Recommendations are What Drives Your BusinessJuly 26, 2012
By Ed Keller
July 25 2012
A new study reveals that you don’t need a big company advertising budget to drive sales—face-to-face word of mouth among friends and family drive more purchases than any other purchase influence. It’s an insight of vital importance to every small business owner.
Just how important are personal recommendations? They are the #1 driver of consumer purchase decisions at every stage of the purchase cycle, across multiple product categories. That’s according to just released research that my firm conducted on behalf of RewardStream , a provider of viral marketing, social referral, social loyalty, traditional loyalty and engagement solutions for some of the world’s most esteemed brands.
Here are some of the key findings from the research:
- Personal recommendations are the number one driver of consumer purchase decisions at every stage in the purchase cycle across 10 product categories studied, from banking to vacation travel and from subscription entertainment to retail categories, such as apparel and personal are products.
- Recommendations are the #1 factor across all stages of the purchase cycle, from becoming initially aware of a product right on through to the actual purchase decision. Other areas, such as advertising or online sources of information, are important for one or another phase but not throughout. And none are as important as recommendations. For example, advertising is important during the awareness building phase, while online activity, such as price comparison websites, social media, or ratings and review sites are important during the phase where consumers are deciding among several options.
- Over 8-in-10 purchases influenced by a recommendation are influenced by people talking face-to-face. This is highly consistent with the theme of my new book, The Face-to-Face Book: Why Real Relationships Rule in a Digital Marketplace, which argues that despite the tremendous intrigue with online social networking sites, they represent only a small fraction of the way people really communicate with each other. In the current study, we find that only 2% of purchases are influenced by social media.
- The overwhelming majority of purchases that are swayed by recommendations are influenced by either friends or family. Every category we studied, regardless of price point, was influenced by friends and family rather than more expert sources of advice, such as sales people/clerks. Although “experts” mattered more when seeking advice from others in technical categories, such as mortgages, computers, and new cars, they were still overshadowed by friends and family when receiving advice.
- Women are more likely to be influenced by a recommendation than men are, but recommendations play a big role for both genders. This is consistent with a more generalized finding that “women . . . dominate the conversations both online and offline. Not only that, they seem to hold more influence when it comes to advice on purchasing decisions.”
The pivotal importance of recommendations should be a comforting fact for entrepreneurs and small business owners, who often have close personal connections with their customers. Be sure when you engage in a discussion with them to ask them if they would please recommend you to their family and friends. You’ll be surprised how many will respond positively, and need a little reminder to do so. Create opportunities for them to bring potential customers to meet with you and other current or prospective customers face-to-face, where the majority of recommendations take place. And by all means, please remember to thank your customers who make recommendations on your behalf, and you might even consider an appropriate way to reward them for doing so.