Customer word-of-mouth can have a strong positive and negative financial impact on firms and on customer loyalty, new research suggests.
According to a study by Satmetrix Systems, customers can be broadly categorised into promoters – those who are highly likely to recommend a company and/or its products – or detractors, those likely to give negative referrals.
The report found that half of all customers surveyed were promoters, about one fifth were detractors and just under a third were passives – likely to give no referrals.
Promoters were found to account for roughly half of a new customer acquired through positive word-of-mouth, while a detractor costs a business 0.84 per cent of a new customer through negative word-of-mouth.
Richard Owen, chief executive of Satmetrix, said: “Word-of-mouth is one of the most powerful and trusted marketing sources.
“When customer experiences are positive – and loyalty is high – we expect customers to spend more on average and to generate new business via positive word-of-mouth.”