Companies love customers who recommend them to friends, family, colleagues etc.
In these times of influencer marketing having loyal customers isn’t good enough, we need brand advocates.
How do we identify such people, and accurately calculate their financial impact?
The answer is more complicated than it might seem.
Although we know much more on brand advocacy, influencer marketing, word-of-mouth and recommendations than before, it seems that many companies still struggle identifying ‘influencers’.
But, more important, most companies still have no clue how to calculate how valuable word of mouth is. We know it is worth a lot but how much exactly? Can you explain it in a few words?
And besides: do people that are referred to our companies really become customers? And if they do: do they become ‘good’ customers?
It seems that customer-satisfaction surveys are wildly inaccurate: few of the respondents who say they would recommend any given product to another consumer actually do—even if they think they will.
All this reminds me of research that was published in the Harvard Business Review, some two years ago.
It found that only 12-14% of those who were referred to a vendor actually bought anything; and a mere 9-11% of these became profitable customers.
Also, some of those referrals might have become customers anyway—so the added value lies only in the marketing costs saved, not the purchases.
Affluents are not not necessarily brand advocates
The most important insight is to demonstrate that big spenders (“affluents”) are not necessarily big referrers (“advocates”) and vice versa, which raises the question as to where best to focus marketing efforts.
The authors suggested “segmenting” marketing campaigns—in other words, persuading affluents to spread the word; seducing advocates into spending more; and prompting “misers” (who do neither) to do at least one or the other.
Within this exercise, the authors found 4-5% in each group shifted into a higher-value category.
Do you know what word of mouth in the end means for your company’s bottom-line?