Handbook / Marketing a small business

Word of mouth marketing for small businesses: how to earn referrals

For many small businesses, the best customers come from recommendations. People trust friends, neighbours and colleagues more than ads, and referred customers often arrive ready to buy. Word of mouth may seem like luck, but you can make it far more likely by designing for it.

Start with work worth talking about

Nobody recommends an average experience. Word of mouth starts with:

• doing what you promised, on time
• communicating clearly and promptly
• solving problems quickly when they occur
• small, memorable touches, such as a handwritten note, a follow-up check or a tidy finish

Reliability is the foundation; memorable touches give people something to mention.

Make it easy to describe you

If customers cannot explain what you do, they cannot recommend you. Give them a simple line, such as "She does bookkeeping for tradespeople", by using a clear, consistent message everywhere. The guide to an elevator pitch shows how to create one.

Ask at the right time

The best moment to ask for a recommendation is right after a clear success: a delivered project, a positive comment, a problem solved. Ask simply:

I am glad this worked out well. If you know anyone else who needs help with [service], I would be grateful if you passed on my name.

Tell people who you help best, so referrals are a good fit. The guide to asking for referrals has more scripts.

Make sharing easy

• give customers a card or a short link to your website or booking page
• send a follow-up email with your details they can forward
• ask for an online review, which works as written word of mouth; see get reviews
• keep your Google Business Profile current so people searching your name find you

Thank people who refer you

Always thank referrers, whether or not the referral becomes a customer. A personal message goes a long way. Some businesses offer a thank-you gift, discount or referral reward.

If you offer rewards, be careful how they interact with reviews and endorsements. The FTC's endorsement guides say material connections between an endorser and a business should be clearly disclosed. Its consumer reviews rule prohibits offering compensation for reviews conditioned on them expressing a particular sentiment. Reward referrals, not positive reviews, and ask people who receive rewards to disclose them if they post about you. See endorsements and testimonials.

Build referral partnerships

Other businesses that serve the same customers can be steady sources of referrals. Examples:

• a wedding photographer and a florist
• a bookkeeper and a tax preparer
• a dog walker and a groomer
• a cleaner and an estate agent

Get to know them, understand who they serve best and send them good referrals first. Partnerships grow when they benefit both sides.

Be visible in your community

Word of mouth spreads faster when people see you around: local events, business groups, sponsorships, workshops or volunteering. Offer help and expertise rather than hard selling.

Turn customers into repeat customers

Repeat customers talk about you more. Stay in touch with useful updates, reminders and seasonal offers; see email marketing. Follow up after a job to check everything is fine.

Handle complaints well

Negative word of mouth spreads quickly too. When something goes wrong, respond quickly, listen, fix it where you can and follow up. A problem handled well can create a loyal customer.

Track where customers come from

Ask every new customer, "How did you hear about us?" and record the answer. Over time you will see which customers, partners and activities bring the most business, so you can thank them and invest more there. The SBA's marketing guidance stresses understanding your customers; this simple question is one of the best ways to do it.

Make referred customers feel welcome

When a referred customer contacts you, mention who sent them and give them the same care that impressed the referrer. Let the referrer know, with the new customer's agreement, that the introduction worked. This closes the loop and encourages more referrals.

Online word of mouth

Recommendations increasingly happen online, in community groups, review sites and social media. Monitor mentions of your business, thank people who recommend you and reply politely to questions.

Answer reviews too, positive and negative, in a calm and helpful tone.

Deliver reliably with memorable touches, give people a simple way to describe you, ask after successes, make sharing easy, thank referrers, disclose rewards honestly, build partnerships, handle complaints well and track where customers come from.