The Power of the Spoken Word
What is WOMR (Word of Mount Referrals)?
One key factor in defined “Customer Loyalty” is Word of Mouth Referrals (WOMR). Word of Mouth Referrals is very strong because it drives revenue. Unfortunately, the contrary is also true. Negative Word of Mouth costs organizations millions of dollars per year. To get this under control, there must be a method for tracking and improving these statistics. You can’t manage what you can’t measure, so let’s review what these numbers look like in summary and then dive into the details. If you increase satisfaction and reduce dissatisfaction, your revenues will increase dramatically.
Why is this important?
The best way to answer this question is to highlight it through an example. Here is what it looks like in summary:
80% satisfaction rating = $960,000
20% dissatisfaction rating = $720,000
90% satisfaction rating = $1,080,000
10% dissatisfaction rating = $540,000
10% positive satisfaction swing = an additional $300,000
Let's take a closer look at the math. Assume the following:
70% satisfaction rating
30% dissatisfaction rating
Satisfied customers tell 2 people
Dissatisfied customer tell 6 people
10 Referrals +/- equals 1 Action (Lost customer or New customer)
LTV is $300 per customer
Assume 20,000 customers serviced per month
*Source: TARP
Positive Word of Mouth Effect (PWOM):
20,000 x 70% x 2 = 28,000 positive referrals
(28,000 referrals/10 referrals) x 1 Action = 2,800 new customers
2,800 new customers x $300 LTV = $840,000 in PWOM revenue
Negative Word of Mouth Effect (NWOM):
20,000 x 30% x 6 = 36,000 negative referrals
(36,000 referrals/10 referrals) x 1 Action = 3,600 lost customers
3,600 lost customers x $300 LTV = $1,080,000 in NWOM revenue LOST
The key factor in controlling word of mouth referrals is understanding "WHY" customers are satisfied as well as dissatisfied and working on the right end of the problem. The good news is when satisfaction increases overall, dissatisfaction decreases yielding an exponential effect on revenue.