We hear regularly from many business development and management types, especially in the industrial sector, that marketing isn’t necessary for them.
Their customers already know who they are, and simply refer others to them. Perhaps the reason for this objection is that they distrust marketing and advertising (which I don’t blame them for), but with any distrust put aside, Word of Mouth (WOM) is hardly a replacement for marketing. Relying on WOM alone is not a good business strategy – in fact, it’s not a strategy at all.
One of the first problems with relying solely on WOM, is that every business uses it, meaning there is no competitive advantage in it.
If this is the extent of your marketing strategy, it means you aren’t doing much besides schmoozing with clients. Maybe that’s why it’s so popular – who doesn’t want to have lunch or go to a game? The bottom line here is that by relying on WOM alone, you’re just doing something that all of your competitors also do, and aren’t doing anything to establish a repeatable or predictable source of business.
The second problem with word of mouth is that it is totally random and often relies on luck.
During a downturn (such as in the energy sector currently), WOM fails miserably, as it works primarily in industries where there is some level of growth. Making matters worse, companies that use the only word of mouth, typically don’t build a strategy behind it to counter the decline in referrals that come during downturns. When an industry moves into a downturn, the companies without any other strategy are often left with no choice but to downsize.
A final point about WOM is that it is popular because it works.
You get a referral, your follow-up, and you have a better than average chance of winning the ‘bid’ (often you’re the only bidder). What could be better than that? Nothing – that is, unless you want predictability and scalability. By establishing a more predictable and scalable business, industrial companies can not only increase revenues and customers but can also become more valuable to their banks, investors, and employees because they will be more stable.
Companies in the industrial sector like manufacturers, distributors and service providers, have avoided marketing for good reason – it doesn’t work that well and can cut into their margins.
There are many reasons for this, but the biggest is a lack of measurement and accountability. Fortunately, marketing has gone digital in the last 5-10 years, with Google leading the way, and today everything is measurable and accounted for. Today’s digital marketing tactics, such as cost per lead and cost per impression ads that only show to interested buyers, have made marketing easy, low cost AND accountable.
To further establish the value of modern sales and marketing tactics, McKinsey & Co. recently conducted a detailed benchmarking study involving 15,000 employees at more than 140 leading B2B and B2B2C global businesses.
Their findings were: revenue growth at companies with more advanced marketing and sales capabilities tended to be 30 percent greater than the average company within their sector. The report is summed up here with conclusions.
The study includes findings that are invaluable to industrial companies, such as the fact that dollars spent on advanced sales and marketing capabilities can yield 5-10x more value than the same investment in factory equipment.
With the dynamic markets industrial companies work in today, and the recent advancements in digital marketing, one thing is clear: WOM is not a sales and marketing capability and in fact the opposite – a significant business risk.
About Fred Yee
Fred Yee is the founder and CEO of ActiveConversion, a company that makes online marketing work for industrial companies. Fred was voted as one of the 40 Most Inspiring Leaders in Sales Lead Management in 2017, and his work with ActiveConversion has helped hundreds of businesses succeed online. ActiveConversion is Fred’s third successful company, and he continues to explore the possibilities of technology in industrial sales and marketing.