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Word-of-Mouth Advertising Can Be Bad For Business
Posted on July 1st 2014
Building a small business can be tough. Especially when you're in that in-between stage where you've got almost more work than you can handle, but maybe not quite enough to hire extra help. The kind of extra help you may need to deliver the quality of products and services your growing customer base expects.
This was highlighted for me a few years back when meeting with a potential client. She was a small business owner and shared her disappointment with a company she was doing business with. She had been with them for three years, on an annual contract. Her contract was up for renewal and she was considering her options. A mutual friend suggested she contact me.
She was thinking about changing because the service she was paying a monthly fee for had been less than desirable. Significantly less than desirable.
The business she was dealing with was difficult for her to reach by phone and, when she did leave a message, it often took several days before she received a response. The same for email. When she asked for work to be done, not major work, she often waited 3 to 4 weeks before the work was actually done. And, to add insult to injury, when she called to let them know she was disappointed in the service she was told, essentially, "Lady, what's your problem? We'll get to it."
It's a long story but suffice to say this company, a very talented business in truth, promised one thing when they got the contract but fell far short of keeping their promises once they had the contract.
In the early days of discussions with this client I encouraged her to remain with her existing service provider, opt for a basic plan rather than a full service plan, and hire me when needed for specific projects. We agreed this made the most sense financially, as it would cost her money to move her business to me.
But as the date of her contract expiry loomed it became clear to her that the price she was paying for dealing with this company was both emotional and financial. As a result, she decided to pay me to take over her business while cutting her ties with her old service provider.
Making the move cost her money, several hundred more dollars. It would have been far less costly, financially, for her to stay where she was. But the client decided she was tired of not getting the service she believed she deserved and was paying for. She continues to be one of my clients today. And, no, she is not high maintenance, in case you're wondering.
The sad part of this story is that the company she was dealing with was very good at what they did - designing websites. What they weren't so good at was responding to customer requests for changes and updates in a timely and caring fashion.
I think the problem may have been that the company had taken on more work than they were capable of handling. The result? They were over promising and under delivering. And their client, and likely others, was spreading the word (the bad word) letting others know about their poor customer service.
This type of word-of-mouth advertising is likely costing their business a lot more money than it should. They may be attracting new customers but I'll wager many of them are leaving through the back door. An expensive way to run a business.
In Jim Collins' book 'Built to Last' he shares Packard's Law as:
No company can consistently grow revenues faster than its ability to get enough of the right people to implement that growth and still become a great company. [And] If a company consistently grows revenue faster than its ability to get enough of the right people to implement that growth, it will not simply stagnate; it will fall.
In other words, it's better to turn the occasional client away, with regret and grace, than it is to take on so much business that we're unable to deliver on our promises to existing clients. When existing customers become unhappy with the service we provide, they will tell others. And this type of word-of-mouth advertising we can do without!