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Customer Advocacy - What's the Big Deal?

By Jack Borland and Sarah Beckley
September 25, 2006

What do USAA, Progressive and E*TRADE all have in common? They're all committed to doing what's right for the customer, up to and including recommending a competitor's product, if it better fits the customers' needs.

Why is this important, besides being great PR? These companies represent the tip of a new iceberg entering mainstream culture. Companies are recognizing that customer advocacy is simply good for business. Companies dedicated to customer advocacy are substantially more profitable than the market average. They focus on long-term investments in the customer, rather than on short-term, market-focused strategies, which results in higher customer loyalty, higher lifetime customer value, increased referral business and reduced marketing costs

Keys to Customer Advocacy

How do these companies differ from their competitors? How can a company aspire to join their ranks? It's pretty basic, when you get down to it. They've all thoroughly internalized the idea that the customer comes first.

Consider:

If your average customer is worth $10,000 over the lifetime of the relationship and
Average lifetime is 10 years and
Employee to customer ratio is 1:100

Then each employee touches approximately $100,000 worth of customer profit a year.

Empowering employees to spend up to $2,000 per year on above-and-beyond service is a very worthwhile investment.

1. Customer Success

Determine what success is, as defined by the customer. Then drive that thinking throughout the organization. "Treat the customer as you would like to be treated" shouldn't be a catchphrase. It should be the mandate that empowers employees to go above and beyond to serve their customers' best interests.

For most organizations, this means a fundamental shift in organizational culture. You have to empower people at every level to act, and reward them for taking care of the customer. A good first step is to quantify the lifetime worth of a customer. Then educate employees on that value, what options fall into that range and allow them to use their own discretion on spending to provide superior service.

2. Customer Experience

Involve customers in experiencing your brand. For example, a number of banks have created small business incubator networks. They connect entrepreneurs with each other, and with services entrepreneurs can use such as lawyers, marketers and recruiters. In the insurance industry, Progressive has been providing concierge service. You can drop off your car, get a rental and let Progressive handle all the repair work. Once the work is done, they'll process the rental return as you pick up your car.

Ask yourself how you can go above and beyond to provide not just a commodity service, but a superior experience for which people might be willing to pay a premium. Then offer that service, without charging for it! Identify services so useful that people will share them with their networks and provide a viral marketing effort to showcase your superior service.

Amazingly, most organizations don't have a systematic method of capturing customer needs. IBM recently released a report showing that over 70% of banks focus on efficiency or speed improvements rather than on addressing customer values.

According to a recent CMO Council Study (Select & Connect: Strategies for Targeted Acquisition and Retention), nearly 75% of marketers don't have a customer advisory board or council. Of those that did, only 6% said the board was "very critical" in product innovation.

3. Customer Voices

Use outreach to capture the customer's ideas on what you're doing right and what you're doing wrong. Then incorporate feedback loops at all levels of the organization. Listen to the customer and show them that you act on their suggestions. Consider forming corporate guidance councils from your best customer segments. Ask them for advice on what you should and shouldn't be doing.

Conducting an outreach program to drive customers to community forums on sites such as The Motley Fool, and scanning the site posts for suggestions on great product offerings, may be good toe-in-the-water steps towards points two and three.

4. Transparency, Transparency, Transparency!

Make yourself transparent to customers. Recognize that transparency exists. Customers can gather information on both you and your competitors more easily than ever. Researching what would have been an unbelievable array of competitive offers ten years ago is child's play today. Go the extra step. Provide customers with insight about your product or service (eliminate the small print!), and how your offer stacks up against the competition.

Forrester, in ongoing studies of the financial service market, has found a consistent correlation between customer perception of firms' customer advocacy and stronger customer relationships (and profitability)

Customers are wary of giving out their personal data; transparency also means not forcing the customer to participate in their own data capture. For companies that sell content, offer select free web content without a sign-up process. The benefit is that it breeds trust in the level of insight a company (like Forrester) can provide.

For financial service firms, practical steps towards greater transparency are to provide quote or rate comparisons without collecting any personal data and let your customers know your competitors' rates. If you don't need it to determine how you and your competitors would price or quote, then don't ask for it. Think of Progressive or E*TRADE's online comparative shopping tools-both are willing to make you aware when a competitor's product is cheaper.

Summing up

Customer advocacy is a substantial change from how traditional businesses organize themselves. But it creates real long-term competitive advantage. Reveal your pricing, your service and your culture to your customer. Involve customers in your strategic planning. Show them how you are thinking about their best interests and build the trust they have with you. If you can do that, you'll have erected a formidable barrier to your competition, and you'll have primed your customer with the arguments for recommending you to everyone they know.

Jack Borland is a Customer Experience Consultant and Sarah Beckley is a technical writer and editor at Vox, Inc., a customer experience research and consulting firm. Contact them through the feedback form on our Contact Us page. Copyright 2006 Vox, Inc. All rights reserved.

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