Word-of-mouth advertising is by far the most relied upon form of advertising by bootstrapping entrepreneurs.  The idea of having existing customers, friends, and family tell others about your business and you just sitting back and letting the dollars roll-in is how just about every entrepreneur imagines their new venture will take-off.   This is a smart way to think.  As a matter of fact, this is how the most brilliant engineers in Silicon Valley think.

Optimizing your business for word-of-mouth advertising is no different than some software geek in the Valley designing his or her app to optimize the viral co-efficient.  After all, the mathematical formula that dictates the viral co-efficient for a successful word of mouth campaign and a software application is the same.  If you haven’t already, I recommend you read the previous post in which I break down this mathematical formula.

However, too many entrepreneurs sabotage their word-of-mouth efforts by getting word-of-mouth tunnel vision.

I know the last thing you want to do is sabotage your own business.  It’s one thing when the economy or a competitor causes your business to struggle, but you’re on another level when it’s your own thinking that crushes your growth.  Just like an app that is doomed to fail by relying on a bad viral formula to grow, your business may be doomed to fail by relying on bad word-of-mouth techniques.

I don’t want to see this happen to you.  So below I want to share the 3 killer mistakes sabotaging your word-of-mouth advertising efforts, and how to avoid them:

1. Letting word-of-mouth advertising run on autopilot

Too many entrepreneurs are on a race to the bottom when it comes to getting new customers through word-of-mouth.  This typically starts with the mindset that you are doing your customers a favor by serving them.  This mentality then leads to you acting too nonchalant about the fact that somebody took the time to share your business venture with friends.  It also leads to you taking for granted the risk a new customer is taking by giving you a try.

Symptoms of this behavior include not keeping track of who’s sending you referrals and not actively thanking those who send you referrals. The cure for this is simple.  Keep a written record of not only how someone found out about your business, but also record the name of the actual person who told the new customer about you.  As a bonus you should associate the new customer’s name to the person who refereed them in your records.

This is the only way you can actively thank those who are powering your word-of-mouth efforts. In addition, you should treat your word-of-mouth advocates as your best customers and empower them with the ability to offer their friends the hook-up with you.  If you haven’t already, go back and read the articles in which I share a few strategies to use with your best customers and how to use the hook-up strategy.

2. Not treating referred customers extra special

When a prospective customer hears about your product or service through word-of-mouth, there is something magical about it.  They get the feeling of being an insider, having their ear to the street, and being in the know.  Don’t spoil this opportunity to create another word-of-mouth advocate by providing them with an average experience.

The first thing you should do when you find out someone heard about you through word-of-mouth is give them the hook-up. Especially if you haven’t yet empowered your existing customers to offer the hook-up, you should proactively offer one yourself.  If you are a restauranteur, give this word-of-mouth customer the best seat in the house or a complimentary dessert, if you are a professional service provider offer a 10% discount, if you are selling a product throw in a free shipping or installation. Bottom line, make word-of-mouth customers feel special.

By doing this, it is very likely that they will tell all of their friends because everyone wants to be the cool kid who has the inside scoop on the best products, services, and places to be in town.  Never forget that turning more than half of your word-of-mouth customers into word-of-mouth sharers is the key to create a viral referral loop.  As stated in a previous post, this should be the only goal that matters if you are bootstrapping your business.

3. Not investing money to amplify word-of-mouth

Depending 100% on free word-of-mouth advertising is probably the most common mistake bootstrapping entrepreneurs make.  The thought is that if most of your business is coming from word-of-mouth, then why waste money on advertising.  This is okay thinking if you are okay with being average.  However, the best businesses amplify their word-of-mouth advertising by investing in it. The reason for this is that you are in a competition for mind share with your customers.  If you don’t know what mind share is, then I would read up on Wikipedia about it.

In short, when someone is having a conversation with friends and family, there are hundreds if not thousands of things that one could choose to talk about.  In addition, there are probably at least 10 to 20 different businesses that could come up.  Your goal is to stay on the top of the mind of your customers.  You do this not with mass marketing, but by focusing on the what will get the biggest bang for your buck based on the behaviors of those in your niche. This requires thinking out of the box.

For example, depending on your type of business, you may want to pay to sponsor a school play or little league sports event, host a customer appreciation lunch or breakfast that encourages your customers to bring their friends, give away a high-quality t-shirt or hat with your branding eloquently featured in a subtle manner, or just do something as simple as offer discounts and freebies on random days and times then notify your customers using a text messaging campaign.

You should know the amount a new customer is worth, and not be afraid to spend the amount that makes sense to acquire them.