What’s Your Word of Mouth Potential?

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Customer word of mouth referrals is the holy grail of startup customer acquisition. Yet, in observing hundreds of startups and investing in 19 startups as of September 2024, I’ve observed that…

✅ For some startup products, customer word of mouth doesn’t flow as freely. ✅

Over the years, I have spoken to various startups that had a very lackluster go-to-market strategy. Yet customers were actively telling other potential customers about the startup. Thus, the startup was receiving inbound leads on the website, requesting product demos. On the other hand, I’ve spoken to some startups where word of mouth is virtually non-existent. The startup has to work extra hard to penetrate customer accounts and convert them into customers, with very little help from word of mouth kinetic energy. Why the difference?

I’ve seen that there are three postures that your customer could have that affects the potential of word of mouth.

✅ Does the customer feel…

1. …Possessive about the startup’s product?

2. …Ambivalent about the startup’s product?

3. …Evangelistic about the startup’s product? ✅

When I evaluate potential startups from an investor lens, I always seek to understand the word of mouth potential across these three postures because I find it to be critical to developing the startup’s Go-To-Market strategy. Let’s explore each of them, and how to navigate with each one.

Is the customer possessive about the product?

A customer is often possessive of the startup’s product when they see the product as providing an competitive edge in the market. It is sort of like a secret that they want to keep internally to their company.

I was once chatting with a Series A startup Founder and CEO whose startup sold their tech product to enterprise household name companies.

As we discussed the product, it provided insights to their customers on how to best bring products to market. The CEO gave a few examples of how the product was used in Customer A. There was clear core product value.

Trying to get a sense of the word of mouth posture, I threw out a company that I knew was a direct competitor to Customer A and asked, “How would Customer A feel if Competitor X started using your product? Now Competitor X would receive the same insights for their domain that Customer A does.” 

The CEO replied that Customer A sees using their product as a competitive edge. Thus, they would not want Competitor X to use it.

Thus, among this product and use case, word of mouth potential was nearly non-existent due to the possessiveness that each company felt. Sure enough, the startup had to do several types of marketing activation at each of their target companies to raise awareness and to convert each one of the competitive companies into customers.

Is the customer ambivalent about the product?

When a customer is ambivalent about the startup’s product, there is sporadic and unpredictable word of mouth. It’s low frequency. An ambivalent word of mouth posture is more about when it’s convenient. The customer likely won’t go out of their way to do word of mouth.

Tundra Angels was once doing due diligence on a startup. I had a customer reference call with a customer who was using the startup’s software.

I asked the question, “How would you feel if another __(company like yours)__ started using the startup’s product?” 

The customer replied, “I’ve had other companies like mine call me up that are looking at the startup’s product, I’ve given all of them two thumbs up. If the startup is looking to expand their customer base, it wouldn’t increase competition. [The startup team] really does rock. I don’t mind giving them accolades.” 

That’s a great review! Clearly the startup had a happy customer. After I learned this, I immediately expected the customer to be evangelizing the startup’s product. Yet, the customer appeared ambivalent from a word of mouth perspective. They were not readily evangelizing the product to other potential customers of the startup.

✅ The customer was happy to give a good message to potential customers coming inbound to speak with him, but not actively taking the message outbound. ✅

This breaks an assumption that I think many founders inadvertently make.

✅ It is highly possible that your customers are very happy with your product yet never tell a single person about it. 

In some cases, especially when customers are ambivalent, maybe the startup just needs to give the happy customer an at-bat. ✅