3 ways to drive customer growth through the power of word-of-mouth marketing

Marketers know that word-of-mouth is by far the most powerful tool they have to acquire customers and grow their businesses. But the conventional wisdom is that people are not going to recommend insurance to their friends around the braai or on their Twitter feeds. Naked Insurance entered the market in 2018 with the ambition of changing that.

Nearly four years after its launch, Naked has grown its business largely on the power of word-of-mouth by creating a product people love enough to share with others. Co-founder Ernest North shares three insights about growing a business via positive customer sentiment that could be applied to nearly any industry.

1. Start by solving a customer problem

There’s plenty of research out there about the power of word of mouth. According to Nielsen research, 83% of online respondents in 60 countries say they trust the recommendations of friends and family, making word-of-mouth the most trusted form of marketing among consumers. A McKinsey study, meanwhile, indicates that word of mouth is the primary factor behind 20% to 50% of all purchasing decisions.

But to get that positive customer buzz, a business first needs to impress the customer by solving a problem for them. In Naked’s case, that was about enabling customers to do everything online — no need for long conversations with a call centre or broker — and delivering lower premiums through technology. ‘We designed our business to be fully automated and digital, which puts the customer in control and reduces costs,’ says North.

‘We have been blown away by how many new consumers are introduced to our brand through public social media chatter or watercooler conversations,’ he adds. ‘Another spin-off from positive word of mouth is that we were able to scale while spending less on traditional advertising than the established players. This lets us keep premium pricing down—which inspires people to tell others about our product.’

1. Take the bad feedback along with the good

Authenticity matters when winning a customer’s trust. People can see straight through paid-for or fake positive TV ads or social media reviews. Naked prefers to let real customers do the talking. When a mistake happens and results in negative feedback from a customer, this is an opportunity to learn and make things right, North observes. ‘We are proud of the great responses we get, but we are also grateful for any feedback that helps us to improve. Plus, it gives people assurance that the positive reviews out there are genuine,’ he says.

1. Use reviews as inspiration

‘Because the users’ experience is core to how we built Naked, we are obsessed about listening to customer feedback. It mostly informs our ongoing technology developments as we keep scaling our self-service offering, but occasionally we also use some of the reviews and compliments as inspiration for telling stories about our brand,’ says North.

‘In fact, our latest ad campaign – “Reviews” – highlights how creative and entertaining people are when talking about Naked. While the characters and the actual content is clearly fictitious, comparing it to Naked’s actual reviews makes it clear that it’s a case of “inspired by a true story”.