As marketers look for new ways to maximize customer loyalty, many talk about advocacy, the latest buzzword and remedy of choice. Yet advocacy is just one piece of the loyalty utopia puzzle. Advocacy, which creates promoters and referral sources to build and deepen customer relationships, is a step toward loyalty. But what is loyalty?
Share of loyalty, rather than gaining all of a customer’s loyalty, is the reality today. People are overwhelmed with offers to join loyalty programs. Loyalty program redemption studies reveal consumers actively participate in just one-third of the programs to which they belong. Expecting 100 percent of a customer’s loyalty 100 percent of the time is dangerous. It doesn’t meet customers on their terms. Customers can be loyal to many brands, products, services or companies.
With this in mind, marketers can reach loyalty when they have attracted and retained customers who are resistant to competitive offers and have optimized the lifetime value of their customers – in other words, garnering as much loyalty as the customer will give. Loyalty also occurs when customers become advocates for a product or service.
First stop on the road to advocacy: optimizing customer value. Because marketers cannot achieve 100 percent loyalty, it’s crucial to maximize share of loyalty. One of the first considerations is optimizing customer value, including potential, current and lifetime value.
Value scoring is based on purchase frequency, average transaction amount and number of products owned, using a weighted scale customized to a company’s unique needs. For example, a gas station customer’s transaction amount will be similar for every visit, but the frequency of visits would indicate the level of loyalty: Is the customer visiting a station every time he fills up or every second or third time? For an electronics store, the type of product purchased can be a loyalty indicator. Is the customer buying electronics only for entertainment, such as televisions, or is she returning to the store for appliances as well?
Customer value also can be optimized through segmenting and profiling customers by their value scores, which lets marketers allocate resources appropriately to create targeted campaigns. For example, the electronics store could showcase appliances to customers who have yet to make such a purchase but are making other types of purchases.
Behaviors + attitudes = whole customer picture. The next phase of maximizing loyalty requires exploring behaviors and attitudes to understand the factors influencing them and to get a sense of the share of loyalty the customer will give.
Assessing customers’ loyalty requires identifying and understanding behaviors and attitudes to predict what customers will do next. Customer experiences, including those within the sales channel, during product experience or service and support of either, feed into attitudinal loyalty, which is composed of thoughts, feelings and social norms. This attitudinal loyalty combined with market factors, such as price, competition, existing loyalty programs and product availability, is a large driver of willingness to behave loyally. Individual differences, such as risk aversion and desire for variety, come into play when forming a person’s intentions or planned actions. The results are the loyal behaviors: purchase, repurchase, retention and advocacy.
This multidimensional view of loyalty helps marketers prioritize their loyalty initiatives. Building customer biographies using customer behavior and attitude information enhances targeted marketing campaigns. Then, through further segmentation marketers can learn more about their customers and increase success at cross- and upselling, in addition to creating targeted, consumer-centric messaging to maximize share of loyalty.
Creating advocates. Once a customer’s share of loyalty is maximized, cashing in on the relationship is possible through advocacy programs. The base of the advocacy ladder is indirect contact through mass media. Once aware of the product or brand, a customer can decide to buy. Information gleaned from the purchase transaction or loyalty program enrollment can be used for direct marketing targeted at moving customers into a position of engagement and loyalty. Finally, at the top of the ladder, targeted dialogue creates advocates.
But it’s not enough simply to encourage referrals: Advocates should be rewarded. After all, if it’s rewardable, it’s trackable, letting marketers allocate resources properly and measure effectiveness.
Advocacy is even stronger when built around a community with special interests or a common denominator. For example, a large PC microprocessor manufacturer wanted to drive customer advocacy in the “gamer” community. Results of the community-based approach were monthly member growth in the thousands and member feedback indicating increased frequency of purchase. Marketers can create such communities by identifying customer affinities based on educational or professional affiliations or hobbies (e.g., sports enthusiasts or pet owners).
Advocacy, the golden ticket. Consciously growing customer advocates is important because traditionally acquired customers have lower customer value and loyalty than do customers referred by a personal source. Also, customers referred by advocates tend quickly to become advocates themselves. Advocacy studies have shown that higher household income respondents ($100,000 or more) are more likely to refer. This is good news because research shows that when people refer, they usually refer others with similar lifestyles.
Knowing who is likely to act as a referral source adds to the information many marketers already have about the customer base. Marketers know advocates are more loyal, more engaged and active. In addition, studying referral-source profiles can help marketers create a model to identify advocates in the future. Conversely, gaining vital knowledge about those referred by advocates can help marketers deliver, meet and often exceed the higher expectations that referred customers have when they enter the relationship.
Though it’s important to recognize the role advocacy plays in the quest to maximize share of loyalty, it’s equally important to recognize that it’s not the Holy Grail. Building advocates should be part of an integrated loyalty marketing program that involves identifying and learning about customer behaviors and attitudes, creating customer profiles and developing targeted marketing programs to attract and retain loyal customers.