Dr. Michael Lowenstein of research firm Market Probe recently engaged in a dialogue with us after reading our post that correlated social engagement to Net Promoter Score. Mr. Lowenstein shared very interesting insights into the difference between customer “advocacy” and “recommendations,” two terms that many of us use synonymously. So we invited him to expand on his thoughts here, on It’s All About Revenue. The below guest post from Mr. Lowenstein is an excerpt from his forthcoming book, titled, “The Customer Advocate and The Customer Saboteur.”
Creators and sellers of the single recommendation question as surrogate for profitability and growth also, increasingly, appear to be asking the business community to accept the premise that Recommendation = Word of Mouth = Advocacy. This thesis, though the usually unchallenged annexation of the concept of advocacy has audacity, fails on a number of bases.
First, recommendation can be purchased. Companies can, and do, directly incentivize customer referrals; and there are ‘viral marketing’ organizations whose sole business proposition is to use recruited, and compensated, individuals who will communicate their endorsement of selected products and services to others. This makes the referral scores for those products and services go up, of course, though the reasons for this increased recommendation are artificial.
Next, recommendation is clearly only one of several downstream communication and action behaviors which can take place after a transaction or an experience. Offline and online word-of-mouth between peers is one of them, and this behavior is certainly not coequal with either recommendation or advocacy (which also requires strong brand favorability). As the previous section has demonstrated, based on national polling results, customers can also communicate with the vendor or service provider involved; and this can take place in an array of ways, again both offline and online. Because the creators of the one-number approach favor very short surveys, it is unlikely that the technique would ever generate diagnostic information which leverages the type of downstream communication, or other, behavior taking place as a result of experiences and transactions.
Also, customers can be completely silent after a transaction or experience; and this very lack of post-event communication has an impact on their future behavior (known as ‘self-perception theory’ in academic circles) all the while their failure to communicate has no influence on the behavior of others. Even though generally silent on their preferred brands, these customers, which we identify as ‘Allegiants’, also demonstrate fairly strong loyalty. If companies can identify ways to build and bootstrap these quiet loyalists into more vocal supporters, the positive financial impact will be significant. Recommendation, as a single metric, cannot do this.
Another shortcoming of recommendation as a stand-alone measure, discussed somewhat earlier in the chapter, is that the same customer can, and often does, recommend or refer competitive brands, services, or suppliers in the same business sector. There is nothing in the one number technique which requires a customer to narrow the consideration set or justify why they might recommend one, or multiple, brands or firms offering the same product or service. Because customer advocacy is more rigorous, connecting as it does on future purchase intent, and driven by brand impression, and evidence of positive or negative word of mouth on behalf of the brand or company, there is often a natural reduction of consideration sets.
Customer advocacy behavior has been extensively discussed throughout the book; however, as it compares to individuals or customers who positively recommend, advocates are the deeply connected and brand-involved, energized, positive and vocal de facto sales force within a company’s, product’s, or service’s customer base.
Customer advocacy can, in part, be defined as the degree of kinship with, favorability toward, and trust of brands; but, principally, advocacy identifies the monetizing downstream customer behavioral impact of informal communication, by individuals on a voluntary, active, peer-to-peer basis (and as it influences their own downstream behavior, i.e. the self-perception effect, as a result of personal experiences). Inclusion of the ‘personal experiences’ qualifier is critical, because it represents a depth of individual knowledge unidentified in the one-number recommendation approach. Consulting firms such as McKinsey have determined that word-of-mouth drives 20% to 50% of customer decision-making, so it is extremely important; and it is every bit as leveraging as recommendation. Again, recommendation isn’t word-of-mouth, nor is it advocacy behavior. It should be added that, just as recommendation isn’t word of mouth or advocacy, neither is it customer loyalty (and can’t give management much guidance for creating loyalty or pinpointing motivations for individual purchase choices); however, as discussed throughout this book, much of true customer loyalty behavior can be identified in drivers of customer advocacy.
When considered as a core measure, or metric, of customer loyalty and business health, advocacy can be expressed as a combination of two key constructs: rational (tangible and functional) and emotional (service and brand impression) toward a brand, expressed through preference and narrowed consideration, or evoked, set, high share of spend, and positive, frequent communication behavior on behalf of the preferred company, brand or product, principally through offline and online word-of-mouth. As presented throughout the book, this approach, or framework, is far more robust, rigorous and actionable when compared to the single-number recommendation metric; and the willingness to refer or recommend can be considered one outcome of loyalty or advocacy behavior, rather than the behavior itself.
Again, advocacy behavior isn’t the same as promotion, nor is promotion the same as advocacy behavior.
The accuracy of the statement just made has been proven in multiple research studies. In a 2010 national study among customers of the fifteen largest banks in the United States, it was found that 90% of the customers identified as advocates were in the highest category of customers when the single-number recommendation metric was applied, while only 56% of these high single-number metric customers were found to be advocates. In the same study, results showed that the highest group of single-number customers were 1.8 times more likely to open new accounts at their primary bank when compared to the lowest group of single-number customers; however, using the advocacy framework, the advocates were 2.8 times more likely to open new accounts when compared to the antagonists, the lowest performing group of advocates.
In our work, we certainly don’t discourage clients from using the NPS metric. In fact, our advocacy research can target elements of performance and communication to increase NPS, if that is the customer-related KPI they are using as a gauge and to incentivize employees. Hope the above contributes to the healthy dialogue.