4 Reasons Why Customer Advocacy Is Important To Your Business
Customer advocacy is a marketing term for a customer-focused strategy that encompasses all aspects of contact a company has with its customers, including experiences with products, services, sales, support and complaints.
Customer advocacy is important because it provides marketers and business owners with a way to leverage their most loyal customers as brand ambassadors to build awareness, drive sales and increase revenue. In fact, research by BzzAgent, a leading word-of-mouth marketing company, shows that a customer advocate is 50% more likely to influence a purchase decision than a regular customer.
The following are the top four reasons why customer advocacy is important to your business.
1. Word of mouth is the primary factor behind purchasing decisions
A study by McKinsey & Company found that word of mouth is the primary factor behind 20-50% of all purchasing decisions. Interestingly, the same study found that word of mouth is most influential when a customer is buying a product for the first time or the product is relatively expensive.
This makes sense. These two scenarios will require you to do more research, seek trusted opinions and weigh up the purchase decision longer than you usually would.
As a customer, we all remember buying something that didn’t quite meet our expectations and then feeling buyer’s remorse. Often times, these purchases could have been avoided if we had a trusted opinion from a friend, family member or colleague.
How do you think Apple experienced so much growth in the past decade? Yes, they spent some money on creative advertising, but so did Microsoft (PCs) and Sony (mp3 players).
Apple’s products and their customer experience did the selling for them. This combination fuelled millions of brand ambassadors who told millions of other customers about their iPods, iPhones and Macs. Microsoft and Sony simply didn’t have the same passionate customers spreading word-of-mouth opinions about their PCs and MP3 players.
The lesson here is to create products and experiences that your customers love. You want your customers telling their friends about your products – both when they explicitly ask for recommendations and in passing conversations.
2. People trust friends and family more than any other information source
According to research by Nielsen that looked at consumer trust, 92% of respondents trust recommendations from people they know, which is well above any other information source. Ads on TV are only trusted by 47% of respondents, while online banner ads are trusted by a measly 33%.
This is probably no surprise to you. As a customer, you likely rely on friends’ opinions and you trust them more than any TV or banner ad.
But think about what this means for your business. How much money are you spending on paid advertising? How much of this advertising is not being trusted by your customers? In comparison, think about how much you are spending on customer advocacy.
I challenge you to consider customer advocacy an important part of your marketing strategy and allocate some of your marketing budget to create an advocacy strategy (here are some ideas to give you inspiration).
3. Referred customers typically cost less to acquire and are less price sensitive
How much does it cost you to acquire a customer through word of mouth? This question can be interpreted in many ways, but essentially, customers you acquire through word of mouth cost you nothing from an advertising perspective.
I understand there may be some marketing initiatives that influence these customers and I understand there may be some costs associated with your customer advocacy programs, but all in all, it’s safe to assume the customers acquired through word of mouth were done so for less money than your other marketing channels.
From my experience, these customers are also less sensitive to price. Referred customers are less likely to haggle with you over cost because they have been referred by someone they trust. This inherently means they trust the price and value they get from the product or service.
According to a study by a team at Goethe University, customer referral programs were found to be a financially attractive way for companies to acquire new customers.
The study looked at information from a database of 10,000 customers acquired by a bank in 2006 and found that about half of them were acquired through referrals and the other half through direct mail and advertising. The analysis found that referred customers had higher margins, churned less and had higher customer lifetime values than other customers.
The point here is that customers acquired through customer advocacy can cost less to acquire and be more profitable than customers acquired through other paid and unpaid marketing channels.
4. Advocates are repeat customers who spend more money
Customer advocates don’t just refer new customers – they are also valuable repeat customers. They come back and buy from you regularly, they upgrade their packages more often and they effortlessly sign contract renewals.
There’s no better example of this than Chick-fil-A’s raving fans. This group is extremely profitable for the restaurant, making up 10-15% of its total audience. Chick-fil-A’s advocates eat at the restaurant four or more times each and every month. That’s at least once a week!
Imagine if your customers kept coming back every week.
Steve Robinson, Chick-fil-A’s senior vice president and chief marketing officer, says these die-hards “are crucial to the health of the business and help us grow. Our goal and strategy is to build special relationships with them.”
You can see from this example that, although we tend to focus on referrals being the big benefit of customer advocacy, advocates themselves also drive significant revenue through their repeat purchases and loyalty.
Customer advocates are your brand ambassadors and biggest marketing asset
Customer advocacy is important for all businesses because we now live in a world where the most important person selling your product or service is no longer you – it’s your customer.
Buyers increasingly want to learn about products and services through peers – their trusted friends, family and colleagues. As a company, you need to be creative and find a way to put your happy customers in front of these buyers.
Apple found a way to create a passionate community of Apple fans who came together around a purpose for innovation and being different. They used these customers as ambassadors to spread their vision and sell a lot of products.
Chick-fil-A found a way to create ambassadors by doing lots of little things to create a memorable customer experience. By consistently exceeding expectations, they have created millions of ambassadors, with hundreds who will to dress up as a cow for “Cow Appreciation Day” every year.
Hubspot found a way to cultivate advocacy by creating valuable educational content and letting their customers do the sharing for them. Hubspot leads the movement away from outbound marketing towards new, fresh inbound marketing methodology. They create useful content so valuable to their customers that they share it with all of their colleagues via social media and email. Hubspot reaches millions of new customers each and every day through their educational content.
I challenge you to start leveraging your most loyal customers by creating a customer advocacy initiative. Allocate some of your marketing budget and turn these happy customers into brand ambassadors who will do your marketing for you – much more effectively.
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