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Customer Loyalty Does Not Equal Customer Advocacy

Customer Advocacy“We have very loyal customers; we don’t need a customer advocacy campaign.” I’ve been in a senior sales and/or marketing position for more than 20 years and the one constant mistake I still see and hear is a lack of understanding in the difference between customer loyalty and customer advocacy.

Making the distinction is not difficult.

Customer loyalty is earned through consistently positive experiences with the brand’s product, customer service, value for price, etc. The net result is that customers are more likely to look to you first when in need of additional products and/or services, which increases the likelihood that they’ll purchase again.

Customer advocacy is an action taken by existing loyal customers to promote a business or product to their colleagues and, more importantly, to encourage those colleagues to purchase as well.

The key differentiation here is that strong customer loyalty will certainly increase repeat purchases from those customers but it does not guarantee an increase in qualified leads in the sales funnel.

We’ve often heard the platitude: “It costs five times more to acquire a new customer than to retain an existing customer.” This is a long-held belief by business executives and as a result, much effort is placed into keeping customers happy and loyal, and rightly so. But is it being done for the right reasons?

Customer Retention Isn’t Less Costly Than Customer Acquisition

The Ipsos Loyalty group has debunked the theory that customer retention is less costly than customer acquisition.

For this rule to be true, we must assume that existing customers will: (a) increase their level of spending at an increasing rate; (b) purchase at full-margin rather than discounted prices; and (3) create operating efficiencies for the business.  Their studies have proved these not to be universal truths.

Further, the assumption that the advertising costs to earn a new customer are greater than those to keep existing customers happy is not accurate.  The problem is that advertising isn’t just about acquiring new customers anymore. Digital and social media marketing may have changed that forever; advertising and marketing is no longer just about lead acquisition, it’s about community building, online customer service, brand reputation management, etc. The marketing costs that are most often allocated to customer acquisition are, in reality, used to manage and encourage existing customers.

Customer Loyalty Does Not Equal Customer Advocacy

This blending of customer loyalty and customer acquisition further highlights the need to separate customer loyalty from customer advocacy campaigns but also to understand how they’re linked.

Customer advocacy is the next stage in the customer lifecycle and one that too few businesses invest in. Loyal customers may be less swayed by competitive offers and may be less likely to abandon their brand-love when small customer service issues arise.However, that does not mean they will actively promote your business in order to improve the quality of your sales funnel.

Customer loyalty can be earned by providing consistently positive customer experiences but for advocacy to thrive, the business must invest in what is best for the customer. Often this means that the corporate culture must change in order to change the customers’ view of their relationship with the brand.  Customers must no longer see and think “value for price” or “good customer experience” when they engage with the brand, they must feel that their patronage of your business is improving their lives and that the relationship forged with your business is a personal choice, not one of necessity.

Exceeding Customer Expectations

For brands with lower marketing budgets, a simple way of achieving customer advocacy is to understand that customer loyalty can be earned by meeting the customer’s expectations, whereas customer advocacy is earned by exceeding them.  What would it take to exceed those expectations? What campaigns and budgets are in place to understand what that really means to the customer? What efforts are being exerted to exceed those expectations once identified? How are they being measured?

Referencing the Ipsos Loyalty study, we understand that that customer retention, while important, is not a business maker in and of itself.  It is, however, the best investment toward filling the new customer pipeline with more qualified and more convertible leads. Countless studies have proven that prospects referred by customers from a business with a high NPS or Net Promoter Score (those where the majority of existing customers rate their likelihood to recommend the business 9 or 10 out of 10), are more profitable and generate a higher lifetime value.

Achieving a high NPS requires an investment in converting loyal customers to advocates and that means ensuring your marketing team understands the difference. Keeping customers happy and loyal is a good strategy, but not because they’re cheaper to keep than new customers are to acquire. Loyal customers must be managed along the customer lifecycle to the point of advocacy, at which point they ARE your new customer acquisition campaign.

Sensei Debates

Do customer loyalty and customer advocacy require independent campaigns and budgets?

Share your thoughts in the comments below.

Sam Fiorella
Feed Your Community, Not Your Ego

 

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5 comments
ericwilbanks
ericwilbanks 5pts

This is a really fascinating subject, and one that I'm constantly chewing on. I really appreciate your pointing out that loyalty doesn't necessarily mean advocacy. I've never fully entertained that dynamic. At the same time, I have a somewhat similar approach to the idea of advocacy. The technical definition of advocate is "to speak or write in favor of; support or urge by argument; recommend publicly." I teach the NGOs that I work with that advocacy (especially in this day and age) is actually much higher on the funnel because people are much more likely to lend their VOICE before they will lend a HAND. In other words, the level of commitment and sacrifice required to spread my message to your friends on TW or FB (even repeatedly over a span of time) is much lower than that of someone who is volunteering. But, to reiterate your point, I can certainly see how a loyal volunteer could easily cease to be an advocate unless prompted (and, in fact, may have never really been an advocate). And, as someone who was a psych major, I also wonder if personality styles play into our funnels much more than we are willing to admit. What is a sacrifice for me -- from a psychological standpoint -- may be a no-brainer for you. Just thinking out loud now... :-)


Thanks again for the article. I have lots to continue chewing on.

samfiorella
samfiorella moderator 5pts

@ericwilbanks There are most definitely "levels" of customers, and among them, levels of advocacy. This is particularly evident among NGOs, non-profits, charities, etc.

Consider the act of sharing an article about a social cause on Faceobook vs. the act of starting a conversation or actively sharing a personal opinion about said cause on a Facebook wall post. Both might be considered advocacy; however, each is a different stage in the continuum. 

mikemyers614
mikemyers614 5pts

Interesting article, Sam, thanks for sharing. Totally with you on advocacy and how that's different from loyalty, but I'm struggling with the idea that retaining an existing customer costs the same as attracting a new one. Perhaps you can set me straight.

I believe most of the lower-cost logic comes from a pure awareness view; that is, making people aware of your brand/product/service (typically through advertising) is what makes acquisition more expensive. Because current customers already have awareness of you and your offerings, you don't need to invest that $$, making those folks inherently less expensive.


To your point, there is certainly still investment needed to maintain loyal customers (and hopefully build them into advocates), especially in the areas you talk about like community building, customer service, etc. But brands don't need to spend $$ in order to make them aware of their offerings, which is where the savings come in. No?


Thanks again for your thoughts.

samfiorella
samfiorella moderator 5pts

@mikemyers614 I've always believed in the idiom that it's less costly to retain existing customers than it is to acquire new ones. The IPOS study, as I report in my post disproved this premise in many businesses when studying the actual costs to acquire customers and to retain them. 

From my understanding of the study, there a few factors at play including: 


1) the original premise is that the only variable is the cost of awareness, as you suggest. In reality, businesses must still market to existing customers thanks to the competitive forces. Just as Coke. Why do they continue to spend money in brand advertising when they already have the dominant market share? 

2) Social media has increased the amount of information that customers have access to and that's created an environment that's ripe for "brand interception." It's very easy for one brand to jump in on the online communications between another brand and its customers. That threat means more costs are required today to keep customers focused one's brand, including loyal customers. 

mikemyers614
mikemyers614 5pts

@samfiorella @mikemyers614 Thanks for the reply. Maybe it's the classically trained marketer in me, but I still believe it costs less to keep an existing customer. I did read the summary of the study and completely agree it's not free to serve existing customers by any means, but reaching them (email, postal mail, phone, etc.) is much more cost effective simply because a brand has that ability (they have that contact information and can choose the most effective way to reach them). Prospects are more costly to reach because brands can't be sure how to reach them or when/if they have, so they typically do so in multiple (inefficient) ways.


Your point about market leaders (Coke) is a good one, as well. To me, spending there is more about defending the brand from competitors (Pepsi) than awareness. If there were no other sodas to choose from, would Coke still be doing brand advertising? Perhaps, but I would guess their frequency would go down and the message would shift to location (where can I get it) and category (why soda is better than, say, water).


In SoMe, I've seen more failures than successes when brands try to jump between a brand and its followers/customers, but perhaps those cases just get more air time.


Thanks again for an interesting debate!

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