A No B.S. Guide to Word of Mouth for Software Companies

I’ve written on this site before about how word of mouth has been one of the main drivers of growth at Mailshake and my other Ramp Ventures companies.

But while word of mouth sounds simple on the surface, I’ve been hearing a lot of questions lately about how you actually put it into practice. What is it that makes consumers share the products they love with others? And how can marketers encourage this particular type of viral sharing for their software products?

That’s why, today, I’m taking a look not just at what word of mouth actually is, but also at the specific strategies you can use to start taking advantage of it at your company.

What is Word of Mouth?

At its core, word of mouth is about personal recommendations. As humans, we’re hard-wired to seek approval from others before making decisions. For instance, we know that:

• 90% of consumers believe recommendations from friends, 70% believe other consumer opinions and 62% go in search of reviews before making a purchase.
• Three-quarters of consumers don’t trust advertisements
• Word of mouth generates 2x more sales than paid ads, and consumers are 4x more likely to buy when recommended by a friend

But thanks to technology and new forms of social sharing, word of mouth recommendations occur through more channels than ever before. It isn’t just asking a friend for tips. Now, it’s also searching online, asking questions on digital forums and reading reviews and testimonials.

As a result, there are several different channels through which word of mouth occurs that marketers need to be aware of, including:

• User-generated content (UGC) and hashtags, which help expose potential new users to your company
• Reviews and testimonials, which offer the social proof consumers are looking for
• Product and service ratings, which provide seemingly objective evidence to consumers who are comparing different options
• Incentivized sharing, such as Dropbox’s viral promotion to offer extra space for every referred friend
• Formal referral program, which attempts to turn your existing customers into a new sales force for your company
• Influencer marketing, which adds elements of social proof and authority to your outreach

Not all of these strategies will be appropriate for your software company, since word of mouth isn’t a cookie-cutter strategy. The most effective methods for generating referrals are going to look different if you’re operating an ecommerce store or sharing video, rather than running a SaaS company. But since most of my experience is in running software companies, that’s where I’m focusing my suggestions in this article.

It’s also worth noting that neither the list above nor the strategies I’ll cover next are comprehensive. Word of mouth is fluid – just because I haven’t included a particular channel or tactic in this article doesn’t mean that it can’t be leveraged successfully (or isn’t already driving results) for your company.

What Makes Word of Mouth Work?

Although there are plenty of different types of word of mouth marketing out there, they aren’t all equally effective.

Take Dropbox, for example. Although every software company wants to run out and replicate their incentivized sharing program, the reality is that Dropbox successfully capitalized on a new strategy at a specific moment in time. Viral-style referral programs aren’t as effective as they used to be, in part because so many copycats followed in their footsteps.

So what does work these days? Although the specific combination of word of mouth elements that’s appropriate for each company may vary, the strategies below are ones I’m still seeing work effectively today.

Offer Early Users a Great Deal

No one launches with a fully-realized software product. So why not offer the early users who are willing to give you a try anyways a great deal?

At Mailshake, we offered our first users a lifetime deal at a great price, both because we knew our product wasn’t where we eventually wanted it to be, and because we knew we’d be relying on them for critical early-stage feedback. But doing so had the added advantage of driving word of mouth, since those who took us up on the deal shared the value they received with others looking for similar solutions.

You don’t have to do a lifetime deal, but do consider that treating your early users well can lead to a lifetime of future referrals. Figure out how to get your first hundred or your first thousand people using your product to spark that fire, and then the system works by itself.

Freemium Programs

Zoom – the internet’s current favorite video conferencing platform – is a great example of this. Basically, you give part of your product or service away, and then present a compelling reason why users should update to your paid version. At Zoom, that means you get 40 minutes of free video conferencing service before you’re required to upgrade to a paid plan.

According to Zoom’s Head of Sales, Greg Holmes, the company’s freemium model has led to:

• Adoption by 58% of Fortune 500 companies and 96% of top U.S. universities
• Triple-digit YoY user and revenue growth
• $145.5 million in total funding

Adopting this model has been deliberate, due in part to the company’s position within a crowded landscape. In an interview at SaaStr Annual, Eric Yuan, CEO of Zoom explains to Mallun Yen, Chief Business and Product Officer of RPX Corp, how he’s used freemium delivery to stand out and convert skeptical consumers:

“In our case, we really want to get the customers to test our product. This market is extremely crowded. It’s really hard to tell customers, ‘You’ve got to try Zoom.’ Without a freemium product, I think you’re going to lose the opportunity to let many users to test your products. We make our freemium product work so well. We give most of our features for free and one-to-one is no limitation. That’s why almost every day there are so many users coming to our website, free users. If they like our product, very soon they are going to pay for the subscription.”

Create Something Epic

You can also think about “freemium” in terms of content and customer experience. Hubspot is a great example of a software company that has grown on the basis of high-value, virally-shared free content – to the tune of more than $500M in revenue in 2018. Yes, Hubspot has the advantage of having nearly a decade of content creation behind it, but there are advantages to entering markets late as well.

At Mailshake, we’ve benefited significantly from a “last mover advantage.” Because we were one of the last companies to enter an already-crowded space, we were able to see the gaps that existed. We could look at customer reviews to see what was working and what wasn’t. And we could draw on those lessons to build a UX that was so different from what was already out there that people couldn’t help but talk about it.

“Epic” doesn’t have to be big, either. It just has to be valuable. At Pick, our calendar scheduling company, epic meant creating the simplest possible UI to address a pain point we were seeing of programs that had become needlessly complicated.

There are tons of different ways to offer a stellar UX in 2019, from investing in customer service, to optimizing your communication channels and making your product as easy to use as possible. Find the right combination for your software company by asking yourself what value you can provide for free that users would not have otherwise.

Organic vs. Amplified Word of Mouth

Organic word of mouth is great. Any new customer you capture for free, by referral, represents a big win for your company’s bottom line. But free can be slow when you’re starting out, which is why paying to amplify your message can make sense.

In a Bigcommerce article, Matt Warren shares the example of Flash Tattoos, which created a partnership with Beyonce to wear the company’s products at music festivals and performances. Although it’s not a software company, it’s still worth noting that the paid collaboration boosted the brand’s sales by 1,100% and led to coverage on sites like Buzzfeed, TIME and Marie Claire.

Start small with amplified word of mouth campaigns until you’re confident you’ve got something that’ll convert. You can always scale up later to create further buzz.

Ask for Word of Mouth Shares

This might sound too simple to actually be effective, but the data tells us that, although referrals are so important for word of mouth marketing, only about a third of businesses are actually asking for them.

For best results, time your ask for the right moment. Don’t spam new users with requests. Instead, wait until you’ve hit an “aha” moment, until you’ve had a positive interaction or until your users have successfully completed some other type of milestone to make your request – whether or not you’ve decided to incentivize your referral program.

Leveraging the Power of Word of Mouth Marketing

Word of mouth marketing doesn’t have to be something that just “happens” at random. There are specific choices you can make – no matter where you are in your company’s growth – to encourage this viral sharing from one person to another.

It’s critical that you do. Half of American consumers, if they had to rely on just one source of information, would choose word of mouth referrals, while 83% have personally made a word of mouth recommendation. The #1 reason they’ve chosen to do so? 71% cite “a great experience” as the main motivator.  

Having a high-quality product with an epic customer experience is only the starting point. By implementing the tactics described above, you’ll create a marketing machine that feeds itself through word of mouth recommendations.

What other strategies are you using to drive word of mouth referrals? Leave me a note below sharing what’s working – or not working – for you:

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