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Advocacy - Yes! Satisfaction - No!
Loyalty - Sure
Mr. Paul Greenberg
President, The 56 Group
G-CEM International Partner (US)
www.the56group.typepad.com
This article is exclusively written for G-CEM.
With all the conversations, debates and arguments going on about the nature of the new social customer and what that means for companies - especially around adoption of the rapid growth of the newly minted "Social CRM" - the core of the entire customer and company relationship remains what it always was - the customer experience. How a customer feels about a company over a longer period of time is far more important than what they buy in any particular period or the size of any particular purchase. Not only does that lead to repeated purchases - the more or less simple definition of loyalty - but to potentially an advocate - someone who not only would recommend your company to someone they know - but actually did that.
But what does that mean when it comes to the customer experience? How does the idea of customer delight help create advocates? What does that mean to loyalty marketing and to the idea of a loyal customer?
Let's start at the beginning.
We are human beings. That is first and foremost. Sure we measure and in fact get a great deal of pleasure in doing so. For example, several years ago, I was a keynote at a Gartner CRM conference. I found out that Gartner ranked their speakers and was told by Gartner that I came in 2nd out of what was over 100 speakers. My immediate response was "who beat me?" Note that I presume given the amount of ranked speakers, there wasn't a lot of difference between #1 and #2 but the comparison - the ranking - made me immediately competitive and I responded accordingly. If asked what the difference in the number was I might have been told, let's say, "the #1 had 4.74 and you had 4.72." How would I have felt? Probably fine. Why? Because I couldn't really tell the meaningful difference between the two numbers which would have dulled the difference.
Yet on the other hand, I do an exercise in my Social CRM training where I ask each participant to take five minutes and write down something that:
1. They are in love with
2. They love
3. They like a lot
4. They feel "eh" about
5. They dislike
6. They hate.
Almost to a person, they are able to distinguish something in each category in the allotted five minutes.
What does that prove? That while we can granularly understand our different emotional states, we really can't distinguish between numbers on a scale when they are close e.g. the emotional difference between 4.2 and 4.6 on a scale of 5 - unless it's spelled out in emotional terms.
This has implications for how we measure loyalty and what the customer experience really means when it comes to distinguishing expectations and desires as research by Dr. Steven Vargo distinguishes them.
The Meaning for Customer Satisfaction, Advocacy, Loyalty
"You don't have to have luxury, you have to feel luxurious." This whimsical statement is the reality of what determines whether or not a 21st century customer's experience is good enough to create an advocate.
Yes, create an advocate. Not satisfy the customer, not create a loyal customer, but instead an advocate.
What's the difference? A satisfied customer is a customer that will abandon your company the minute that something better comes along. They have no emotional or even rational commitment to your company. Your company met their expectations at the moment they were surveyed - and that was all. Typically, it was based on a small series of adequate transactions. If I had to translate it into some emotional terms, it would be - "they did okay." The problem with satisfaction is that because it represents a moment in time, not a longer term relationship and it merely satisfies some minimal level of expectations, the ties that the customer has to the company, based on this functionally adequate experience is not something to use in making decisions on how you are going to treat customers.
For example, some famous early in the decade studies reported by the Harvard Business Review found when questioning people who had filled out customer satisfaction surveys within a month of the time they abandoned the company that they did the survey for, that 65% of them had said they were very satisfied - and then left the company.
What about loyalty? After all loyal customers indicate a pattern of repurchasing with the same company. That's good right? Yes, it is but I contend that it isn't enough - especially in the age of the social customer that is infinitely more demanding than his or her predecessor - pre-2004.
For example, while it is a good thing to keep repurchasing, a landmark study done in 2000 by Dr. V. Kumar from Georgia State University and published once again in the Harvard Business Review found that the correlation between loyalty and profitability was mediocre to fair.
That's not good, you're probably thinking. What's the good of loyalty if its not profitable? Why isn't it profitable as much as one would think? Professor Kumar found two predominant reasons. First, the loyal customer expects the company to give them more for their loyalty. Second, they know how to game the system due to their familiarity with the company. You know that's true of your behavior with the companies that you're loyal to, don't you?
Advocates on the other hand are found to be profitable especially if you're willing to reconsider the metrics that you measure their value with.
Dr. Kumar, in his book, "Managing Customers for Profit" (Pearson Education, 2008), identifies an advance over traditional customer lifetime value (CLV) that he calls customer referral value (CRV) - which in terms of profitability is the "ability of a customer to generate indirect profit to a company." But what it means in direct terms is the measure of a potential advocate. It is measures how a customer who may or may not exhibit a propensity to repurchase from you, is willing to recommend your company nonetheless - and not only promises to do so, but actually does.
As simple as CRV seems to be to understand, it reflects the complexities of the new approach that businesses have to take with their increasingly social customers as the customers demand increasingly more important relationships with companies they choose to interact with.
How does the customer experience impact this social customer? Because the social customers most trusted source is "someone like me" (Edelman Trust Barometer from 2003-2009) - they are expecting that the companies they interact with are going to be "companies like me." That realistically translates to an experience that the customer has with the company that continually more than satisfies their expectations even if it doesn't meet all their desires - their wishes for what they would LOVE to get from the company.
But how do you handle this hugely complex endeavor known as a superlative personalized experience when you have countless customers who are expecting an experience that at least conforms to whatever their personal expectations are - given that these same customers might have similar likes and dislikes but by no means identical likes and dislikes. For example, Citigroup has 250,000,000 customers who, I'm sure, if subjected to standard segmentation criteria would show similar characteristics that could provide some foundation to target the expectation. But, as a customer, what I'm expecting is what I'm expecting, not what my segment expects.
The answer is that the company business model and objectives need to be reformulated. The business objective needs to aim at creating the optimal customer - the advocate. The business model is a move from a model that provides products and services for sale to a model that provides products, services, tools and customizable experiences that allow the customer to sculpt their own experiences. That lets them personalize how they interact with your company, which of course will allow them to control their relationship with you.
Does This Work? The Case of Karmaloop
There are successful prototypes of these customer experiences and their relationship to measurable business success - not just good feelings, though they go a long way too.
Karmaloop is a Boston based clothier that does all its business online. It sells apparel and accessories aimed at younger buyers. The model that they use is called community retailing, which is based on building a community of advocates who will not only purchase the clothing that Karmaloop sells, but advocate for the company by recruiting others to the community and, in certain cases, will actually become an extended sales arm for the company.
To create this community, which currently numbers around 900,000, Karmaloop provides an all encompassing experience within the community providing bidirectional interactions that not only allow the community members to participate in Karmaloop programs but to communicate and collaborate with each other. To that end, Karmaloop provides such capabilities as a part of their marketplace called the Kazbah that caters to s45 elected members of the community who are independent clothing designers and allows them to sell their wares to the community at large. It also ships an e-zine that highlights these designers.
But that's just one part of the experience. They have an online TV station that discusses trends in fashion, a by-invitation-only social network for "trend setters in fashion" and most importantly, what they call their "street teams."
The Karmaloop street teams are 1% of the community who register, get a unique identifier and proceed to use that identifier to:
1. buy clothing
2. get their friends to buy clothing
3. recruit their friends to the community
4. upload videos and photos of the clothes they ?ve chosen to sell for Karmaloop
In return for doing this, the member gets free clothes, discounts, cash and/or prizes.
In other words, the customer/community member is immersed in an engaged experience with Karmaloop that makes them feel they have a stake in the success of the company.
What are the numbers for the left-brained among you? That engaged 1% is responsible for 15% of Karmaloop's revenues.
Okay. I can't obvious know if you're in love, love, like, have no feelings either way, dislike or hate this article, but the reality is that, as the 21st century progresses, the social customer demands far more than satisfactory experiences with the company. A strategy for advocacy, while doubtlessly never going to be 100% successful, is far more the model that any business that takes the customer experience seriously has to take now.
Or else, your customers will leave you - because they hate you - or perhaps just indifferent.
Its your choice.
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About the Author
Prior to his current position as President of the 56 Group, LLC, Paul was the Executive Vice President of Live Wire, Inc. a Massachusetts-based enterprise applications staff augmentation company. Before that, Paul was vice president of marketing for Atlantic Duncans International (now Optimos) where he was responsible for developing and securing strategic relationships with critical vendors and partners. In addition, Paul was the director of strategic relations for Nexgen Solutions, Inc., where he was directly responsible for generating business development working with Fortune 500 clientele.
Paul has years of experience with both CRM and Enterprise Resource Planning (ERP). He has built SAP and People Soft practices and, has extremely deep ties into the CRM and enterprise applications communities.
Paul received a Bachelor of Science in Journalism with majors in editorial journalism, sociology, and a minor in English Literature from Northwestern University, Medill School of Journalism. He currently lives in Northern Virginia with his beloved wife Yvonne and their two cats.
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