customer loyalty

How Advocacy Drives Loyalty- Reduce the Revolving Door Effect

Customer disloyalty is costing companies billions of dollars each year. According to loyalty guru Fred Reichheld, many major companies now lose – and have to replace – half their customers in five years. Think about that. Companies keep trying to get new customers in the front door. Meanwhile, about half of the existing customers are leaving out the back door. It’s like a revolving door. One CMO for a services company that we know said that increasing his company’s loyalty rate by only 1% would mean millions of dollars in revenues and profits.

Airlines, hotels, restaurants, retailers and other companies use loyalty programs to keep their customers from leaving. But these companies are missing a major opportunity to increase loyalty by energizing their Brand Advocates, those consumers who act as Champions for your brand and who influence purchase decisions and perceptions of others.

How?

  • First, creating and nurturing Brand Advocates increases the loyalty of these enthusiastic customers themselves. A recent Harris study found that 79% of Brand Advocates are likely to repurchase.
  • Second, and even more important, energizing Brand Advocates helps companies keep customers who might have otherwise churned out.

We saw this at Apple, where I worked as a marketing consultant for ten years. Apple Advocates drove loyalty by acting as a powerful marketing force. These enthusiastic customers went out of their way to:

  • Educate other Apple customers about product features and benefits, which increased product usage
  • Defend the Apple brand against negative Word of Mouth, a significant cause of churn
  • Build communities of other Apple customers, which drove brand engagement
  • Remind Apple customers why they purchased Apple products in the first place 

So what do we recommend?

  • Build your Brand Army. Identify and engage your Brand Advocates. These are not just people who like your brand. They recommend you to others.
  • Activate your Brand Army. Provide them with Social Recommendations tools that make it easy for them to recommend you even more on Facebook, Twitter, shopping sites, and more.
  • Acknowledge your Brand Army.Don’t pay or provide incentives to your Advocates. That would be inauthentic and even risk offending Advocates. But thank them for recommending you.

Ultimately, the best solution for keeping customers is to provide positive customer experiences.  But building and energizing Brand Advocates is also powerful way to increase loyalty and should be part of nearly every marketer’s arsenal.

PS: Did you know?

According to marketing firm Colloquy's Loyalty Census released last year:

  • Membership in U.S. customer-loyalty programs has reached 1.8 billion, up from 1.3 billion in 2007.
  • The average U.S. household has signed up for 14.1 loyalty programs, but only participates in 6.2 of them.
  • American businesses issue roughly $48 billion worth of perceived value in reward points and miles annually.

-Rob Fuggetta, Founder/CEO, Zuberance

Acquire and keep new customers- The retention effect of Word of Mouth

In a recent post, I expressed my thoughts on "Why Referral Programs Suck" from a brand's perspective. Now it's time to look at the weaknesses of referral programs from a consumer's perspective. Think back to a time when someone made a recommendation to you. Whether it was a restaurant, a car, or a SaaS Software platform, that recommendation carried weight with you and played a significant role in your purchase decision. Now, consider for a moment, you find out that your "friend," Matt, who recommended you purchase a $45,000 car, was paid $500 after your purchase. Or worse yet, he got some rewards points redeemable for a cheesy vacation getaway, which turns out to be a sleazy timeshare pitch. What are you thinking?

You might feel…

  • Misguided – The intention behind the referral was not pure. “What’s the deal Matt, you pimp out your friends for cold hard cash now?
  • Indifferent – That recommendation wasn’t authentic, the referral was made for personal gain. Maybe not exclusively, but that doesn’t matter. “That means about as much to me as the ads on the back of a bathroom stall door.”
  • Hustled – Especially if you find out after your purchase. You just spent your hard earned cash based on a recommendation you thought was genuine. What remains of your relationship with that person? With that brand? “Did you actually believe this was right for me, or did you just want a reward?”
  • Less loyal – If a few bucks got you in the door, a few bucks will get you out the door. Your switching costs are no longer tied to any brand affinity, just the dollars and cents. “I’ll stick with this until the next deal comes along.

You get it.

On the flipside, an Advocate recommendation is:

  • Trustworthy – In a study by Nielsen, 92% of consumers said they trust a recommendation from a ‘person they know’, and according to Econsultancy 70% still trust recommendations from people they don’t know.
  • Influential –  Research conducted by McKinsey concluded that “a recommendation from a trusted friend conveying a relevant message is up to 50 times more likely to trigger a purchase.” In another study by Zocalo Group, “90% of consumers said that Word of Mouth was the primary influencer in their purchase decision.”
  • Cultivating Loyalty – The Harris Poll reports that “76% of Brand Advocates said they were more likely to repurchase themselves after recommending a brand or product.” And Deloitte found that “customers referred by other customers have a 37% higher retention rate.”

When referred to your brand based on altruistic and authentic recommendations, consumers are more likely to develop a deeper and more long term relationship with your brand and the Advocates that helped them. Growing your business through Advocacy will result in more loyalty, more Word of Mouth, and more profits.

-Alex Littlewood, Senior Customer Success Manager, Zuberance

Would you rather reach thousands who "like" your brand or reach hundreds of Advocates?

Have you ever played the game 'Would you rather?'

Would you rather always lose or never play?

Would you rather be able to stop time or fly?

Would you rather find true love or 10 million dollars?

Would you rather reach thousands of people who "like" you or reach hundreds of Brand Advocates?

Brands continue to work diligently to build their Facebook and Twitter followers, and although a vital piece of any social media strategy, how much more impressive would it be if they first focused on how many of their customers are Advocates?

Take Norton Anti-virus software for example...

14,000 Norton Advocates vs 150,000 Norton Loyalists were asked to write a product review and share offers via email.

Compared to Loyalists, Advocates:

  • opened the email at a 2X higher rate
  • clicked through at 2.5X higher rate
  • shared offers at a 9.5X higher rate
  • wrote reviews at a 25X higher rate

This is the essence of what I refer to as 'Advocate Gearing'. Reach a large group at a faster speed (or cadence) and achieve less impact - the Loyalists. OR reach out to a smaller, more responsive group and drive results with a greater impact - aka: An Advocate Channel.

What are your thoughts?

Loyal Customers, Brand Advocates, What’s the difference?

As I have talked about the characteristics of Brand Advocates over the past few months I typically use one of my favorite subjects, “Coffee Shops,” to explain the difference between Loyal Customers and Brand Advocates. So grab a cup and here we go… I know I’m not alone, but about 3pm in the afternoon, my craving for that coffee beverage really starts to kick in. Much to my checking account’s dismay, I have become a Starbucks customer almost once a day. My daily routine is largely driven by the fact that my favorite coffee shop is 15 miles down the road and Starbucks is a one-minute walk away.

Do I recommend Starbucks to friends? Not really, but I’m a fairly loyal customer of Starbucks.

But if a friend or co-worker asked me to recommend a coffee shop I would recommend Red Rock Coffee in Mountain View, CA. I have sent more people to Red Rock than I can count. The “Silicon Valley” vibe, locally owned spirit, carefully handcrafted beverages complete with foam art, and coffee making expertise are a beautiful blend. I’m a Red Rock Advocate and a highly valuable customer for their business.

So let me get back to Starbucks to fully illustrate the difference between Loyal Customers and Advocates. The info graphic below shows how 1 in 5 Loyal Customers are Detractors.

This statistic describes my Coffee world well. Even though I spend a lot of money at Starbucks, I’m primarily a Detractor in that the main reason I go there is out of utility and lack of other inspired options.

But something happened over Christmas that actually moved me up the scale towards being a Starbucks Advocate. One of the baristas gave me a hand-signed Holiday card with a gift card inside. I assumed the idea was thought up by someone in the marketing department but I really didn’t care. It was a thoughtful and personal gesture that made a positive impact on my perception of Starbucks or at the very least the Starbucks location to which I go every day.

So what suggestions can Brands take away from my Coffee experience?

  • Don't make too many assumptions about loyal customer’s loyalty or Advocacy. It is quite possible that “loyalty” may simply be from a lack of better choices.
  • Consistently ask your customers how you (the brand) are doing with them. Our recommendation is to ask the Ultimate Question: “How likely are you to recommend our brand or products to your friends?”
  • Continually strive to make customer experiences more human and personal. For example, Denihan’s Affinia hotels give their customers a choice of 6 different types of pillows and allows guest to bring their pets. These great experiences are the corner stones of Advocacy.
  • Don't confuse Loyal Customers with Brand Advocates. Instead, think about these 2 groups as distinct segments.
  • If you have yet to systematically identify your Advocates, your Loyal Customers are are a great place to start because they have the most experience with your brand. There are surely customers in this segment that are recommending your products to their friends, or would do so if you just made it easy for them.