Word-of-mouth is still the most popular form of marketing for small businesses, while social media – though still widely-used – lags behind, according to a recent survey by accounting software firm Reckon.
Over 70 per cent of the small-business owners that Reckon surveyed used word-of-mouth marketing. This made it the most popular marketing tool by a fair margin – social media came in second, but only 30.9 per cent of respondents said they used it.
The next most popular form of marketing was email (20.9 per cent) followed by direct marketing methods (20.6 per cent) and content marketing (20.3 per cent).
One-third of SME owners find social media “ineffective”
Social media was the second most popular marketing tool, but over a third of small-business owners surveyed claimed that no social media platform has been effective for their business. Over a quarter say they don’t use any social media in their marketing.
ISB has heard mixed reviews about social media marketing from our readers. While many praise its effectiveness, we’ve also heard of diminishing returns and soaring advertising costs.
Tara Jacobsen, Co-founder of educational services provider Groei, is one small-business owner who has recently turned away from social media for marketing.
“The marketplace has become overcrowded, and for us, the cost per click has jumped from 23 cents to a massive $6.24 in just 12 months, even with the same markets and budget,” Jacobsen says. “Social media just isn’t delivering the same results anymore. What’s working for us is going back to basics – focusing on social capital, word-of-mouth, and good old-fashioned networking.”
“You may as well be burning your money.”
As a marketing expert and small-business owner, Perry Henderson knows the pros and cons of social media marketing well. While the founder of Missing Link Social Media extols the virtues of social media advertising, he says costs are tipped to increase by as much as 20 per cent in 2025.
“The cost of Google advertising is increasing by as much as 13 percent year on year. Some sectors are seeing much bigger increases,” he says. “There are many reasons why Google Ads has become more expensive than before. Some common reasons are a rise in demand, excessive competition, regular changes in the bidding system and a core design aimed at making profits.”
Henderson says that many businesses are wasting money on poorly-planned Google ad campaigns.
“Unless Google advertising is well managed, you may as well be burning your money,” he says.
Why word-of-mouth works
Word-of-mouth marketing has the advantage of being cheap, effective, and – best of all – passive.
“When your word of mouth is good, it’s like having your very own marketing team that sells you for you,” says Jasmine Parasram, sole-trader and owner of Jasmine Designs. “Every client I have currently has come to me through a recommendation from someone else.”
The “set-and-forget” nature of word-of-mouth marketing is a big boon for time-poor small-business owners, who have little time to devote to marketing. According to the Reckon study, a quarter (26.7 per cent) of SME owners spend no time on marketing, while almost half (40.5 per cent) dedicate only an hour per week.
Not every word-of-mouth strategy is so hands-off. One small-business owner told us that she spent a lot of time building a network of referrals across Australia.
“I hit the ground running – joining networking groups, attending events, and building connections that actually meant something,” says Jordan Knight of Spicy Pineapple Marketing. “Truth is, I wasn’t actually looking for contacts, I was looking for people who believed in what I was doing and were excited to spread the word. That’s how I started building a network of referral partners across Australia who knew what I brought to the table.”
Despite the rise of digital marketing channels, word of mouth is still the most popular form of marketing for small businesses – and for good reason. It’s cost-effective, credible, and it saves time-poor small-business owners a lot of labour.
