I ran across a post on CustomerThink recently that did a nice job of differentiating customer satisfaction, from customer loyalty, from customer advocacy.

In the customer reference management space, we most definitely want customer advocacy when it comes to building our reference pools.

The piece, called The Strategic Marketing Case for Customer Advocacy Measurement, written by Michael Lowenstein began with a reaffirming fact about our trade:

• “With specific regard to the downstream impact of customers expressing themselves, consulting organization McKinsey has found that word-of-mouth is the primary factor behind 20% to 50% of all purchasing decisions; and 50% to 80% of word-of-mouth comes directly as a result of personal experience with a positive or service.”

He then draws a comparison between these common measures:

• “Satisfaction, because it depends principally on attitudes and recent transactions, isn’t dependable because it doesn’t correlate very well with long-term relationships and key monetary measures like share of spend.”
• “Loyalty, though it recognizes a longer-term relationship and more active purchasing from fewer suppliers, or a single supplier, doesn’t take into account the power and influence of individual, informal offline and online communication.”
• “Advocacy considers not only the likelihood to have an exclusive purchasing relationship, but it also incorporates both strong emotional kinship and active, positive, and voluntary communication about the supplier.”

This distinction is useful in your efforts to identify the customers you want in your program. How do you identify it? Does Net Promoter help? What behaviors might be an indicator? Do communities and the relative levels of participation from various members help identify the advocates?

One of the most important thoughts was that companies who leverage their advocates don’t have to spend as much on marketing.

“Noted marketing Professor Philip Kotler, at Northwestern University, believes that stand-out organizations are those which can most effectively optimize stakeholder trust, engagement and perceived personal value. In a recent Financial Times interview article, Dr. Kotler said that some of the most successful companies spend less on marketing than companies that have achieved lower success, building value through inclusion, engagement, authenticity, and stakeholder focus. Though it sounds counterintuitive, Dr. Kotler said, ‘They use the word-of-mouth effect of unpaid advocates—truly loyal customers—to boost their reputation. Advocates will do your marketing for you if you mobilize them, listen to them and engage them.’”

That’s a metric in terms of the valuation of a customer reference program that has not been fully explored, but one that should be measured within those companies that truly invest in their reference program.

Food for thought…