Word of mouth is very powerful—just ask any insurance agent.

But how do referrals rank compared to other types of advertising? Can referrals alone outweigh other common channels? Is there more to successful referrals than just relying on the goodwill of customers to promote your insurance services? Recent research reveals five reasons why consumers are the best form of advertising for the insurance industry:

Word of mouth is consumers’ preferred medium.

According to Nielson’s 2013 Trust in Advertising report, the vast majority of consumers—84 percent—prefer word-of-mouth recommendations from people they know over and above any other form of advertising.

The study—which found this type of “earned advertising” from family and friends was more trustworthy than branded website advertising and opinions posted online by consumers—surveyed global respondents from 58 countries. And trust in word of mouth is climbing even higher over time with a 6 percent increase in the category since 2007, when only 78 percent of respondents trusted recommendations from known contacts.

Half of Millennials seek known referrals before buying insurance.

A 2014 survey by Applied Systems and ORC International notes that Millennials “are transforming how insurance agencies operate, from how to market their products and services to providing multichannel client touch points.”

As the Millennial generation continues to shape the insurance industry, it’s important for insurance agents to understand how Millennials behave as consumers so that they can better attract, serve, and retain them as customers. The report, Why Millennials Matter, found that 50 percent of Millennials, the fastest-growing generation of consumers, reportedly seek referrals from family and friends before purchasing insurance policies.

Most of these Millennials—approximately 80 million people born between 1980 and 1996—find such recommendations online via text and social media. For 71 percent of this generation, an online search is the first stop to finding any solution.

See Also: Why Don’t Millennials Buy From Independent Insurance Agents?

Most Americans don’t trust online reviews.

A 2014 YouGov Omnibus survey reported that only 13 percent of U.S. consumers feel that online reviews are trustworthy, despite the fact that a majority (78 percent) rely on online reviews to make purchase decisions, and 44 percent contribute online reviews themselves at least on occasion.

Some reasons that consumers cited for distrusting online reviews include believing that businesses manipulate reviews (90 percent), believing that people review products and services without actually trying them first (90 percent), believing that businesses write negative reviews of competitors (89 percent), and believing that businesses write their own positive reviews (91 percent).

This distrust in online reviews makes word-of-mouth recommendations even more important.

1 in 5 people will recommend preferred brands to friends and family.

In a recent study of 1,000 adults between ages 18 and 34, The Connected Consumer, which examined brand advocacy trends from over 100 social media campaigns, almost one-fifth of 3.2 million consumers who participated in 119 advocacy-focused social marketing campaigns—and were incentivized to share—advocated the brand to their family and friends. 

The study, which included a wide range of industries including services, concluded that: “Consumers are the biggest source of influence over other consumers.”

See Also: Millennials Are Buying Homes, but Will They Choose Your Agency?

A single influencer amplifies a brand’s message 15X.

Consumer advocacy begins with one referral that creates awareness of a brand, leading to new impressions among friends referred. Think of the classic marketing funnel where awareness of a product or service among friends leads to greater engagement, brand affiliation, and ultimately, conversion and consumer loyalty.

In The Connected Consumer study, 600,000 influencers or brand advocates told 9 million friends about the brand’s offers and messages, resulting in approximately 302,000 new customers. This resulted in amplification of the brand message equal to 15 times the number of friends reached per influencer.

Getting customers to become brand advocates is a key focus for the insurance industry—but if you don’t focus on how to make referrals scalable and easy for you and your customers, you may be missing the boat. Clearly, creating solid relationships with your consumer base can result in powerful endorsements for your services.

Think of your business as a network of connections, each one of whom has the potential to connect you to hundreds of his or her friends. It has been estimated that a single share on a social media site like Facebook can result in 200X amplification.

That means that if only 10 of your customers shared your information on the site, you’d reach 2000 of their trusted contacts instantly. By working on turning every customer connection into advocacy-based engagement in a repeatable, measurable way, you’ll be making the most of your best and most powerful form of advertising.

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