Word of mouth is still the most powerful marketing tool a small business has. New CommBank data shows it beats social media, local markets and every other channel for discovery.
Despite the explosion of social media platforms, digital advertising tools, and influencer marketing over the past decade, the most powerful way Australians discover new small businesses remains the oldest one: someone they know telling them about it.
New research from CommBank shows 64% of Australians find new small businesses through personal recommendations, making word of mouth the dominant discovery channel and comfortably ahead of social media at 49%.
For small business owners who spend significant time and energy on their social media presence, the finding is not a reason to abandon digital channels. It is a reminder that the foundation of customer acquisition is still the quality of the experience you deliver and the conversations that follow from it.
How Australians find small businesses
The CommBank research surveyed Australians nationally and found personal recommendations outperform every other discovery channel by a meaningful margin. Word of mouth at 64% is followed by social media at 49%, with local markets and community events a significant channel for younger Australians specifically, at 47% for Gen Z and 41% for Millennials compared to 29% for Gen X and 24% for Baby Boomers.
The dominance of word of mouth has a practical implication for how small business owners should think about their marketing. Every customer interaction is a potential referral. The quality of the product or service, the responsiveness to questions and complaints, the personal warmth of the experience, all of these feed directly into the most effective marketing channel available. No advertising spend replicates the trust carried by a genuine recommendation from a friend, family member, or colleague.
Karina Goudie, founder of Melbourne ceramic business Klaypots Studio, captures what drives that kind of advocacy. “When customers choose a small business like mine, they’re not just buying an object or booking a class, they’re supporting creativity, their local community and the courage that goes into building something from the ground up,” she says. That sense of meaning and personal connection is what customers talk about when they recommend a small business to someone else.
The social media layer
Social media’s role as a discovery channel is significant, particularly for younger audiences, and growing. More than three quarters of Gen Z Australians, 76%, and 65% of Millennials use social platforms to discover new small businesses. For businesses targeting these demographics, social media is not a supplementary channel. It is where a large share of their potential customers are actively looking.
This aligns with separate PayPal research released this week showing 72% of Australian SMEs now selling through social platforms, with social media driving more than one in ten online sales nationally. The two datasets together suggest that for younger Australian consumers, social media has become both a discovery tool and a purchase environment, collapsing the journey from awareness to transaction into a single platform experience.
The practical takeaway for small business owners is not to choose between word of mouth and social media, but to understand how they work together. A great customer experience generates word of mouth. Word of mouth leads people to check out a business on social media. A strong social media presence converts that interest into a follow, a visit, or a purchase. Each channel amplifies the other when both are working well.
The personal relationship advantage
The CommBank data identifies personal relationships as the most powerful driver of loyalty and repeat spending among small business customers. Nearly three quarters of Australians, 72%, have a personal relationship with a small business owner. Those who do are significantly more likely to spend with that business even when it costs more, at 61% compared to 40% for those without a personal connection. They are also more likely to regularly choose small businesses over large chains, at 33% compared to 24%.
That relationship premium is one of the most durable competitive advantages a small business holds over a large one. A major retailer or chain can match or beat a small business on price, range, and convenience. It cannot replicate the feeling of being known, remembered, and genuinely valued as a customer. For small business owners who invest in those personal interactions, knowing regular customers by name, following up after a purchase, responding personally to messages and reviews, the CommBank data suggests the return on that investment is substantial.
The goodwill gap
The broader context the CommBank research sets is one of genuine but constrained support for small business. More than half of Australians, 55%, are willing to pay more to support a small business they value, and three in ten actively prefer small businesses over large chains. One in four says supporting small businesses remains a spending priority even under financial pressure.
But 39% say they are finding it increasingly difficult to follow through on that intent financially as cost-of-living pressures shape household budgets. The goodwill is real. The constraint is economic, not attitudinal.
Bec Warren, Executive General Manager of Small Business Banking at CommBank, frames visibility as the key to capturing the spending that does happen. “Australians want to support small businesses even when budgets are tight, but visibility remains one of the biggest barriers to growth,” she says. “Businesses that combine strong social engagement with seamless, trusted payment experiences will be best positioned to convert attention into revenue.”
For small business owners, the CommBank data points to a clear set of priorities. Deliver experiences worth talking about, because word of mouth is still where most new customers come from. Be visible and active on social media, particularly if your customer base skews younger. Invest in personal relationships with existing customers, because those relationships are the most reliable predictor of loyalty. And understand that the customers who want to support you are still out there, even if their budgets are tighter than they were. The businesses that stay visible and connected will be the ones they choose when they do have money to spend.
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