Word-of-mouth marketing is a strategy that convinces existing customers to tell their family and friends about products they’re happy with. For retailers, the goal is to create something worth spreading the word about.
This type of marketing drives $6 trillion in revenue annually for retailers. It’s estimated to account for 13% of all consumer sales. Shoppers in industries like electronics, groceries, and apparel rely on word-of-mouth recommendations most often.
Ready to take advantage of word-of-mouth recommendations? In this guide, we’ll share how your retail business can drive revenue using word-of-mouth marketing.
What is a word-of-mouth marketing strategy?
Word-of-mouth marketing, also known as word-of-mouth advertising, is the process of influencing organic discussions about your brand. It’s a free advertisement from a customer that comes from having a positive experience with your brand. Highly involved buyers often recommend their personal contacts. They also make word of mouth a key influencer in their purchasing decisions, and generate high customer lifetime loyalty.
Word of mouth is the most effective marketing channel, but more importantly, it is the only thing that really shows that what you are building has any true value.
It’s a strategy almost half of businesses worldwide rely on heavily to drive sales. That makes sense considering 92% of consumers trust family and friends over advertising, and 38.5% of brands report conversions and sales from influencer marketing.
Why word-of-mouth marketing matters for retailers
Traditional advertising is taking a back seat to other forms of promotion in today’s world. Many advertising channels have seen a decline in click-through rate (CTR) over the past few years.
In Q1 2020, the median CTR for Google Research ads decreased from 2.5% to 1.55%. CTR remains lower year over year. The same applies to display ads, which have an even worse CTR average of 0.47%.
Head to social media and things don’t get much better. Just 1.1% of people who view your Facebook news feed ads, 0.79% of Facebook Story views, and 0.22% of Instagram ad audiences will click through.
As a small-business retailer, you don’t have money to waste on expensive and unpredictable ads. You need to know your marketing strategies will work and be cost effective.
Word of mouth is a reliable channel for retailers of any size and age. Not only is it mostly free to generate referrals, but 40% of leads come from word-of-mouth marketing.
Not convinced? Beyond friends and family, 88% of people trust online reviews written by other consumers as much as they trust recommendations from personal contacts. Plus, 74% of consumers identify word of mouth as a key influencer in their purchasing decisions.
Benefits of word-of-mouth marketing
Word-of-mouth marketing creates a loyal customer base. Shoppers don’t just purchase and forget. Instead, they engage with the brand and share their experience with others.
Data shows that 65% of sales will come from existing customers. By having customers who can verify that your products are amazing, you’ll have a base of people who’ll continue buying from you.
These people can assist your marketing efforts and bring new customers to your business. They provide the value of sharing a referral, and you save time and money on acquiring new customers.
(That’s especially important considering customer acquisition costs have increased by nearly 50% in the past eight years.)
Brand affinity and trust
With so much competition for customer attention, brands are investing heavily in marketing and advertising. But that comes with an onslaught of shady marketing tactics that consumers are becoming ignorant to.
Think about where you see them: Facebook, Instagram, radio, laptop, billboards. People just want products from brands they can trust. They can be skeptical of professional ads.
Nielsen reports that 92% of consumers believe suggestions from friends and family more than advertising.
Those recommendations and reviews from customers or brand ambassadors are more trustworthy. It shows your business’ track record of being reliable and builds trust with buyers.
In short: trust drives consumer decision making. Retailers don’t have to build their own trust; just get someone who a potential customer already trusts to recommend them.
Social engagement and buzz
Viral marketing campaigns aren’t sustainable, but they give short bursts of brand awareness and revenue to retailers.
A word-of-mouth marketing strategy is viral in nature. If you create enough hype around your brand or create a memorable customer experience, it can help your brand go viral.
At first, you’ll find WOM may only lead to a few sales. But as your brand grows, you’ll see more people start tagging friends in your posts, mentioning you in their Stories or Reels, or talking about your brand on TikTok.
Over time, this social engagement and buzz can help you grow at a faster rate than just relying on influencer partnerships, Facebook ads, or organic social media marketing.
Reach older generations
It’s easy to forget that not everybody shops online. The internet penetration rate is just 59.5% globally, meaning billions of potential shoppers don’t use the web to research, browse, or buy products.
Word of mouth slots perfectly into that strategy, making it essential for retailers who reach older generations. Some 18% of Generation X discover products through word of mouth, compared to 16% of baby boomers and 12% of Generation Z.
The difference between word-of-mouth and referral marketing
People often confuse referral marketing and word-of-mouth marketing as the same thing, which makes sense considering the two concepts seem similar at first glance.
The difference? Word-of-mouth marketing is about creating buzz around your brand or service. It’s organic and not a true promotional strategy because it’s not forced. People naturally talk about your brand because they genuinely want to.
Imagine a brand you love sends you a free birthday gift in the mail. You share it on social media, your friends see it, they sign up for the same campaign.
When they receive their birthday gift, they share it on social media, tell their friends, and recommend others sign up because the service was so great. The retailers who use organic word-of-mouth marketing are starting viral campaigns.
Referral marketing, on the other hand, is a promotion strategy that encourages current customers to refer new ones. There is usually an incentive attached to referral programs, such as points in a program, discounts on future purchases, or cash bonuses.
How to drive word-of-mouth marketing
Word of mouth is undoubtedly a powerful marketing tactic for retailers.
Here’s how to develop your own word-of-mouth strategy to trigger positive conversations about your brand, expand your potential customer base, and make more revenue.
- Create something buzzworthy
- Provide quality service and experiences
- Amplify brand advocates
- Empower fans and experts
- Build an active social media following
- Become a local thought leader
- Collect online reviews
1. Create something buzzworthy
The first thing that comes to mind when you hear “buzzworthy” is a product launch or a big sale. However, there’s a strategy behind viral content that gains popularity through social sharing.
According to a research study by Jonah Berger, the author of Contagious, there are six key factors that drive what people talk about and share.
Let’s take a look at how we retailers use them to drive word-of-mouth recommendations:
- Social currency. The better your product makes someone look, the more likely they’ll be to share it. Create content that excites customers. Who are your customers trying to impress? How can you make them better at something? Create a blog, do a Facebook Live, or run live workshops.
- Triggers. Things that are top of mind are more likely to be shared. Create partnerships with influencers and other local brands that have similar audiences. Make sure they also have similar values as your brand.
- Emotion. People share things they care about. Think about content that will excite your readers emotionally. Relevant content is a good way to engage and get them talking about your brand.
- Public. The easier something is to see, the more likely people will imitate it. Create content your audience can share. Host public events and share news. Try to avoid sensitive topics or polarizing opinion pieces or any other content that will turn off readers from sharing.
- Practical value. People share useful information to help others. What are your audience’s pain points? What questions do they have? What information are they looking for? For example, if your audience is made up of wine enthusiasts, create a tasting guide or answer an FAQ about how wine is made.
- Stories. Stories boast our feelings of trust and compassion. They also help communicate important information in a relatable way. Share your story or stories about your customers using your products. It helps readers envision using your products and can encourage them to share the story in their network.
2. Provide quality service and experiences
The secret to word-of-mouth marketing is to create something worth talking about—be it products, services, or experiences.
The good news is that the bar is low. Research shows 94% of US consumers would recommend a brand whose service they rate as “very good”. But that experience spans many different sectors in a retail store, from your product to customer service and visual merchandising.
Do your best to go any lengths to make customers feel happy and satisfied, whether in-store or online. Train sales associates on what a positive experience looks like, how to ask discovery questions and use techniques like suggestive selling.
Myriam Jessier is a customer of Les gourmandises d'Olivier, a French pastry shop that pivoted its entire business online in four days during the pandemic. It makes money thanks to word of mouth.
According to Myriam, “It involves an Instagram presence, but a lot of customers recommend things because macaroons and croissants are not something you trust anyone with.”
Lean into comforts. We seek childhood comforts. French expats adore this brand [Les gourmandises d’Olivier] and share it as a self-care tip. This couple and their pastries take me back to the ’90s, back when my dad was still alive and things weren’t so dire. That feeling, there’s no price for it. They import specific things from France for that feeling and mouthfeel.
The most important part: if your customers don’t love your products, it’s unlikely they’ll take the time to tell their friends, their family, or people on the internet about it.
3. Amplify brand advocates
Happy customers are the perfect people to refer products to their family and friends. Encourage them to do so by recognizing and rewarding their brand loyalty.
User-generated content is any image, video, or text posted online by your customers. Not only will it make existing customers feel valued if you share their social media posts on your brand profile, but Social Media Today found that 85% of users believe UGC is more believable than other types of content.
“Content generated by your users and followers can be much more impactful, engaging, and shareable. That is why you have to learn how to encourage people to create user-generated content.
“Start with encouraging your Instagram followers to use your branded hashtag or @mention you in Instagram content about your brand. You can also run contests and share giveaways with UGC as an entry to qualify.” —Courtney Quigley, Business Reputation Consultant at Rize Reviews
4. Empower fans and experts
A subsection of customer satisfaction, empowerment is another great way to generate word-of-mouth marketing referrals. It makes customers feel confident in their choices.
The simplest way to do this is by getting customers involved in the product development process. This shows you care about them and their stories and experiences, and that you value their feedback.
Three ways to empower fans include:
- Collect feedback for new products by sending out post-purchase surveys with tools like Typeform and Shopify Email.
- Livestream with subject matter experts and fans to give them a voice.
- Get on channels they prefer.
Clothing retailer Gymshark empowered fans with its video livestreams. Its community consisted mainly of fitness enthusiasts and professionals. To empower both, it paid personal trainers to host live workout sessions through its Facebook page. The trainers got paid work when most of their income disappeared; others could get their workout when gyms closed.
5. Build an active social media following
Did you know that 71% of consumers are more likely to purchase based on social media referrals?
Social networks are superb word-of-mouth marketing channels because they scale. One happy customer who heads to LinkedIn, for example, can influence hundreds of others to buy the same item (depending on their audience size).
One way to get more word-of-mouth referrals is through building your own social media community. Communities create a feeling of fellowship around shared interests and goals. They also:
- Promote engagement
- Bring people closer to your brand
- Increase visibility
- Provide inspiration for customers
- Build trust and attracts followers
Myriam describes how the pastry shop Les gourmandises d’Olivier builds its social media presence through WOM marketing:
- “Great product + IG friendly macaroon making classes. The pastries are that good. But the macaroon making is unique and IG friendly. It attracted a crowd starved for cool things to do at home. An influencer reached out and Sandrine was baffled. She just told the lady: bring your lover boy on Valentine’s Day and we'll make macaroons, no money. The rest is history, the content produced resonated with quite a few folks.”
- “Connect with local fans. There are a few folks, high rollers, who spend thousands online and come into the shop for the daily fix (or almost daily fix). They tell all their colleagues and friends about it. So you come in for one croissant and, oh boy, you find out you can buy a bunch of these and make them at home on your own time without having to deal with COVID restrictions.”
This product is great for word-of-mouth marketing for many reasons. It photographs super well. It also tastes incredibly good, and customers can even pretend they are a pâtissier if they buy the frozen bits to bake at home.
6. Become a local thought leader
Brick-and-mortar retail stores have one big advantage over online-only businesses: they can build a local community presence. SMB owners have a better understanding of their community. They can actively get involved and bring value to the people around them.
There are several ways to do this, such as:
- Hosting events related to your business (or for charity)
- Participating in, or sponsoring, existing events
- Having a volunteer program or incentive for employees
- Donating to local causes through one-offs or portions of your profits
- Joining community boards or organizations your business could help with (such as arts or music councils, health boards, etc.)
One retailer putting this into action is Better Life Bags, a retail business located in Detroit, Michigan. Its founder, Rebecca Smith, built the entire business on top of a mission to support women in the local community:
“Our mission is to hire women who have various barriers to employment to make our custom leather and fabric bags. They are adopted into our Better Life family and given a chance to succeed in life, family, and friendship.”
7. Collect online reviews
Today, word of mouth can come from outside a customer’s social circle.
Online reviews from customers now make an impact on purchasing decisions. Reviews help customers feel they can trust a business. Some 94% of consumers say positive reviews make them more likely to buy from a business.
Despite their value, when was the last time you asked previous customers to leave a review? Just a third of businesses actively do it.
Reviews with high star ratings and positive sentiment impact buying decisions, so it’s important to make sure your reviews are in good shape.
Recent reviews have an impact on whether or not a customer will buy from your business. Data shows 86% of consumers say they’ll look at reviews from the past three months. This means that old reviews get less attention and have diminishing returns over time.
So, what can you do to get customer reviews consistently? The simplest way is to ask:
- Ask for customer reviews in person, over email, or via SMS.
- Add review links to order confirmation emails.
- Train sales teams to always ask for feedback after taking payment in-store.
- Offer incentives—such as entry to a competition or points for a loyalty program—in exchange for reviews on sites like Yelp.
You can choose from a variety of Shopify apps to proactively ask for reviews. Here are a few notable apps, in no particular order:
Examples of word of mouth marketing campaigns
Casper is a DTC company praised for its incredible short-term growth. It sold $20 million in its first 10 months through word of mouth and a minimal advertising budget.
The brand has a fun social media strategy that includes sleep-related articles, fast response times, and gifting events. Alongside high-quality products, those elements work together to create the perfect storm: the willingness for customers to share its products organically.
Getting customers to engage with Casper was a crucial part of the startup’s strategy from the beginning, because it didn’t have the advertising budget to compete against the mattress giants.
Threadless is a t-shirt marketplace based out of Chicago and founded in 2003. It helps artists sell their designs for t-shirts and accessories online.
In its first two years, more than 10,000 members joined the site and sold six figures’ worth of t-shirts—largely through word-of-mouth marketing.
Part of its strategy was competitions. Its founder, Jake Nickell, organically promoted a t-shirt design competition using blog comments and social media posts. Family and friends shared the competition off their own back.
Thanks to its early commitment to word-of-mouth marketing, the company now brings in over $12M per year.
Locals love In-N-Out because the food is always fresh. The joint makes everything the old-fashioned way, with nothing frozen or prepackaged. Plus, customers only find out about its “secret menu” when told about it from family and friends.
In-N-Out also supports non-profit organizations close to its restaurant locations. All of those elements combine to create a restaurant that customers recommend to their friends without having to ask.
Its growth strategy? Word-of-mouth marketing.
It’s another case study showing how excellent customer service can drive the early success of a retailer. Zappos went out of its way to surprise and delight customers: it sent flowers to a customer and upgraded them to VIP status after it heard their feet were injured through medical treatment.
Stellar customer service is embedded in every interaction someone has with the Zappos brand—even when returning an item. If someone doesn’t like the shoes they’ve purchased, they can return them free of charge.
Sozy is a clothing brand on a mission to empower women with soft and cozy clothing. It also aims to make a difference in the world, with 10% of profits supporting survivors of sexual violence, and an additional 10% of profits going toward other chariable initiatives. It’s safe to say they are a brand many women can get behind.
Word of mouth is one of its most effective marketing channels. “It is the only thing that shows what you are building has true value,” says Sozy’s founder Lanai Moliterno. The brand encourages people to naturally spread the word through its ambassador program.
“We offer ambassadors a gift card to join. Once they do, they are usually our best marketers. Our clothing is so soft and flattering that it doesn’t take much convincing for them to talk about it with their audiences. It works so well, we built a dedicated process to grow our ambassador program.”
Sozy’s ambassadors also help provide feedback about new products. They share thoughts on designs, what items they share most, and how their audiences respond to posts. In turn, this helps Sozy create better products for their customers, which helps get the word out naturally and drives more sales.
Getting started with your WOMM strategy
There’s no doubt that WOM is a form of marketing with the power to increase retail sales and ecommerce conversion rates.
The key is to create products worth talking about. Give outstanding customer service, amplify brand advocates, and build an active social media following. It’s a marketing strategy that’s tough to standardize, but a steady flow of word-of-mouth recommendations have the power to grow your business dramatically.