A Look into "The Entrepreneurial Mind" of Prof. Jeff Cornwall

Using Referrals for Word of Mouth

Excerpted from Jeff Cornwall's June 18, 2009 blog

Word of mouth never just happens. Although it is a great way to bootstrap your marketing efforts, it does take, well, some effort.

1. Ask! Don't be afraid to be direct about asking for referrals. A great technique is to view every client you work with as though your sole purpose is to get a referral.
2. Create a referral program -- Offer service credits as an incentive to your clients who send you new business.
3. Spread the word by sending a description of your referral program to all of your satisfied clients.
4. A few other dos and don'ts:

• Don't ask for a referral when presenting a bill.
• When asking for a referral, also ask for a testimonial from the client. It's great for websites!
• Ask people who perform complementary services to you for referrals. (i.e. If you are a contractor, why not ask an electrician or plumber who may be on the same site?)
• Have some type of printed marketing material handy to provide clients with that describes everything you do-- and give them a few copies to spread around

My Take

Prof. Cornwall provides some refreshingly practical WOM tips. Business owners and sales representatives need constant reminders about these, because, while appearing simple they are constantly overlooked.

With growing usage of Web-based social networks it seems natural that businesses will use them as a medium to engage customers, ask for referrals and provide word-of-mouth tools - and even rewards - for their clients use.

Fueling Your Connection Engine

The "Golden Fuel"^TM Rule

In business, "doing unto others as you would have them do unto you" is a way to maximize customer satisfaction and generate word-of-mouth referrals - the best type of advertising.

Applying the Pareto Principle, if 80% of revenue comes from 20% of clients, then each referring client is worth 16 times more in lifetime value than the clients who do not refer.

Let that sink in - your referring customers are worth sixteen times more to you than your one-hit clients. And this does not even consider that your paid advertising had no effect on bringing you these clients who account for 80% of your sales.

So most of your advertising has zero effect on most of your new sales? Wow - that's enough to make you scratch your head.

These top referring clients are a business's "Golden Fuel" for revenue growth. And by following "The Golden Fuel Rule" they can contribute more and more to your bottom line each year. The Rule is "Do unto your top referring clients 16 times more than your other clientele."

How does a smart businesses implement their "Golden Fuel" strategy? Here are the elements:
- Find these Golden Fuel customers - identify which clients are regular referrers of business
- Communicate with them - stay close with them through regular mail or e-mail communiques. Use your Web site for this.
- Give them more reasons - as well as a means - to refer their friends. Your goal should be to create a new 16X client with each new customer
- Reward them - use your imagination to give incentives or meaningful, if inexpensive gifts to your top referrers. These go a long way to show your appreciation and keep you on the front of their minds.
- Keep them satisfied - your top level service is how you established your reputation in the first place.

Disclaimer: I am the founder of a local/social media site that provides a means of rapidly deploying a "Golden Fuel" strategy for free. YouGottaCall, in our central Connecticut test market, has hundreds of local members and businesses. We're developing integration with leading social sites as well as advanced reporting features prior to release to other markets.

Until we're available in your locale, there are practical ways to implement your "Golden Fuel" strategy. Help is on the way!

- - Tim

My Take on Thomas Baekdal's "Is Social Taking Over Google?"

Some articles need to be read in their entirety - excerpting just cuts out too much good stuff.

You gotta read Thomas' entire article, "Is Social Taking over Google?"

I am only including snippets and graphics here to tantalize you.

On baekdal.com:

• in 2005, Google and the other search engines accounted for 65%.
  
• today Google has dropped to 2%***.

Note: *** Normal search via Google.com. Search engines variations e.g. image search, language search, and other search engines - still totals 15%

Traffic vs. Influence

You need to forget about measuring traffic. It's inaccurate and it's irrelevant. Instead you need to measure ‘influence'. How many people have you really connected to today? How many people chose to make you a part of their stream? How many people decided to come back another time? That is your new ‘how many are there' statistics. Not people but Influence!

Referrer vs. communication

You need to look at all the times people are referring to you as person, your company, product, content, website, and your social profiles. And you should not look at where people are coming from, but instead what they are doing. What they are talking about, what they are sharing, and who is subscribing to it.

Reaction

But what you really need to do is to look at how people are reacting to your content (or you as a person). The point of this is to discover how people are responding

My Take

Again, please read Thomas' original article. This is a concise, data rich presentation of a trend foreseen in 2007 by Robert Scoble (Twitter: @scobleizer) in his "Why Mahalo, TechMeme, and Facebook are going to kick Google’s butt in four years" video series.

My Take on "Trust Word-of-Mouth" by eMarketer Digital Intelligence

From June 8, 2009 article in eMarketer Digital Intelligence

Look who’s talking

In a poll of chief marketing officers from the Duke University Fuqua School of Business and the American Marketing Association (AMA), the top overall customer priority named was service excellence, followed by building a trusting relationship.

Unfortunately, building trust can be difficult.

A 2007 Myers Publishing study found only 17% of people trusted advertisers. And things got worse in 2008, when respondents to a Gallup poll said that only 10% of ad practitioners were trustworthy.

According to BIGresearch, however, word-of-mouth recommendations have different effects depending on the type of purchase.

Over one-half of consumers believed that word-of-mouth influenced the restaurants they went to. Slightly more than one-third felt word-of-mouth had some impact on home improvement purchases.

Leveraging word-of-mouth marketing initiatives might matter more to some retailers and product sellers than to others—but whether to a greater or lesser extent, word-of-mouth matters, always.

My Take

"Unfortunately, building trust can be difficult." That's the power of word-of-mouth - the trust is already there.

WOM is a powerful and growing consumer force. Social media is an effective facilitator of WOM because it uses the Web to help consumers cut through advertising clutter and connect with trusted businesses.

BIGResearch's findings re: the percentage of consumers who use WOM looks off. It's difficult to compare the purchase of groceries to the hiring of a home repair contractor - the costs and the frequency of use are on completely different scales.

I doubt grocery shoppers vary supermarkets each week based on what their friends say. It'd be a stretch to accept that 40.7% of the items they place in their carts is due to a word-of-mouth referral.

Whereas our members tells us they hire 8 out of 10 of their home repair contractors based on recommendation of friends and neighbors. Most contractors rely on WOM for their business's survival and 80% of their revenues.

Placing dissimilar categories next to each other in such a summarized table merits a note on the survey methodology.

Getting Social - Good Tips for Busy Business Owners

Why Your Potential Customers Want To See You Social Networking

Excerpted from Noah Weiner's blog "Web New Point 0"

It’s a burning question on small, medium, and large business minds while considering getting started with Social Media:What use can my company make out of Social Networking?

Before rolling down that slippery slope, take a breath. It ... deserves answers about what you want to get out of Social Media in the first place. But that might lead you to an easier answer if you turn it on your audience: What does my marketplace want out of Social Media?

That answer is easy. They want useful information. Far more than looking for someone to spend money with, your audience uses social media to gain and share in information, insight, and the exchange of topic-specific content. Give your audience some useful content.

When it comes to getting started down the path of sharing your industry specific knowledge as a resource with your potential customers, you might find that a traditional blog becomes the simplest way for you to step into the Social Media mix.

Do you know your space? Are you passionate about your industry? Do you find yourself in a position to educate and enlighten people curious about the subject matter you know? You’re ready to blog. From your reader’s perspective, a blog is nothing more than a rich source of topic-specific information, followed very much like a magazine subscription.

It doesn’t matter how narrowly focused your subject matter is (in fact, often the more narrow the better), even if there’s only a small population of interested readers out there, they are your population. This can be an ideal entrance into the space of Social Networking.

Write topic-specific content about what you know. Share some of your passion. Forget the marketing message. Be valued for the information you are willing to share. That’s what builds a solid audience of followers in Social Media. You have to be willing to do social media activities as much for the sake of others as you might think you are doing it for yourself.

Setting up a blog can be completely free. I just encourage you to do it. Without going down a path that could unravel into days of discussion, here are a few quick guidelines to getting started:

1: Plan out some topics to write about before you get started.

2: Write some posts before launching the blog.

3: Don’t stop blogging. There is only one thing worse than not having a blog, and that’s starting one and letting it die. And this rule applies in all areas of Social Networking.

You can learn as you go. It really need not become an all consuming effort. The rewards in Social Networking come from *doing* good Social Networking in the first place.

My Take

Compelling case and great tips for the busy business owner who feels challenged by the complexity of venturing into a new marketing arena.

Local Business Owners Face More Marketing Choices

Bringing your local business online - Part 1: Why?

Excerpted from June 1, 2009 Omaha Internet Examiner by Leslie Clark

The local search space has undergone a dramatic transformation in the past few years as consumers have moved online to find everything from a plumber to a new home. As stated in a SBI+M post, 54% of Americans have substituted the internet and local search for phone books.

I know many local based, brick-and-mortar businesses that are well aware of the fact that they need to move their marketing efforts online - but don't know where to start. Back in the day, you worked with sales and account representatives for buying media and producing new creative for your yellow page, radio, newspaper, direct mail, and (if you were lucky) TV ads.

Now we are in age where social media such as Facebook, Twitter, MySpace, and LinkedIn rule. Tangles of confusing suggestions on how to use AdWords, Yahoo! Search Marketing, and adCenter choke forums, blogs, and marketing sites. Online webinars and podcasts give detailed information on how to get useful data and metrics from Google Analytics accounts.

First, you are not alone. Many SMB owners and marketers are not only confused, but very hesitant of putting dollars into a marketing channel they know nothing about. Second, you don't have to do everything. Third, you don't have to do it all at once.

So where do I start? The answer is easy, it is the core of your web presence, your first impression to your potential customers - your website. Not as simple as it sounds, and that is why we are going to cover the website creation process in-depth in my next article - Part 2: The core of your online presence.

My Take

Good summary of the challenges facing small, local business owners as they face confusing new advertising choices.

The stats Clark cites are powerful and indisputable. It is revealing that advertising publishing firms, now in bankruptcy, may still be in denial of their desparate situation.

Consumers are changing the tools they use. Local businesses - and the advertising media that dominated for the past 5 decades - need to adapt.

The ultimate form of advertising may be near - recurring word-of-mouth referrals powered by new, Web based tools. When local businesses can tap their customers' loyalty through social media there will be no turning back.

Looking forward to Part 2.

Changing Consumers, Changing Advertising

Consumers Have Changed, So Should Advertisers

Excerpted from June 4, 2009 ClickZ article by Augustine Fou

Are you still broadcasting your ads to the "haystack" and praying that the "needle" saw your ad? Advertising has always been like sending a message to a haystack and hoping there were enough "needles" in the haystack (i.e. target customers) who would see the ad, recall it, and then go make purchases. That used to work, but these days the needles are getting harder to find, they tend to block out all advertising, and they have built up new expectations and irreversible habits. These expectations and habits have a dramatic impact on how they receive, react to, and act upon advertising.

Consumers Seek Trusted Sources for Information

When modern consumers go online to look for information, there's sometimes too much information and it is hard to tell what's official or even true.

Savvy consumers look for clues from others. The information that they rely on tends to be from peers, or at least others like them (i.e. total strangers who wrote reviews on an item they are considering buying), instead of the information in ads put out by advertisers. They trust claims made in ads less and less. They trust the reviews, comments, and recommendations from other users more and more.

Consumers Prefer Collaboration Over Isolation

Finally, today's consumers expect to get help from friends or others like them. They will ask which restaurant, digital camera, or even wedding dress their friends recommend and why. They will look for clues about what other users find useful. Usually if readers are engaged and vocal in their commenting, others get a sense of the quality and value of the post. This way, they have immediate feedback on whether they need to even spend any time reading the post.

Consumers also expect to share information. Their friends know them best and they also know what they are looking for or are in the market for. Consumers will share items and recommendations with friends because they know their friend will appreciate help and insights and they expect the same in return. And this is real advice from real people, not an ad from someone trying to sell you something.

My Take

My take is focused on two points that Dr. Fou makes regarding consumer trust and collaboration. Please see the entire article to read his recommendations.

The tools available for getting and sharing information are always changing. Yet people are still people - they always have and always will find a way to get the most value and to do business with the most trustworthy business.

Consumers and businesses who stay current with new tools will enjoy a marginal advantage. However, for business owners, social media is no substitute for quality. In fact just the opposite is true - through social media poor quality will be exposed and broadcast.

Paying attention to new media is important - but providing great service is paramount. It is the best advertising.

"Social" Gains Ground in Media Mix During - and After Recession

"Pricing, WOM, PR Efforts Get Recession Boost"

Excerpted from MarketingVOX article June 1, 2009

Two-thirds of marketers have shifted emphasis to more short-term strategies - such as pricing deals - in the last six months in response to difficult economic conditions, according to a study from the ANA (Association of National Advertisers) and 'mktg.'

The research found that relatively few respondents reported any marketing initiatives had been shelved or delayed, but many are being reduced.

The activities most likely to be increased in the current economic environment are pricing deals (47%), social networking and word-of-mouth activities (26%) and public relations (23%):

Renewed Activities Post-Recession

The study also found that, despite recession cutbacks and tactical strategies, marketers are planning for renewed activities when the recession ends and the recovery begins. For example, media budgets will be increased (68%) along with social networking/word-of-mouth (41%) and budgets for innovation and testing/learning (40%). Nearly three-fourths (73%) of respondents say they will ideally implement these increased marketing activities three to six months before the recession ends, and an additional 16% will implement as soon as it ends.

Shift in Media-Channel Effectiveness

The study also found that media channel effectiveness for building brand equity has shifted materially. While TV is still ranked highest in importance (64%), online (61%) and guerilla/word of mouth/buzz marketing (57%) have grown to be on par with TV, with social media being ranked as the next highest effective media channel (40%). Social media ranked highest as the media channel that marketers would like to use but have not yet been able to implement.

About the survey: This survey was conducted online in April 2009 among the members of the ANA Brand Marketer Leadership Community panel. A total of 129 client-side marketing executives responded to the survey.

My Take

Consumer acceptance of social media is growing rapidly. It's being spread virally through all demographics - particularly among consumers over 30.

Major advertisers recognize this and are planning to aim more and more advertising dollars into this medium.

Unlike the "message clutter' caused by broadcast and mass media ads, consumers will be in control of what social ad messages they see by the sites they choose to use. This will create an interesting competition among advertisers to create more creative messages which will encourage viral transmission.

Currently, those businesses hold the "high ground" who are already benefiting from real word-of-mouth advertising. If they adopt social media as part of their marketing strategy, they can maintain their competitive positions vs.national brands.

The time for local businesses to act is now to maintain their advantage. They can begin developing new habits which engage neighbors and customers in social media, leveraging their established relationships to grow high-quality, word-of-mouth referrals - and profits.

Facebook Bucks - "My Take"

Facebook brings in payment system

Excerpted from David Gelles Financial Times article - Published: June 2 2009

Facebook is rolling out a new internal payments system, testing it on three different applications on the site, a move that could help the social networking giant become less reliant on advertising. The system will allow users to purchase Facebook "credits" to buy virtual goods across the social network's services and third party applications. Facebook will take a cut of every transaction.

Gartner analyst Ray Valdes says. "Social networking sites have suffered with monetizing [their services], but this leverages [the fact that] users are there on Facebook."

My Take

This is an important step advancing the ease and convenience of the coming social economy. In a short while, conducting social commerce transactions will be more commonplace than swiping your debit/credit card at an ATM or a retail checkout machine.