‘The customer is always right.’ For businesses that rely on consumers to provide direction and profit, no adage or truism so perfectly sums up the supplier-purchaser relationship. Of course, in order to be right, customers have to be heard. Luckily, modern technology makes it easy for customers to become involved in the conversation. But what does that mean for the businesses themselves?

Retailers in the early 20th Century were just beginning to understand the power of the consumer. Pioneers in big retail, like Chicago’s Marshall Field, understood how important customers were, and how critical their good opinion was to business.

Field knew how to create buzz with sales and new promotions, but he was also keenly aware of how to harness the power of word of mouth in Chicago by giving excellent customer service. “Give the lady what she wants,” was a motto he often spoke to employees. As word travelled about the excellent service at Marshall Fields, business grew exponentially.

The customer-focused era

The success of Marshall Field’s approach may have inspired the likes of Walt Disney, who built an empire around his audience and the guests at his amusement parks. He took the customer experience to the extreme, truly believing that the customer was at the center of his business. “You don’t build it for yourself. You know what the people want and you build it for them,” said Disney.

By the 1980s and 1990s, the Disney approach was being taught in business schools, and inspired a who new generation of entrepreneurs to build customer-focused organizations - just in time for the launch of the World Wide Web.

Here comes the crowd

Once consumers figured out how loud their voices could be on the Internet, they were off and running. Now, customers who felt wronged had a platform where they could shout about their treatment – and be heard. By the mid-1990s, there were more than 35 million AOL subscribers who traded ideas, consumer reviews, and made suggestions frequently, creating a whole new set of opportunities for “word of mouth” communication through email and chat rooms.

The advent of platforms like Facebook, Twitter, and Yelp have put the power flatly in consumers’ hands. Consumer-oriented businesses use listening tools that are designed to “hear” to what’s being said about them on social media so that they can react and drive the conversation in the right direction. Businesses who do well on social media work hard to resolve issues quickly, and thank consumers for kind words. Businesses that ignore social media – or who don’t have time to listen and react – can suffer a great deal from bad publicity and negative word of mouth. This CNN report shows how quickly word spread on social media when a customer with measles sat down to eat at a New Jersey diner revealing that without fast action, even an event that has nothing to do with your business or your employees’ actions can do harm to your bottom line.

Retailers these days are depending on good word of mouth and recommendations on social media. A recent report in the Guardian notes that “customers who have the best experiences can spend 140% more than those with poor experiences and can remain customers for nearly six times as long.” Additionally, those customers share their experiences, good and bad, with friends and family, influencing them much more than traditional marketing ever could. The study also revealed that “88% of consumers read online reviews to determine the quality of local businesses” and these recommendations are trusted just as much as personal recommendations.

A Harvard Business Review article backs up the theory that word of mouth is particularly effective when it comes from someone you know. A recent Gallup poll found that 62 percent of U.S. adults who use social media say the sites have absolutely no influence on their purchasing decisions. The key, it turns out, is in relationships. Gallup research shows that comments and reviews from friends,  family members, and experts have the most influence on what consumers will buy – good news for small businesses all across America that do a good job of being on social media, and just plain being social.

The consumer vote

One sure way to test the power of consumer word of mouth these days is to put yourself out there. Social crowdsourcing and crowdfunding tools give businesses an opportunity to ask, “How do you think we’re doing?” and get actionable answers. This approach has the power  to create a new consumer class where the customer is always right – as long as they’re willing to put their money where their mouth is.

Rocker Neil Young decided recently to put the quality back into music’s sound. MP3 players often trade quality for quantity, and Neil wanted high quality music out of his little player. He put the specs up on Kickstarter, and through social media efforts and good old-fashioned word of mouth, he had 18,220 backers pledge more than $6.25 million so far. The Pono Player hit the market in time for the holiday season.

As companies see more clearly how important social media will be to the future of their reputation and brand, they’re beginning to phase out the idea of hiring social media specialists in the marketing department in favor of weaving social media expertise into the fabric of key departments throughout the organization.

Social media consultant Jay Baer predicts, “I think we’re getting close to that tipping point where social starts to get plugged into other parts of the organization as a layer rather than as a freestanding department.” This approach will allow the organization to interact more organically with customers, to achieve a more realistic ongoing conversation.