This week I was having a discussion with someone about the laundry business, and they were asking me about where most of our leads come from.
I didn't have to think about it. "Word of mouth. Someone washes here, tells a friend, that friend becomes a regular, mentions us to their coworker. Next thing I know, three new faces in the store. No ad spend. No Google campaign. Just people talking."
The person nodded. Then asked what I was doing to generate more of it.
I paused.
What was I actively doing to create word of mouth? Was I treating it like a system I could build, or just hoping it would happen?
That question stuck with me. Especially after seeing the 2024 CLA survey data.
The Data Shows Something Interesting
62% of laundromat operators say word of mouth is their number one way to get new clients.¹ Nothing else comes close. Websites? 54%. Social media? 51%. Google Business? 49%.²
So if we all agree word of mouth works best, where's the time and money actually going?
Websites. Social media. Google Business profiles. The exact channels that rank BELOW word of mouth.
Here's what caught my attention. We invest in what we can control. We spend on what we can measure. Even when we know something else works better.
And it's not just laundromats. Research from 2013 showed word of mouth drove $6 trillion in consumer spending that year.³ Six. Trillion. And that was before Instagram took over, before TikTok existed, before every purchase came with a Google review.
The number today? Almost certainly higher.
Studies show 88-92% of people trust recommendations from friends and family more than any other type of marketing.⁴ That hasn't changed since 2012, despite everything going digital.
So why do we keep pouring money into channels people trust less?
It's Not Poor Decision-Making, It's Psychology
There's research on why people choose options they can control over options that work better. It comes down to how our brains are wired.
When you run a Facebook ad, you control the budget. You control the message. You control when it runs. You can pause it, change it, see the results immediately. That control feels good. It feels safe.
Word of mouth? Feels random. You can't control when someone mentions you. You can't measure how many conversations happened. You don't see immediate results from it.
So even though word of mouth works better, it feels riskier because you can't control it the same way.
The research calls this "illusion of control."⁵ Psychologist Ellen Langer found we prefer situations where we feel in charge, even if they're less effective. Nobel laureate Daniel Kahneman's work on decision-making shows we systematically avoid uncertainty, even when uncertain options deliver better outcomes.⁶
But Here's What I've Learned
Word of mouth isn't weather you wait for. It's crops you farm.
At our stores, we don't leave it to chance. We build systems around it.
We have someone stationed near the door whose job isn't to sit on their phone but to watch for moments when someone needs help. Carrying bags. Figuring out the machines. Finding change. Small gestures that people remember.
We run community events on a calendar. Back-to-school supply giveaways in August. Thanksgiving turkey distributions in November. Every event creates moments people talk about when they're already gathering with friends and family.
And we don't fund it all ourselves. Local businesses sponsor these events. They get visibility with our clients. We get their network talking about us. Everyone wins.
These aren't random acts. They're planned.
Other businesses prove this works too. Dropbox built their entire growth strategy around referrals. They offered extra storage space to both the referrer and the person who signed up. Result? 35% of their daily signups came from referrals, and they grew from 100,000 to 4 million users in 15 months.⁷
Tesla's referral program gave rewards ranging from exclusive merchandise to free vehicles for top referrers. Between 2015 and 2021, the program generated billions in sales without traditional advertising.⁸
Aveda salons ran a referral program where clients got $25 in product credit for referring a friend, and the friend got $20 toward their first service.⁹ That program brought in 16-50 new clients every month for salons with 6-10 chairs.
A solar company in Australia took it even further. They offered $500 cash to anyone who referred a client, plus 10% off for the new client.¹⁰ They timed the ask perfectly, one week after installation when people were happiest. Within six months, referrals became their top source of new business. Over 12 months? $8.46 million in revenue from referrals. 38% of people they contacted became clients.
The pattern is clear. Reward both people, ask at the right time, make it simple, do it consistently.
The Numbers Don't Lie
Word of mouth doesn't just beat paid advertising. It crushes it.
People who come from referrals convert 30% better than other leads.¹¹ They cost $23 less to acquire.¹² They spend 16% more in their first year.¹³ They stick around longer, 37% better retention.¹⁴ And they're 4 times more likely to refer someone else.¹⁵
These aren't just any clients either. Research shows your best clients, the ones spending the most and coming in most frequently, are worth 10x your average client and become your most powerful source of referrals.¹⁶ When they talk about your service, people listen.
Harvard Business Review found referral programs deliver 4x better ROI than digital ads.¹⁷
Think about that. You spend less, get better clients, and they bring you more clients without additional spending.
Thinking about the thinking of laundry:
When you realize word of mouth can be farmed, every client interaction becomes a chance to plant seeds.
What This Actually Means
The operators farming word of mouth systematically aren't just getting cheaper clients. They're building something competitors can't easily copy.
While others pay for every new client through ads, word of mouth farmers get clients who cost less, stay longer, spend more, and bring their friends.
Each person who comes from a referral might refer someone else. That's exponential growth, not linear.
The question isn't whether word of mouth works. You already know it does.
The question is: are you treating your best marketing channel like weather, or are you farming it?
That's all I got for you today.
Waleed
PS: Building something for laundry entrepreneurs. Early access: joinpressed.com
Echoing the thoughts of Paul M. Rand.
92% of respondents reported that a positive recommendation from a friend, family member, or someone they trust is the biggest influence on whether they buy a product or service.
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Footnotes:
¹ 2024 State of the Industry Survey - Coin Laundry Association
² 2024 State of the Industry Survey - Coin Laundry Association
³ The $6 Trillion Opportunity in Word of Mouth - Word of Mouth Marketing Association, 2014
⁴ Trust in Advertising Study - Nielsen Research, 2021
⁵ The Illusion of Control - Ellen Langer, Journal of Personality and Social Psychology, 1975
⁶ Thinking, Fast and Slow - Daniel Kahneman, Nobel Prize in Economics, 2002
⁷ How Dropbox Grew 3900% Using a Simple Referral Program - Growth Hackers, 2014
⁸ Tesla's Referral Program Success - Electrek, 2021
⁹ Aveda Salon Referral Program Results - Beauty Industry Report, 2022
¹⁰ Solar Company Referral Revenue Case Study - Australian Solar Council Report, 2019
¹¹ Referral Customer Conversion Rates - Wharton School Research, University of Pennsylvania
¹² Customer Acquisition Cost Analysis - Nielsen Research, 2021
¹³ Referral Customer Lifetime Value Study - Harvard Business Review, 2013
¹⁴ Customer Retention Through Referrals - Bain & Company, 2020
¹⁵ Viral Loop Analysis - McKinsey & Company, 2019
¹⁶ Why Your Best Client is Worth 10x Your Average Client - Wash Weekly
¹⁷ ROI of Referral Programs vs Digital Advertising - Harvard Business Review, 2015
