Tag Archives: Traditional Media

Majority of businesses get more than half their customers from word of mouth

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Recognizing the impact recommendations have on their businesses, 92% of the companies we surveyed said customer word of mouth was very important to their businesses’ success. Our latest survey of over 200 retail and restaurant owners and managers helps explain why. Almost two-thirds of these businesses said word of mouth was responsible for generating over half their new customers and, among smaller businesses, the impact was even more pronounced with 75% acquiring the majority of their customers through word of mouth.

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In fact, when compared to other forms of marketing, 70% of businesses said word of mouth had the most impact on the success of their business (3 times more than online and email marketing and 10 times more than print).mrktng_impact

However, 40% of these companies do not currently allocate ANY of their marketing budget to word of mouth and, of those that do, the vast majority (71%) dedicate less than 10% of their marketing budget on word of mouth.  Interestingly, less than 10% of companies said budgetary concerns were the primary reason for the lack of investment in word of mouth marketing initiatives.

Businesses clearly understand the impact word of mouth has on their company’s success, however, this has yet to translate into increased marketing expenditures on programs designed to generate positive word of mouth for their business. We’ll be exploring the reasons why businesses are not making a greater investment in word of mouth marketing in an upcoming post.

What’s the biggest challenge facing small businesses?

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In collaboration with the American Chamber of Commerce Executives, SCORE and the Association of Small Business Development Centers, Constant Contact recently conducted its 2009 Small Business Attitudes & Outlook Survey. From April 30, 2009, through June 12, 2009, a broad representation of more than 3,000 businesses were surveyed to better understand how current economic conditions were impacting small businesses. When asked, “What is the biggest challenge you have in running your small business?”, 71% responded that “effectively reaching my audience with limited marketing resources” is their biggest challenge. So, perhaps, it is not surprising to find that small businesses identified sales and marketing as the two areas in which they need the most help.

2009 SMB Survey

In response to current economic conditions, 29% of small businesses have actually reduced their marketing budgets. However, businesses are continuing to shift more of their marketing online and, as a result, the majority of these cutbacks are coming at the expense of traditional media. In fact, a recent Forrester survey of more than 200 marketers found that “60% planned to increase interactive budgets by pulling back spending on traditional outlets.” According to Forrester, “the biggest victim of the trend will be direct mail, which stands to be slashed by 40%. Print will not fare much better, with spending on newspapers expected to be cut by 35%, and magazines by 28%.”

Today 25% of small businesses now regularly use online marketing and more than half (56%) frequently use email, however, the vast majority (89%) still rely most on word of mouth to find new customers.

How do businesses attract new customers?

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The Borrell Associates report, “Say Goodbye to Yellow Pages,”  projected a $5 billion decline in print directory advertising in the next 5 years. Our latest survey of retail and restaurant owners certainly doesn’t do anything to dissuade that opinion. When asked, “What has the biggest impact on your businesses ability to attract new customers?”, only 1% of the retail and restaurant owners and managers we surveyed said it was the YP.

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Although word of mouth is far and away the most important factor across all businesses, digging a little deeper into the data,  it is even more important among small businesses with 90% saying it most impacts customer acquisition.  Interestingly, the results seem to indicate that larger businesses have a greater reliance on discounts and coupons while medium size companies rely more on traditional advertising - but across all segments, one thing is clear, businesses recognize positive word of mouth is critical to attracting new customers.