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