How to Increase Retail Sales Using Word of Mouth
While that Facebook ad may get your attention it’s that text from a friend telling you how much weight she lost thanks to Peloton that gets you to pull the trigger. In the book Contagious author Jonah Berger states that "word of mouth is the primary factor behind 20% to 50% of all purchasing decisions." What makes word of mouth so powerful? It’s tailored to your wants and needs and it comes from a credible source. One of your friends is not going to try to convince you to buy a toothbrush from Quip if you just got one from Phillips.
Are you trying to take your sales to the next level? If you are these six examples of how companies have successfully used word of mouth can get you moving in the right direction.
1. Canada Goose. Before Canada Goose became popular it was the brand of choice for the people that needed it the most. These initial customers were not celebrities like Drake but mountain climbers, Arctic Circle expeditioners, dogsledders and heli-skiers. The product was so effective among this initial base of customers the brand grew primarily out of word of mouth. Having a core segment of super fans only intensified the impact of word of mouth as these knowledgeable consumers spread the word and were more likely to be taken seriously. If Canada Goose jackets could keep consumers in the coldest parts of the world warm they could keep anyone warm.
Dani Reiss, Canada Goose’s CEO has also said that in the brand’s early days he made sure that bouncers and scalpers wore Canada Goose jackets. That allowed word of mouth to spread faster in urban settings. If you are looking for a winter jacket and you see a bouncer wearing one for hours outside that is a good endorsement for the brand.
Speaking about how Canada Goose grew through word of mouth in its early days Reiss said: “as a still-small company, we couldn’t afford glossy ad campaigns to drive consumer awareness or demand, so we focused on a different, and arguably more powerful, kind of marketing: word of mouth and telling real stories. When an expedition team traveled to the North Pole and was featured in National Geographic, we made sure the team members were wearing our jackets. We also outfitted TV and film crews that were shooting in remote cold-weather locations where temperatures could fall well below freezing. We protected people who lived and worked in the coldest environments on earth and then shared their stories.”
2. lululemon. When starting lululemon, founder and former CEO Chip Wilson’s vision was to market the brand using word of mouth. lululemon at the time had very little money to spend on advertising. Instead Wilson correctly believed the brand’s customers would tell others about the quality of lululemon products.
lululemon also leverages brand ambassadors like yoga instructors to increase brand awareness. These ambassadors teach yoga classes for free on lululemon’s behalf and the free classes draw in existing and new customers. In exchange for teaching classes ambassadors get perks like free clothing. When these instructors wear lululemon clothing during the yoga classes they teach it encourages consumers to try the merchandise for themselves.
“Nike is edging into community-building, but its business is still anchored to a large extent on big marketing campaigns and paid celebrity endorsers.” “On the other hand, lululemon has created a much more powerful community through its 1,500 member ambassador program and its user-generated content,” says author Jono Bacon.Building a strong community of fans like lululemon has can be a powerful way to increase sales organically over time.
3. Peloton. Peloton’s long-term goal is to acquire customers via word of mouth and its working. With millions of people working out from home during the COVID-19 pandemic many consumers learned about Peloton from friends and family members who turned to the fitness company as a great alternative to working out at the gym.
“In mid-March [2020], we paused all advertising in the majority of our markets, allowing us to see the benefit from many years of marketing assessments in brand awareness and high customer satisfaction, driving word of mouth referrals,” said Jill Woodworth Peloton’s CFO during Peloton’s third quarter 2020 earnings call.
Similar to lululemon, Peloton’s focus on its instructors has also been critical to driving awareness of the brand. “The way that Peloton has built their instructors into their brand, with many of their instructors achieving a sort of cult status among the Peloton following, I’d say is definitely one of their biggest advantages over alternative at-home fitness equipment and gym and cycling classes,” says Marisa Lifschutz, lead industry analyst at research firm IBISWorld.
Many of these instructors have large social media followings which only ads to word of mouth as Peloton customers tell their friends about their favourite instructors which then encourages more people to buy a Peloton bike or treadmill. Clearly Peloton’s strategy is working as a survey by CivicScience found that only 28% of those surveyed had not heard of the brand.
Keep in mind that Peloton is notorious for having high marketing costs but the hope is that those costs will level off as strong word of mouth takes over.
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4. Trader Joe’s. A focus on word of mouth instead of traditional advertising has set Trader Joe’s apart from its competitors. The last time you went to a Trader Joe’s did you try a sample of a tasty treat? If you did you are not alone."So what a lot of people might not know is the biggest marketing expense we have at Trader Joe's is actually just letting people try our food,” says Tara Miller, Trader Joe’s Director of Marketing.
Customers can sample anything they want to in the store as long as it does not have to be cooked. The investment Trader Joe’s puts in making high quality on trend products pays off when customers discover new items and tell others about it. There are several Instagram accounts dedicated to Trader Joe’s fans that are run by people that aren’t even employed by the brand who discover and share products with millions of followers at no cost to Trader Joe’s.
5. Oatly. Imagine running a business that’s over 20 years old. You have had success in your home market and now it’s time to expand into a new market, the United States. The first question many brands facing this opportunity will ask is how are we going to market our product in the United States? Instead of flooding the market with Instagram and Facebook ads Oatly employed an entirely different approach. Oatly conducted painstaking research to identify a set of coffee shops in the United States that could serve as informal brand ambassadors for its product.
Oatly didn’t choose any coffee shops but high end shops that roast their own beans and are local favourites The process took several years and resulted in Oatly selecting ten coffee shops in major cities in the United States.“If you’re going to get people to try oat milk for the first time, you want to make sure that first trial is the best possible situation,” says Schoolcraft.
After selecting the ten coffee shops Oatly sent a sales rep to make a quick sales pitch at each location and left the baristas with free samples of Oatly. At first the baristas resisted but who doesn’t like trying something that’s free (think free samples at Trader Joe’s). The strategy worked and Oatly’s product spread through coffee shops across the United States. By the end of Oatly’s first year in the United States its oat milk was in 1,000 coffee shops. "They developed a really strong alignment with baristas, roasters and coffee shop owners — the ultimate influencers for devotees of specialty coffee," said Lori Bartle, president of ad agency MeringCarson. "That's serious word-of-mouth, as these are the people who are more likely to recommend it not as a trend but as a lifestyle choice."
6. Harry’s. You may be familiar with Harry’s the brand that started out selling razors, shaving cream and other grooming products to consumers online. But you may not be familiar with how the brand generated word of mouth to successfully launch the brand. In a blog post on Tim Ferriss’ website, Jeff Raider, co-founder and co-CEO of Harry’s tells the story of how Harry’s successfully got close to 100,000 email sign ups in the week before its eCommerce website went live, something that was critical to the growth of this digitally native brand. In Raider’s words here’s how they did it:
“The idea for our campaign was built around our belief that the most powerful and effective way to be introduced to our new company was through a credible referral. Thus, we focused on building a campaign that helped people to spread the word to their friends.”
“The fundamental mechanic of our campaign was a game: complete the challenge of referring friends and earn prizes. It seems pretty straightforward—and it is—but we think that what those prizes are, and how they are doled out, is critical to getting people excited to play. Not all reward structures are created equal. Here are a few things what worked for us.”
“First, we tried to make our rewards tangible: free Harry’s product. On the page, we very clearly emphasized, ‘Invite Friends and Earn Product.’ It was the one message on the page where we did away with mystery and left nothing up to interpretation. We didn’t want there to be any doubt about what people might receive.”
“To earn the first tier prize—a free shave cream—you had to make only five successful referrals. The next tier was only five further referrals. If you signed up ten friends, you earned a free razor.” “The jump between tier two and tier three was more significant but still not overwhelming: 25 referrals and you’d receive a shave set with our more premium handle, The Winston. Finally, even the grand prize was within reach: a year of free shaving for those who referred 50 friends.”
“We started there, with our own friends. We had our team of 12 employees seed the campaign to their friends.” “When all was said and done, we had collected by our estimation over 85K valid email addresses (and over 100K emails in total) in the span of seven days.”
This example demonstrates the power even a small team of people has to get the word out. Imagine the amount of money it would have taken to gain a similar amount of email signups via Facebook ads. The people you know are more valuable than you realize.