Measuring the Invisible ROI of Customer Loyalty
Tue, 25 Apr 2017, in Customers
It seems that we’ve gotten customer loyalty wrong all along.
We keep hearing that customer advocates are a mythical, if not a one-off anomaly that gets an unreliable (if not questionable) return on investment.
Would an advocate volunteer in your office on weekends or offer to help during trade shows? Is an advocate someone who promotes your company at every possible chance – and if not, how much “promotion” is needed before one is an advocate?
On one hand it sounds silly to expect your customers to perform the work of your employees or marketers. But on the other hand, it would be silly not to tap into this sentimental, loyal customer.
An advocate isn’t an employee, there’s no legal or contractual obligation. Instead, there’s unprecedented levels trust, vulnerability and (hopefully) genuine intentions. It’s not something many brands are comfortable with.It takes an action to generate a reaction
Of course, it takes an excellent product, marketing move or even a single support interaction for customers to start sharing that experience with everyone in their social circle. It takes something else entirely to generate a type of life-long emotionally connected customer.
Before the financial crisis of 2008-2009, customer advocacy was seen as something nice to have, but not very essential. Until then, it was also very difficult to determine the actual economic value vale of a customer advocate.When confidence disappears, only loyalty matters
Hyundai did that just. They decided to test a new strategy based on customer advocacy with their new “Assurance” program. This allowed new-vehicle buyers to return them free of charge if they lost their income due to a job loss. This program was a huge success, as sales increased 8% at a time where virtually every automaker was losing money.
photo credit Hyundai
Extraordinary situations (like a financial crisis) call for extraordinary measures. The marketing team at Hyundai understood that fear is a powerful emotion which can override higher mental processes. When people are scared they are protective and act irrationally and counter-productively. And when purchasing a car, irrational is the last thing you want to be.
According to Jim Trainor, a Hyundai Motor America spokesman – a total of 350 people made use of the Assurance Program’s buyback offer, while the company sold 1,000,000 vehicles in that time. The program was a success for Hyundai.
Nevertheless, it wasn’t a popular or a necessary move given the circumstances. Sales held steady in various industries (after all, 90% of people still had a job and had a good credit score). For Hyundai, advocacy paid off only when the crisis worsened and buyer confidence dropped.
Ingredients of a customer advocate
Smart marketers understand the value of a receptive customer and the positive word-of-mouth it brings. They use every customer interaction to find out the real driver behind their actions.
- The first order of things is establishing personal connections. If you have an automated system, make sure you don’t rely on it 100%. People value natural, pressure-free conversations – and it’s something that will be noticed and remembered even long after the customer service interaction is over.
- The second thing is being ready to relinquish some control over your operations. When you embrace customer advocacy, you place some of your trust in customer abilities. It’s also important to recognize that word-of-mouth will bring an overwhelmingly positive, not negative return on investment.
- The third, perhaps most important thing is to cater to a sense of purpose. If you’re dealing with a customer who is a teacher and your product improves their productivity, you may want to communicate the importance of spreading knowledge, altruism, and compassion within the context of your product. Communicate these values on your website, in your marketing material, and so on.
The economic value of advocacy
Would you pay a friend to introduce you to a contact or to match you up with a potential girlfriend or boyfriend? A company’s relationship with their loyal customers should be more like a personal relationship with a friend than to a company’s relationship with a paying customer. It’s difficult to think of advocacy in economic terms – but it doesn’t mean we can’t try.
The individual element
Danielle Camara from Marketo utilized one-on-one phone calls and emails to engage with her most important customers. Whether she needed content ideas, references, reviews or product feedback, she came to rely on this group of people. As a result of Danielle’s efforts, Marketo customers in her program have seen a 95% retention rate.
However, with Marketo being a global brand, it quickly became apparent that the 50-70 advocates Danielle was able to manage was a minuscule percentage of their overall customer base. The important takeaway is that just one person was enough to nurture and draw value from the company’s advocates.
The community element
Since engaging with your customers one-on-one is resource intensive, a good long-term strategy could be to utilize a branded community to get things rolling.
Some content is most efficiently created, promoted and consumed with input from your most engaged customers. Bo Bandy – a marketing director at ReadyTalk decided to encourage this behavior by creating a community just for them. This program was a huge success for Bo’s marketing efforts, including closed deals and $60,000 in sales.
In a similar twist, Go-Pro, a leading mounted camera manufacturer devised a simple way to engage with their community. People are encouraged to capture their adventures and upload the videos to the company’s YouTube channel. Not surprisingly, these customer stories make up a large percentage of Go-Pro’s marketing literature.
The unexpected “wow”
An author, speaker and entrepreneur – Gary Vaynerchuk thinks that catering to advocates is painful, but oftentimes, it’s the only thing to do.
He decries companies that spend $3 million on a single superbowl spot or an advertising campaign that isn’t the best use of their budgets. In many cases, he claims, it’s 20%-30% of their money being spent on questionable return – money which can be used on engaging with their top customers on Twitter or Facebook.
Therefore, taking the road less traveled is sometimes like killing two birds with one stone. You’re uncovering new marketing opportunities and making a few vocal customers happy at the same time.
Can you scale customer advocacy?
You simply can’t scale picking up the phone and calling your customers.
From there on, based on the successes of each conversation, you can single out those why may be more likely to participate in future marketing, product or even business road map initiatives.
Employees may want to use the “wow effect” where applicable – that is taking your most engaged customers and sending them a surprise gift or a targeted discount.
Of course, automation can also be implemented as long as it doesn’t negatively impact the overall customer experience. This was carefully executed by Starbucks back in 2008 with their MyStarbucksIdea.com customer feedback portal.
Before that, Starbucks would spend immense amounts of money on research, development and analyzing consumer preferences. Now they simply look at thousands of suggestions (whether it’s new products or coffee combinations) from their most loyal customers and then consider what’s worth pursuing.
In the end…
How you approach, orchestrate and execute your advocacy strategy will depend on your business and customers. While it makes sense to automate, optimize and cut costs in production or development cycles, it’s not the right approach for keeping customers engaged. Sometimes it even makes sense to invest. Especially if your competitors aren’t doing the same.