We all want an advocate instead of a customer but how can you measure it and why should you? Let me give two very real scenarios:
Customer one – Goes into a store looks around, buys something small. They don’t find the experience poor, but they also don’t see the experience as delightful.
Customer two – Comes in irate about a faulty product, which they return. They buy nothing else but leave the store extremely happy with the service.
Which customer do you want for your business? Why did you make that choice? If you’re interested in understanding more on the importance of complaint handling, try reading our complaint handling guide.
In this article I’m going to break down:
What is an advocate?
Benefits of advocacy
Simple solutions to measure and track advocacy
What is an advocate?
An advocate is simply a customer who is willing to recommend your product or service to others. At some stage, you’re likely to have seen a survey with two, or sometimes rarely more, questions. The questions are:
How likely is it that you would recommend us to a friend, colleague or family member? – Given on a 0 to 10 scale
What is the main reason for choosing that rating? – Open text response
This first question assists to identify the Net Promoter Score (NPS).
Measuring NPS and what it means
The diagram above shows the scores for the first question split into three groups. The first thing you will notice is the groups are not even. This unevenness reflects the difficulty in retaining customers and having them genuinely aligned with your brand.
Detractors – If a customer gives a score of 0 to 6 on the question of if they’d recommend you, they are a detractor. This group is responsible for the majority of the negative word of mouth, thereby preventing potential sales. Furthermore, they are also much more likely to consider competitor’s offerings.
Passives – This customer is similar to customer one above. While the customer is satisfied, for now, they are easily influenced to consider an alternative brand. Similarly, although they may still recommend the company, there is likely to be some qualification.
Promoters – Finally the most attractive group are the promoters. These customers are likely to have a favourable view of the company and will have stories they are willing to share with others. Similar to customer two earlier, these customers may leave your store with no purchase but have a very high likelihood to return. In general, these customers will be better and easier to serve, with service often resulting in relatively better sales.
So we’ve explored what makes up the NPS calculation, but how do you calculate it? The calculation is quite simple, which is why this is an attractive methodology.
NPS = % of Promoters – % of Detractors
Consequently, NPS ranges from -100% to 100%. Determining the target value will depend on the industry. In particular, high growth industries will typically have higher NPS. Anything over +50% should be considered excellent, but for many mature sectors, the scores will likely be lower. It’s most important to note the target is less important than the direction the score is moving over time. NPS can fluctuate, so it is essential to monitor trends over time.
Benefits of customer advocacy
Now that you know one way to measure advocacy, why does it matter?
The primary reason you should care is Satmetrix, the originators of NPS, found there was nearly a $2,200 difference in value between a promoter and detractor. This value consists of not just direct sales value but also the cost of lost opportunities due to detractors and additional sales from promoter networks. Even in direct sales alone, Lego found promoters spent 53% more than detractors.
Similarly, a study by Bain and co found a good correlation between higher NPS and growth. Furthermore, their research supported Satmetrix, that there is a significantly higher lifetime value difference between promoters and detractors. The critical drivers identified are:
Pricing – Promoters are less sensitive to price. Instead, these customers are already attracted to the company’s products or services and so require less price incentive to return. One notable exception is if they advocate for your company based on the best prices rather than due to product or service. The second question mentioned earlier can be helpful to identify these themes of why customers advocate.
Retention rate – Detractors defect from the company more frequently. Consequently, they are lower value and a higher cost to grow as turnover is high.
Annual spending – Promoters will spend more as seen in the Lego example, as they are more likely to return.
Word of mouth – Inverse to retention rate, promoters drive new customers to your business. This advocacy can create an exponential increase in value over time. Unfortunately, this impact can be hard to measure unless you determine what drove the customer to your business.
Cost efficiencies – Not only do promoters create more income per $ of serving cost, but they also produce other cost efficiencies. For instance, the free word of mouth reduces marketing costs. Also, with a longer service lifetime, the cost of acquisition can be spread over an extended period. Finally, promoters tend to attract other customers who are promoters, building the cost efficiencies.
My favourite example of advocacy is my dentist. We’ve all experienced a dentist we hate and the difficulty to find a good one. I’ve found a dentist that I praise and will retain. Not only do I return to my dentist to schedule, but I also don’t look around. The quality of service is worth more to me than the potential savings.
In a digital world, delivering a survey is easy. Whether it is the iPad for someone to click or a dedicated form. Here are some of the most common I use:
Google surveys – Google surveys are one of my recent favourite options; while it costs $0.01 per survey for an NPS survey, it is very customisable. In particular, you can control the pages where it appears, as well as how frequently. While it does require adding some code to the website, it is no harder than adding Google Analytics.
Provide an iPad or another interface – At my coffee place you can scan a code on your phone for the coffee, this is an excellent time to show a survey for people to complete.
We’re aware not all businesses can interact with customers online. My favourite method to move to a digital channel is simply to offer a digital invoice or receipt. While that works for a lawyer or plumber, it may not work for a food shop or clothes retail store. Having said that I always encourage clients to not be limited. For example, this small business’ creative use of facial recognition could easily be extended to include an optional survey.
So what are your options if you aren’t ready to invest. Consider one of the following:
Informal– While formal surveys are great, if you’re a small business there’s no reason you can’t just ask the customer if they’d recommend you and what could be done to encourage them if they returned.
Simple survey– At the register have some forms and ask customers if they want to complete one while you are processing the transaction. If response rates are low, you may consider a small incentive for if they return.
This article explores the critical topic of what advocacy is and how to measure and track it. However, in a follow-up article, we’ll further explore managing advocacy and other considerations. Let us know about what drives your advocacy and how this could fit in your business. Or perhaps just the challenges you see for implementation.