Why Word-of-Mouth and Referrals Aren’t A Reliable Growth Strategy

Agencies and martech companies often boast that word-of-mouth and referrals are their primary source of growth and new business. While acquiring new clients through word-of-mouth indicates the firm is doing something right—a thriving reputation, excellent client relationships, and retention, word-of-mouth and referrals should be viewed as a bonus, not a growth strategy.

An actual business development strategy is an integrated set of choices that uniquely positions the firm in its industry. Instead of relying on word-of-mouth to bring in quality leads, firms should focus on creating a business development process that creates a sustainable advantage and value relative to the competition.

Word-of-mouth marketing refers to a natural conversation generating recommendations for or about products, businesses, or services. Examples of word-of-mouth include:

• Online client reviews
• Social media conversations
• Offline conversations between satisfied clients

These firms claim to be satisfied with word-of-mouth and referrals as their primary source of new business. Yet, most still struggle with:

• An unpredictable pipeline
• Time-consuming RFPs
• Securing more significant opportunities
• Expanding new services
• Breaking into new markets

These challenges are directly correlated to having a reactive word-of-mouth/referral mindset versus a proactive approach.

Why word-of-mouth marketing is not a growth strategy.

1. It’s unpredictable

Word-of-mouth marketing is great at creating occasional opportunities for businesses, but it’s hard to keep a pipeline with it. Since referrals come in randomly, it’s impossible to plan when they will happen. Therefore, it’s difficult for leaders to hire and staff the firm when they can’t predict the amount of work available.

Not only that, but when all your marketing efforts are tied to word-of-mouth, it leaves the business in a vulnerable position. You find yourself at the mercy of your contacts’ network and referral sources’ desire—and willingness—to share your organization with others. There are very limited ways to control when, where, or how word-of-mouth will occur.

2. Limited audience

When relying on word-of-mouth and referrals alone, you pigeonhole yourself into a small pool of possibilities. Most agencies work with 10-20 clients leaving you with a relatively limited number of potential leads. Not only are you up against a small pool, but those spreading the word about your firm are likely speaking to their colleagues who are often in the same industry, which may be a conflict.

For example, if you’re an advertising agency working with Ford, your clients at Ford may tell their automotive colleagues about the great work you’re doing for them. However, because of your relationship with Ford, it’s a conflict to work with the other auto manufacturers rendering the referrals useless.

3. It isn’t targeted

It’s nearly impossible to control where word-of-mouth and referrals are shared. Satisfied clients often share your information with businesses that may not be in alignment with your firm.

For example, the prospective client could be much smaller—or larger—than you can support. Or the desired work could be out of your scope of services.

Word-of-mouth and referrals shed light on where the business has been, not where the firm is going. If you want to grow a new service or offering, word-of-mouth marketing will not get you there.

4. Non-replicable

When word-of-mouth marketing leads to new business, it is challenging to replicate. Sure, you can create an affiliate program, but these programs rarely work for 6- and 7-figure opportunities.

You can’t dial up word-of-mouth marketing efforts when business is slow, or you lose a big client. Instead, you find yourself at the mercy of your network and dependent on referrals rolling in on their own accord.

5. Word-of-mouth spreads slowly

Since word-of-mouth marketing is dependent on a client’s interaction with you, it may take a while for them to feel good enough to refer you.

The client may need months—maybe years—to see how your team works with their employees, reflect on results, and understand all of your offerings. There’s really no way of predicting how long this process could take. And chances are, you’ll be itching for new business before the referrals come in.

6. Easy to subvert

While you’d hope word-of-mouth marketing would work in your favor, there is the chance of negative publicity. As mentioned, you have limited control over word-of-mouth—when it spreads, who it spreads to, and where—and this also goes for the messaging.

All it takes is one disappointed client, so companies need to be proactive in their approach. You can’t avoid partnership mishaps, but you can control how that impacts your business by ensuring you have a strong marketing and sales strategy.

7. Difficult to measure

Since word-of-mouth typically occurs in informal conversations, it’s difficult to measure what new business results from it.

Unlike digital marketing, where you can track exactly where the leads are coming from, word-of-mouth is tricky to pinpoint. Unfortunately, you can’t be everywhere; everyone is talking about you—online or offline—at all times.

So what is a better growth strategy?

Word-of-mouth and referrals are bonuses to supplement your business development program. But they’re only part of the mix.

On the other hand, outbound business development proactively engages prospects through strategic cold calling, cold emailing, and social media to generate a predictable pipeline of opportunities with target companies.

It allows agencies to introduce business ideas and solutions to target prospects. Outbound builds relationships with prospective clients before an RFP. You can shape the narrative by offering value before they need your services. Leads secured by outbound prospecting often lead to bigger deals.

Instead of hoping word-of-mouth spreads to the c-suite of the world’s most beloved brands, outbound business development is a repeatable and measurable process. You can dial it up or down as needed and can implement it in little to no time.

Ready to take your marketing efforts to the next level?

We see why many agencies and martech companies focus on word-of-mouth, but it’s hardly a growth strategy. It’s a bonus.

You have little to no control over word-of-mouth and referrals. They’re unpredictable, limiting, untargeted, non-replicable, slow to spread, and challenging to measure. On the other hand, outbound prospecting is process-driven, targeted, and measurable. You control the message.

If you’re interested in learning more about outbound business development and how to land 6- and 7-figure opportunities predictably so you can stop relying on word-of-mouth and referrals, check out our Free Agency Growth Keys Masterclass.