63% of Small Businesses Bet Big on Word of Mouth for New Customers

Small- to medium-sized businesses (SMBs) make up most of all U.S. businesses, and each business is as different as its owner.

It stands to reason, then, that they don’t all take the same approach to attracting and retaining their customers.

For long-standing SMBs, customer loyalty is a powerful asset. Decades of experience, strong brand recognition and deep-rooted community ties allow these businesses to thrive without having to continually invest in expensive customer acquisition strategies. Word-of-mouth marketing, both traditional and digital, reinforces their credibility as satisfied customers become brand advocates who drive organic growth.

Unlike their established counterparts, newer SMBs must actively build their customer base from the ground up. They often lack the built-in trust that comes with years of operation, making it imperative to differentiate themselves through innovation and digital engagement.

A key advantage newer businesses have is their agility. Without legacy systems or ingrained processes, they can rapidly adopt new technologies and pivot their strategies as needed. Many startups and young SMBs leverage eCommerce platforms, social media marketing and influencer collaborations to build brand awareness and attract customers quickly.

The latest edition of the PYMNTS Intelligence SMB Growth Report finds that over half of SMBs surveyed report that word of mouth is among the top factors in their growth — but the ways in which that word spreads and gets its start varies by sector size and most importantly: age.

Digital marketing is an essential driver of growth for new SMBs. The report found that 85% of newer SMBs said their customer base has expanded in the past year, while just 64% of older ones said the same. These newer SMBs, at 33%, are much more likely than older ones, at 15%, to sell mostly online. In addition, 80% of businesses selling mostly online report expanding customer bases, as opposed to 67% of businesses that sell mostly in-store. Newer businesses are likely expanding their customer bases specifically because they sell online.

Still, SMBs with over two decades in operation have cultivated a substantial base of repeat customers, and as such, nearly three-quarters of older SMBs with growing customer bases report that word of mouth has helped. Overall, 63% of small businesses that have gained new customers say word of mouth is key to their success.

Against a backdrop of long-standing customer relationships, the PYMNTS Intelligence data also found that older SMBs report the most financial success simply by increasing their prices. In fact, 61% reported increasing prices leads to higher customer spending.

In contrast, newer SMBs are more focused on expanding their customer base. But regardless of whether an SMB has been in business for decades or is just starting out, customer satisfaction and engagement remain the cornerstone of sustained success.

Read more: Small Businesses Captured Outsized Gains From 2024’s Payments Innovations

Research consistently shows that customer experience is a key differentiator. Customer satisfaction hinges on several factors, including product quality, pricing and service responsiveness, to name just a few. However, proactive engagement is just as crucial. Businesses that regularly communicate with their customers, solicit feedback and offer personalized experiences build stronger relationships that drive retention and referrals.

For established SMBs, the challenge could be to modernize without alienating their loyal customer base. This may mean finding ways to integrate digital tools in a way that complements their existing strengths rather than replacing them outright.

Ultimately, the most successful SMBs of the future may be those that recognize the value in blending traditional strengths with modern strategies. Established businesses can incorporate digital tools to enhance their customer engagement efforts without sacrificing the loyalty and trust they’ve built. Meanwhile, newer businesses can complement their innovative approaches with strategies that emphasize long-term relationship-building rather than focusing solely on rapid acquisition.

The businesses that thrive will be those that understand that customer needs are constantly evolving — and that staying ahead means continuously adapting to meet them.

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