Why You Can’t Postpone Investment in Your Customers

Read time: 7 mins

What do Groupon, Whatsapp, and Venmo all have in common? Aside from being some of the most disruptive companies of the last two decades, they were all founded during the turbulence of the 2008-2009 financial crisis and recession. Investing in innovation allowed these brands to flourish during tough times. 

This matters more than ever today. In one recent survey, “68% of marketers said their organisations have experienced a reduction in their budgets by 5% to 10%, or more in the second half of 2023” Pressured by smaller teams and shrinking budgets, many have turned to paid channels as a seemingly quick fix. 

But this is not a long-term strategy for growth. Even before Apple introduced iOS 14.5 in 2021 and triggered an industry wide acquisition crisis, the cost-effectiveness of paid channels was in decline. One 2019 report found CAC spiralling by 60% over the previous 5 years. And since then, CAC has continued to rise. 

Even at a time when 71% of CMOs say they lack the budget to fully execute their marketing strategy, a majority of marketing teams are continuing to increase spend on paid channels. 

It’s an unsustainable position. To achieve long-term profitable growth, brands need to focus on their customers and the data that reveals their sentiments, feelings, and levels of enthusiasm. Looking beyond transaction metrics allows you to create the outstanding CX that customers have come to expect. Marketing resources may be declining, but, for customers, the appetite for a relatable, relevant and emotionally engaging experience has never been stronger. 

As a recent study showed:

“loyalty leaders — companies at the top of their industries in Net Promoter Scores or satisfaction rankings for three or more years — grow revenues roughly 2.5 times as fast as their industry peers and deliver two to five times the shareholder returns over the next 10 years” 

The takeaway? You can’t afford to wait until after things have calmed down in the economy to invest in tools that nurture satisfaction,  loyalty and enthusiasm. 

Betting on the wrong strategy

All businesses need to continually grow their customer base to survive. A brand’s customer base is like a “leaky bucket”: You have to keep on attracting new customers to replace the ones who drain away. It’s your approach to this challenge that defines your relationship with your customers. 

Some brands falsely frame this as a choice between gaining new customers and investing in existing ones. With businesses grappling with increased competition and rising acquisition costs, there is a trend towards, as Forrester describes it, racking up “quick hits at the expense of brand equity”. 

But now is not the time to stop investing in your best customers:

• Customers have become more picky about spending as a result of inflation. Building loyalty and fostering brand fans and advocates provides protection against this trend.  
• Privacy regulations have made customer data harder to come by. Customer data is a must if you want to create personalised, relevant experiences. Winning the trust of customers is key to unlocking the insights you need to deliver adequate experiences.
• Customers who feel an affinity with your brand are more valuable. Those brand fans who’ve come from a trusted referral have a 56% higher 180 day LTV than other customers. 

With 76% of customers saying they are more likely to spend with a brand they feel connected to, and 56% citing emotional connection as a reason to spend more, brands who fail to invest in this area risk losing customers faster than they can replace them. Mention Me’s advocacy data gives you access to the feelings and sentiments driving purchasing decisions, allowing you to patch up the holes in your leaky bucket and provide genuinely personalised experiences. 

When navigating your way out of a harsh economic environment, you can’t be restricted to a purely transactional view of how marketing campaigns perform. You need visibility into the emotional impact of your customer experience. 

To get ahead of the curve when the recovery comes, you need innovative tools that offer deeper, more precise customer insights and go beyond the transactional view that most businesses have.. A lack of clear attribution metrics, imprecise understanding of customer motivations, and an over-reliance on buying signals as loyalty indicators all weaken your long-term marketing strategy. 

Don’t get left behind

Not everyone, however, is in the dark about the motivations and emotional drivers of their customers. More and more businesses are waking up to the possibilities of building emotional connections with their brand. The most innovative marketers are finding ways to track previously intangible metrics like customer enthusiasm, brand affinity, and genuine loyalty. 

Customer-centric brands are thriving

Forward-thinking brands are finding new ways to put the customer at the centre of everything they do:

• PUMA have re-imagined customer segments to take into account advocacy signals. For example, they now exclude customers who are not shopping but are still referring from their lapsed customer segment. As a result they’ve achieved a 6x ROI. 

• Personal wealth company Linexa have driven their CPA 30% lower than their target by experimenting with referral campaigns to understand the preferences and motivations of their customers.

• Supplement brand Symprove now converts 34% of referrals into new customers (with an 18% higher AOV than other customers) after using advocacy data to optimise their referral journey. 

• The referred customers of beauty brand Benefit make 24% more purchases on average than non-referred customers. This is after they ran A/B testing by cohort so they could understand the motivations of their customers better.  

• Travel brand Viator are driving profitable growth by looking for and capitalising on moments of delight in the customer journey, for example: noticing that customers are highly likely to refer after leaving a positive review and adding a referral prompt at this stage. This is important as their referred customers have a 56% higher LTV than other customers. 

But the shift has not been uniform. While some brands are racing ahead, others are in danger of being left behind. As Forrester predicts:

"CX differentiation will erode in three-fourths of industries. The range between the best and worst CX in these industries will narrow as 25% of below-average brands improve and 50% of above-average brands decline or stagnate."

Leading businesses are investing now to deliver a brand experience based on a deep understanding of the customer. These brands set themselves apart by their ability to connect, anticipate needs, and intuitively know what messaging will resonate with their customers, excluding them from irrelevant campaigns and promotions and fostering a deep sense of loyalty. 

Wherever you sit in the market, you can’t be complacent. If your customer experience is currently good, it’s a dangerous trap to think you can stop investing without costs attached. If you have a poor understanding of your customers, the best of your competitors are going to overtake you. To match and surpass them, you need a bold CX strategy powered by advocacy data and insights that holds the customer front and centre. With a customer-centric culture in place, you can dare to innovate with confidence.

Delivering the advocacy first CX you need takes more than simply getting customers to fill out  satisfaction surveys. It requires a nurturing approach that creates advocates for your brand who actively promote you and refer their friends. 

The first stage is to build a loyal core of advocates within your customer base. The next stage is to engage with them in a way that gets them promoting, buying and referring more. Once you see what works, you can nurture more advocates using the same tactics.

An advocacy marketing strategy has major impacts on KPIs: 

• Typically increases new customer acquisition by 10-30%
• Referred customers spend on average 25% more on their first order
• Brand advocates have up to 2x CLTV 
• They have 23% higher engagement rates with personalised email
• They’re also 5x more likely to recommend onward

Embracing the new reality 

For customer leaders, the message is clear: putting the customer, and their motivations, feelings and activity, at the heart of your strategy is no longer optional. 

To do this, some customer leaders will have to swim against a tide of cutbacks and cost saving measures. Successfully navigating these waters means choosing the right options to enhance your martech stack, rather than choosing none at all. 

Despite the general atmosphere of budget savings, Forrester predicts that spend on marketing technology is likely to rise. The need to provide a great customer experience is an overwhelming one for brands, and the number of options for making that happen is vast. 

In this environment, there is a premium on strategic thinking and investment in innovative solutions that enhance your ability to understand and serve your customers. 

Innovative solutions like Mention Me’s Customer Advocacy Intelligence Platform offer insights into customer feelings and the factors encouraging them to shop or not shop. Understanding your customers is a must have: it strengthens relationships and lays out a clear path to sustainable business growth. With it, you can unlock hidden value in your customer base by revealing those who drive revenue with their advocacy actions.

In the end, the brands that understand their customers, deliver meaningful experiences, and foster a culture of ongoing advocacy are the ones set to lead in the period ahead. The future might be uncertain, but the path to success certainly isn't.

Ready to revolutionise your customer experience and unlock the hidden value within your customer base? Don't let your brand get left behind! Take the first step towards driving sustainable business growth guided by customer advocacy intelligence. Request a demo of Mention Me's innovative platform today and let us help you navigate your path to success. Request a Demo