“Word-of-mouth” (WOM) and “viral” marketing are all the rage these days. The objective is simple: secure new customers through low-cost “buzz” about your product or service. The good news is that you don’t need to be selling the latest Web 2.0 AJAX-powered Software-as-A-Service add-on for Zero-to-Billions-in-No-Time.com. At its core, every successful WOM campaign is built on two basic business principles: (1) provide real value to people who recognize they have an unmet need and (2) make sure you always treat them respectfully.

{sidebar id=14 align=left}It’s really all about karma. The Buddhist’s Law of Karma says “for every event that occurs, there will follow another event whose existence was caused by the first, and this second event will be pleasant or unpleasant according to the first.” WOM is all about converting prospects and customers into sales people for your products.

Karma infuses every nook and cranny of a business. We believe it ultimately determines whether a company’s culture can drive positive WOM and, with it, low cost sales. A one-time marketing campaign cannot catapult a company into WOM nirvana. WOM has to emerge from its culture, from how it does business each and every day.

Here are five principles we’ve learned about karma and WOM as we’ve bootstrapped our Web conferencing business, Glance Networks, to service 2,700 companies worldwide today. More than 80 percent of those customers came to us “for free” by WOM. We think the same principles we apply can help just about any company build a positive WOM culture.

1. Is Your Product or Service Inherently Viral?

The most successful viral campaigns have a product that is (1) exciting, useful or fun and (2) has a simple-to-use viral element built into its design or delivery mechanism, so customers can spread the word.

Some standalone products, like an iPod or the Prius, have a coolness factor that makes them exciting to share with friends. In our case, whenever someone uses our online screen sharing service, there must be another party present, so every session is inherently a sales demo of our service. That gives us excellent pass-along value.

Even if your product or service doesn’t inherently lend itself to a word-of-mouth effort, incorporate into its design simple ways for people to tell others about it. Anyone who’s seen the proliferation of Digg.com and YouTube.com understands the power of sharing interesting news stories and videos with others. After all, Lonelygirl15 didn’t get her own fan sites all by herself. People passed along her videos until she became the darling of Internet video (until, of course, she was exposed as an actress!). This is WOM marketing at its most viral.

2. Do the Right Thing, Every Time.

Companies spend lots of money to get new customers, but rarely spend any to keep them. A simple thing like treating your customers with respect goes a long way to earning repeat business.

It’s often said that people tell three others about a good experience, but tell ten about a bad one, so make sure every interaction ends well. A bad experience can be turned into a good one with proper resolution. Do everything possible to make the customer whole.

We live by the following three tenets:

1.     Never tell a customer, "I can't help."

2.     Never blame someone else for not being able to help. Turn a bad incident into a warm memory by becoming your customer's advocate.

3.     Empower your employees to just "do the right thing." Correct problems immediately; clean up the mess later. When there’s a problem, take care of it while the customer is still on the phone.

3. Do Something Unexpected.

A simple thank you kit for new customers builds a lot of good will, which translates into powerful word-of-mouth. Google did this when they launched and it created a lot of repeat business. Some of you may still be sipping from your free Amazon.com mug from their first year in business. We send our customers a notepad with a brief message offering key information, such as how to reach Customer Care, a coupon for new users, tips and other guidelines. 

So many companies treat their customers poorly that the opportunity to exceed expectations is vast. For example, if a Glance customer calls to cancel his service due to low usage, we usually ask if we can refund back the money he paid us for the unused months. Why? We often find that the same person will be back on the phone a few months later to re-subscribe, either because he now has a different job (bringing us access to a new company) or his needs have changed.  Even if he never calls us again, we know we left him with a good story to tell other prospects.

The cost of a refund to a departing customer is often far less than the cost of acquiring a brand new customer with traditional marketing.

4. {sidebar id=7} Keep the Ball Rolling.

Once you start a WOM program, keep the conversation going through regular communication, like an online newsletter. A good newsletter – one that your contacts will take the time to read – has to be useful, not self-promotional. Keep your company news to a snippet or two.

The content can be about nearly anything, provided it has value to the recipient. Make it personal, authentic and heartfelt. Pick topics you can speak to with authority, but which are not about your actual product or service. For example, our last few newsletters chronicled a couple of experiences about delivering good customer service, offered technology tips for small business owners and explored the virtues of open office cultures. Each topic is an important element of our business and hopefully could be interesting and helpful to others as well.

For some great tips on how to design a newsletter that people want to read, check out newsletter guru Michael Katz’s website and sign up for his “newsletter on newsletters.”

5. Let it Grow Organically.

By its nature, WOM is organic. You can’t force it. Be patient and put the right pieces in place for viral growth and watch it blossom over time.

Does any of this work? We think so. Thanks to some consistently good karma, the third quarter this year we signed up 339 new customers. We secured nearly all of them virally, through word-of-mouth.

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