How to future-proof growth through customer advocacy
Read time: 9 mins
Read to discover:
- Why your marketing strategy must change now
- How to leverage customer advocacy for both short and long-term growth
- How to maximise the value of every customer using first-party advocacy data
At risk of stating the obvious, growing your business isn’t easy right now.
Hyperinflation is crippling your core marketing channels. Third-party data is disappearing. We’re hurtling towards a global recession.
All that is making targets like decreasing cost-per-acquisition (CPA) on paid social, or increasing return-on-ad-spend (ROAS) on existing contracts, without growing your team or budget, feel increasingly out of reach.
At times like these, the knee-jerk reaction is to batten down the hatches and wait it out, stripping back your marketing spend to the bare necessities. But that’s the equivalent of stepping aside and waving your competitors ahead.
You may as well give them the key to your best customers while you’re at it.
History has proven, time and time again, that the best businesses prosper in a recession. Instead of withdrawing, they make smart investments that ignite sparks of growth. These sparks keep things ticking over during the economic downturn, before exploding into blazing wildfires that leave their competitors in the blackened dust when normal service resumes.
Just ask Airbnb and Uber, both of which were founded in a recession. Or renowned marketing professor Mark Ritson, who writes for Marketing Week that:
“Smart companies learn where to cut and where to maintain their spend as the recession blows in … [Research shows] it was companies that deployed a mix of defensive moves to reduce costs while offensively investing in growth strategies that were most likely to not only survive but thrive in the recessionary and post-recessionary months ahead.”
Of course, the emphasis here is on knowing where to cut spend and where to invest it.
Upping spend on your go-to channels, the same ones that have been delivering unpredictable, disappointing returns isn’t advisable. In the words of Albert Einstein, “insanity is doing the same thing over and over and expecting different results”. Funnelling money into the same channels isn’t going to magically change the results you report on at the end of each quarter.
Instead, invest in the channels that will streamline your martech stack, drive efficiencies and maximise return-on-investment (ROI) across your marketing mix.
A channel like customer advocacy.
By leveraging their customer advocates, they’re acquiring high-quality customers while building the foundations for long-term success.
Because customer advocacy has the potential to fundamentally transform the economics of your business. With just a fraction of budget, you can turn your brand fans into a high-performing acquisition channel that gathers and activates first-party data capable of radically increasing ROI across your marketing mix.
Ready to transform your business? Read on.
Puma is just one brand unlocking the power of customer advocacy to grow the business
Crunch time for the marketing status quo
When you read the words “customer acquisition”, which channels spring to mind?
If you’re like most businesses, it’s Facebook and Google. 56% of global ad spend goes to digital channels, with these two top of the list.
Just look at the spiralling costs on Facebook in recent times. Even before Covid, customer acquisition costs (CAC) were increasing by 60%. Then the pandemic came, driving a huge wave in fluctuations that caused havoc for ROI. Add iOS 14 into the mix, and you have the holy trinity of a performance marketing nightmare.
Against this daunting landscape, relying on unpredictable, expensive channels places you in a dangerous, short-sighted trap. Instead of investing money outside the business – start-ups reportedly spend more than half of raised capital on Facebook and Google ads – putting just a fraction into your most valuable asset at the heart of your company can yield powerful results.
We’re not talking about cash in the bank, shiny technology, or even your hard-working teams.
We’re talking about your customers: the greatest untapped growth potential for your business.
Turning brand fans into your biggest growth driver
A customer’s recommendation about your brand is valuable – really valuable. Not only can referral increase new customer acquisition by as much as 30%, but it acquires high-quality customers set to drive serious revenue for your business.
Compared to those acquired through other channels, the average referred customer:
- Spends 11% more on their first order
- Has up to double the lifetime value
- Is 5x more likely to refer onwards
It’s no wonder Julia Deutsch, Senior Global Digital Marketing Manager at Charlotte Tilbury describes referral as one of the “most reliable channels for acquiring high-quality customers”. Especially given that customers referred to the luxury beauty brand have a 39% higher average order value.
Customers referred to luxury beauty brand Charlotte Tilbury spend 39% more on average
Referral offers lower acquisition costs and higher lifetime value customers. It drives organic growth, so you can focus less on Google and Facebook, and more on serving your customers experiences that they love enough to tell others about.
That’s especially important right now, when the cost-of-living crisis means more consumers are seeking out their friends’ seal of approval before ordering online.
When you think about that in broader economic terms, you get a glimpse of how transformative referral can be as a channel. (That’s without even considering the power of first-party referral data – we’ll get to that later.)
Don't just take our word for it, either. Harry Symes-Thompson, Head of Growth at our client Wild, describes how:
"In these tough conditions, referral is becoming an increasingly important channel for us. As well as bringing CPA costs down, it’s delivering easy wins that drive efficiency and equip us to better manage other channels. Ultimately, leveraging customer advocacy is helping to increase top line revenue and maximise ROI across our marketing mix."
That’s why our vision here at Mention Me is to make all brands think advocacy-first.
By prioritising customer love – treating customers so well they keep coming back and bringing their friends – brands can drive powerful growth before they’ve spent a penny on marketing.
That means making it your primary purpose to improve your customers’ lives. Rather than being led by the financials, measure (and report on) the progress you’re making in earning your customers’ loyalty and advocacy.
Looking beyond your accounting figures doesn’t mean sacrificing profit; it means the opposite.
As Fred Reichheld, creator of the NPS, best-selling author and all-round marketing legend, writes in this article for the Harvard Business Review: “Business success begins with leaders who embrace a fundamental proposition that their firm’s primary purpose is to treat customers with loving care… It underpins the financial prosperity of great organisations”.
The numbers speak for themselves. Companies with leading NPS scores outperform the stock market by 5x.
Thinking advocacy-first is a fundamental change in mindset – but one that will lead to serious long-term success.
Compared to those acquired through other channels, referred customers are 5x more likely to refer onwards
Optimising the martech stack with referral data
By now you should see the value in referral as a high-performing acquisition channel. Now this is where it gets even better.
Taking an advocacy-first approach underpinned by referrals can optimise your entire business.
It’s a bold claim, but stick with us.
As we spoke about in our blog introducing Cate and Buck, referral data reveals who your best customers are. That’s not your big spenders with high lifetime value.
It’s your advocates with high Extended Customer Revenue (ECR).
Extended Customer Revenue = Lifetime value + Referrals
Looking at your customers through this lens of ECR will completely change how you see them. It’ll take you beyond a flat, two-dimensional view to bring your customers to life in 3D.
It’s even inspiring global sportswear brand PUMA to evolve how they segment and engage with consumers. Following “explosive growth” through referral, they’re working with Mention Me to gather advocacy insights and data that will optimise performance across their marketing channels.
As well as building the foundations for long-term performance, PUMA is also leveraging customer advocacy to drive short-term growth – without heavy overheads.
“With a fraction of budget, Mention Me delivers strong revenue and invaluable insights. It’s absolutely a wise investment,” says David Witts, Senior CRM Manager E-Commerce Europe at PUMA.
Referral data equips you to reduce cost per acquisition (CPA) and increase return on ad spend (ROAS) across your marketing channels to find more customers likely to have high Extended Customer Revenue.
Activate first-party advocacy data across your marketing channels to maximise ROI
Let’s look at paid social as an example. Injecting first-party referral data into your paid social strategy means you can target audiences on Facebook and other platforms who are highly likely to convert into valuable new customers. That’s certainly the case for menswear brand SPOKE: compared to standard seed audiences, their referrer lookalike audiences convert 65% more and drive 30% higher ROAS.
In the aftermath of iOS 14, targeting referrer lookalikes on paid social offers a way for you to upgrade performance and drive immediate revenue. As Luke Jonas, CCO at partner agency Nest Commerce, describes: “Using referral data has brought lookalike audiences back to pre-iOS 14 performance. If you aren’t doing this yet, I recommend you start.”
The benefits of referral data aren’t confined to paid social. A similar approach can be taken for paid search, using first-party referral data to optimise Performance Max audiences and bidding strategies on Google. If Google currently occupies 30% of your paid budget, imagine the impact even a small uplift in conversion would have on your profit margins.
Next up, CRM. By feeding referral data into your CRM in real-time, you can segment and target audiences based on where they are in the advocacy journey. Sustainable deodorant brand Wild did this and decreased CPA by 25%, while increasing conversion rate by 17%.
And that’s just the tip of the referral data iceberg. You use it to turn rave reviewers into referrers; identify the affiliates that bring in your most valuable customers; build and manage micro-influencer campaigns and much, much more.
Maximising the value of every customer
Hold on a minute. You might be thinking. What about customers who don’t want to refer my brand?
We hear you. Even the best brand out there won’t get recommended by every customer after their first purchase. Some might want to receive their order first and put it to the test. Others might want to take their time making sure you’re the real deal before putting their reputation on the line recommending you to their friends.
That’s where Propensity to Refer® comes in.
Backed by machine-learning and artificial intelligence, our team of data scientists have created this customer advocacy metric following extensive analysis of a decade of referral data. With Propensity to Refer®, you can automatically adjust your segmentation and targeting strategy based on where each customer is in their advocacy journey with your brand.
Moss Bros is just one example of a business reaping the rewards of this. Their customers identified as having high propensity to refer were shown a referral offer, driving a 6x higher share rate compared to their low propensity counterparts. Meanwhile, low propensity customers were invited to choose between referring friends or getting a discount on next order. Those that chose the latter went on to repeat purchase 23% more – increasing both acquisition and retention for the menswear brand. In the words of their digital Marketing Manager, “it’s the best of both worlds”.
Moss Bros use Propensity to Refer® machine-learning to automatically segment and target customers based on their stage in the advocacy journey
Future-proofing business success
Getting loyal customers through the front door via referral will drive future full-price sales and repeat purchases, without spending money on paid advertising. On the flip side, fail to look after and reward your best customers, and it won’t be long before they desert you for the competition.
Invest a fraction of your marketing budget into referral now, and you’ll sow the seeds for success that propels you forward the moment the recession ends. All while acquiring high-quality customers and gathering first-party referral data that increases ROI across your channels.
Where is your business on the advocacy maturity curve?
Rather than buy your customers, earn them. Deliver experiences and products so outstanding they’re proud to be part of your community and introduce others. Get this right, and you’ll kickstart a powerful cycle of growth that exponentially grows your business.
In the words of Fred Reichheld: “Firms today undervalue referrals. They treat them as the icing on the cake, rather than an essential (perhaps the most essential) ingredient for sustainable growth.”
If you’re not harnessing referral and advocacy, you’re missing out on the most effective way to grow your business. That’s valuable at the best of times. In a recession, it’s the difference between winning and surviving.