The Impact of Customer Advocacy on Business

• Loyalty Beyond Limits: The Impact of Customer Advocacy on Business
• From Customers to Advocates: The Evolution of the Loyalty Paradigm

In the early days of commerce, loyalty was often tied to local businesses and personal relationships. Customers would return to the same shopkeepers or service providers due to familiarity and trust — think of a neighbourhood bakery visited regularly due to the quality of products and personalised service.

The mid-20th century saw the rise of loyalty programmes, with companies offering rewards and incentives to encourage repeat business. These programmes often involved collecting points or earning discounts. American Airlines introduced the first-ever frequent flyer programme in 1981, offering miles to loyal customers, which later became a model for many other industries.

Later, companies started using data and technology to manage customer interactions more effectively. CRM systems helped businesses to track and analyse customer behaviour to provide personalised experiences. Salesforce, founded in 1999, revolutionised CRM by offering cloud-based solutions for companies to manage customer relationships efficiently.

In the 21st century, the focus shifted from merely retaining clients to turning them into customer advocates. Companies recognised that loyal customers who actively promote their brand can have a profound impact on business success. For example, Apple’s passionate customer base is a prime example of customer advocacy. Apple fans not only buy their products but also eagerly promote them, creating a strong community around the brand.

The arrival of social media platforms complemented advocacy significantly, allowing customers to share their experiences and opinions about brands with a global audience. Companies began leveraging user-generated content and online communities. Remember GoPro encouraging customers to share action-packed videos and photos captured with their cameras? This user-generated content helped to build a loyal community of customer advocates. Businesses also started focusing on creating memorable experiences and emotional connections with customers. They realised that customer loyalty is not just transactional but deeply tied to how customers feel about the brand.

Many companies now have advocacy marketing programmes that reward loyal customers for referring friends and promoting the brand. These programmes often blend elements of traditional loyalty marketing with advocacy initiatives. For example, Dropbox’s “Refer a Friend” programme offers users extra storage capacity for every friend they refer, turning satisfied customers into advocates who help to grow the user base.

In summary, the evolution of the loyalty paradigm has seen a progression from transactional customer relationships to emotional connections and advocacy. Successful companies today understand the value of turning customers into advocates who actively endorse and promote their brand, often playing a pivotal role in driving business growth and reputation.

Advocacy as a Trust Signal: Strengthening Bonds and Repeat Business

Advocacy serves as a powerful trust signal by providing peer validation and social proof. When a customer becomes an advocate and openly supports a brand, it signifies to others that the brand is worth considering. People often place trust in endorsements and suggestions that come from friends, family members or close acquaintances more than traditional advertising, leading to new customers trying out the brand. They view advocacy as a vote of confidence.

That is how brands build credibility. Advocates openly share positive experiences, making their opinions more genuine and trustworthy than marketing messages crafted by the brand itself. This authenticity is a key factor in building trust, as people take into account the opinions of real users.

Advocacy can also reduce the perceived risk of trying out a new product or service. When prospective customers see that others have enjoyed positive interactions with the brand, they are more likely to believe that they, too, will have a positive experience. This reduced risk perception encourages them to make a purchase, knowing they have a network of satisfied customers to rely on.

At the same time, advocates’ insights and suggestions can assist the brand in enhancing its products, services and overall customer experience. When potential customers see that a brand actively listens to and acts upon customer feedback, it signals a commitment to delivering quality and customer satisfaction, further enhancing trust.

Advocacy-Driven Referrals: Expanding Customer Networks and Loyalty

Advocacy-driven referrals extend a brand’s reach beyond its traditional marketing channels. When satisfied customers spread positive brand awareness within their networks, they introduce the brand to a broader audience. This word-of-mouth marketing can reach individuals who might not have encountered the brand through other means.

Moreover, referrals are often a cost-effective way to acquire new customers. Compared to traditional advertising and marketing campaigns, which can be expensive, advocacy-driven referrals rely on the goodwill and advocacy of existing customers. This strategy can lead to a more efficient allocation of marketing resources.

Now, let’s look at how specific companies have benefited from advocacy-driven referrals and expanded their networks thanks to a leading customer advocacy software provider, Mention Me.

PUMA

Thanks to customer advocacy, PUMA achieved a remarkable 6x return on investment (ROI) in just a half-year. This means that for every dollar invested in advocacy-driven referrals through Mention Me’s platform, the company generated six times that amount in revenue. On top of that, seeing the immense success of its initiative, the global sports brand expanded the referral programme in an additional 19 countries. These impressive numbers demonstrate the effectiveness of advocacy-driven referral programmes in propelling customer acquisition and brand growth.

Nutmeg

With the help of customer advocacy brought to life through Mention Me, Nutmeg — a digital wealth management space based in the UK — managed to convert an impressive 26% of referrals into new customers. This high conversion rate showcases the power of advocacy-driven referrals in turning potential leads into actual customers, indicating that the referrals coming through the advocacy programme were highly qualified and motivated to make a purchase.

kencko

kencko, a US plant-based smoothie maker, acquired 8% more new customers via Mention Me Referral Engineering® compared to previous methods. This increase in customer acquisition demonstrates the impact of advocacy-driven referrals in expanding the customer base. By motivating satisfied customers to refer friends, the company successfully attracted a significant number of new customers who might have otherwise remained undiscovered.

Moreover, it also motivated 66% of existing customers to share the brand with their friends, a fact that highlights the effectiveness of Mention Me’s platform in encouraging customers to become advocates and actively participate in referring others.

All these examples clearly show that with the right tools and incentives, a substantial portion of your customer base can be transformed into brand advocates who will help to expand your customer network.

Advocacy and Customer Lifetime Value: A New Metric for Success

In its essence, customer lifetime value (LTV) represents the amount of profit a customer brings to your brand, whether that’s over a short span of time or stretching across decades. For those who prefer crunching numbers, calculating LTV involves this formula:

(annual profit contribution x the number of years as a customer) – the initial customer acquisition costs

But this is just a portion of the whole story. Consider this: a customer who frequently promotes your brand may bring more value than a client with a higher average order value (AOV) who doesn’t bring in new business. To get a more precise LTV calculation, you should factor in other variables. For a deeper dive, you can explore this informative infographic put together by Neil Patel.

So, just how valuable are customers who come through referrals?

With customer advocacy experience that has come from collaborating with over 400 brands worldwide, Mention Me has gathered valuable insights into the significance of referred customers.

Let’s jump straight into the numbers. On average, referred customers:

1. Spend 15–25% more on their initial purchase.
2. Make notably more repeat purchases.
3. Have a threefold higher likelihood of recommending your brand to friends.
4. Have twice the customer lifetime value compared to non-referred customers.

Impressive, isn’t it?

Advocacy in Challenging Times: Navigating Business Turbulence

What’s even more impressive is that, as per the Global Customer Loyalty Report 2022 shared by Forbes Councils Member Zsuzsa Kecsmar, loyalty programmes not only weathered the COVID-19 pandemic storm but also thrived during these challenging times. An impressive 62% of respondents stated customer advocacy had played a crucial role in retaining engagement throughout the pandemic, with programmes featuring tiered structures having shown an even better performance.

But what explains consumer loyalty programmes blossoming during economic downturns? Several key reasons underpin this phenomenon, Kecsmar says. First, during times of economic uncertainty, customers often reassess their priorities. They become more focused on value and savings, making customer loyalty programmes that offer discounts and benefits particularly appealing.

Another driving force is that companies find cost savings in directing their efforts towards retaining and expanding business from existing customers rather than pursuing new customer acquisition. This shift in focus allows businesses to capitalise on the trust and loyalty they’ve already built with their customer base, ultimately proving more efficient and cost-effective during economic instability.

If you’d like to decipher the true meaning of customer advocacy and achieve results similar to — or even better than — those mentioned in this article, feel free to request a free demo with one of Mention Me’s dedicated specialists.

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