lifestyle data on customer records and groups them into customer types. United tries to include basic demographic information in each member profile such as age, household income, and net worth, and interest-specific elements such as members who enjoy playing golf.

United's new policies include customer centric actions such as these:

• When a customers is about to reach a milestone, a local representative delivers a hand-written thank-you card to the customer as they scan their boarding passes upon boarding.

• Segmentation that accurately groups customers by behaviors creates more relevant offer opportunities.

Since the initiative was launched, United has been able to convert 4 percent of its non-members to the MileagePlus program, resulting in tens of millions of dollars in additional revenue.

Key Takeaways:

• Show customers that you are "involved" in their buying experience with actions such as a reminder notice about a product or service based on previous behaviors, a thank-you note, a preview of an upcoming sale, a birthday incentive, etc.

• Show customers you are listening by conducting ongoing Voice of Customer-driven assessments of your business and marketing strategies to ensure alignment with customer expectations.

• Increase the frequency of database updates so they reflect the ongoing changes in customer’s needs. Update information regarding preferences, demographics, behaviors, sales purchase history, etc.

Free Shipping and Returns: Cost, Value, and ROI

The Challenge: It’s no secret that online shoppers don’t like to pay for shipping. With carrier rates on the rise, ecommerce businesses are fully aware that there is no such thing as “free shipping”, it is an expense that has to be factored into pricing one way or another.

Many successful ecommerce marketers offer free shipping, and even free return shipping, as part of a “no hassle returns” policy. Zappos is famous for offering free shipping and free 365 day returns as part of their efforts to deliver a “wow” experience. The reward and ROI Zappos receives in exchange for this policy; 75% repeat buyers, even though their products are priced higher than competitors in order to cover the costs associated with delivering that excellent customer experience.

Studies on the Benefits of Offering Free Shipping

Compete.com shows a comparison between two similar retailers and the difference between Patagonia, offering everyday low shipping and The North Face, offering free shipping for holidays.

The numbers also indicate that offering free shipping increases search traffic as well as conversions for The North Face.

The Find is an online shopping comparison site where retailers can list products and offers, including free shipping. Their Quick Promotion tool showed 23% traffic increase for retailers running Free Shipping promotions.

A ShopRunner/Harris Interactive study of over 2,800 online consumers provides the following results from offering free return shipping:

• 81% of shoppers are less likely to make additional purchases on websites that charge for return shipping

• Consumers who paid for return shipping at a given retailer decreased their purchases 75% to 100% within a two-year period.

Takeaways:

Evaluate Costs Involved in Offering Free Shipping: The question for your business is whether or not shipping costs can be factored into your margins, or if it means raising the price. Free shipping does not always have to mean a reduction in your bottom line. Consider these 10 Ways to Offer Free Shipping.

• Test Different Offers: A/B testing of different offers will provide insight into how your customers react to different models. Also compare sales and returns over time to see how the conversion rate and the bottom line are affected. A ProImpact7.com survey shows that 72% of website shoppers abandon the checkout process because shipping rate was higher than expected. The word expected is key. In many cases offering a flat rate or lower shipping might achieve the increased conversion rate you are looking for without decreasing your profit margin.

• Consider the Increased Lifetime Value of Satisfied Customers: Increased customer satisfaction often leads to repeat customers, so the lifetime value of your customer can be another factor in the equation for free shipping and returns. BusinessNewsDaily reports that companies who offer free shipping on returns can see between a 58% to 357% increase in sales in the next two years.

Strong Customer Relationships: More Powerful than Satisfaction for Retention

The Challenge: As companies grow, relationships with customers usually suffer. Larger customer files, heavier account loads, and less available time, often contribute to a decrease in engagement with customers. This begins the cycle of increasing losses of customers.

Findings from research conducted by our company ERDM indicate that engaging and forming strong relationships with customers has 12 times more influence on retention and repeat purchases than customer satisfaction. Satisfaction is now a minimum expectation.

As DMG Consulting says in their Microsoft-sponsored white paper, “In an era of intense competition, the customer experience is often the main differentiator between commoditized products and services.” In today’s consumer-centric business world, customers dictate the rise and fall of companies, and your business is completely dependent on keeping your customer relationships strong.

The key starting point for retention is understanding the state of customer relationships. Luca Paderni, VP and principal analyst at Forrester Research, says, “CMO’s and their peers...must understand what customers represent for the whole organization to help shape the strategy for the overall business.”

Once understanding is achieved, the next step, according to Walker, is closing the loop. This begins with setting alerts that indicate low customer loyalty or negative behavior, usually in the form of survey questions. After alerts are designed, a feedback system is created to ensure the information gets to someone who can act on it. There should also be follow-up protocols in place that allow staff to act on customer concerns, complaints, and opportunities accordingly. Finally, results should be documented, so the company can understand what works best and fine-tune accordingly.

This correlates with our findings, as well as the strategy used by Microsoft in the aforementioned white paper, that changing from relationships based on customer satisfaction to relationships with deeper levels of engagement - based on more in-depth understanding of their needs - increases customer retention drastically over the course of the customer lifecycle.

Key Takeaways for Marketers

1. Assess the state of current customer relationships.
Learn if you’re doing enough to meet customer expectations, and form deeper relationships with customers across multiple channels. Customers don’t just want to be satisfied, they want to be engaged.

2. Develop strategies for following up.
Create a system that will seek out red flags, notify appropriate staff members at the right time, acquire customer feedback, and use that feedback to enrich and improve customer experience.