Your customers who spend the most money with you are NOT necessarily your most valuable ones. Yes, you read that right. They are important, of course, but there’s another group that’s even more important: Your Customer Advocates.
Your customer advocates are characterized by three things: 1) they love you; 2) they frequently recommend you; 3) they are socially well connected. While it’s harder to calculate a customer’s “social value” than it is to calculate to his or her direct expenditures, you probably are aware of some of them. They are the people whose names come up the most often when a new customers say “you were recommended to me by ________.”
Can these people really be worth more than your biggest spenders? Yes, and here’s how. Consider a customer, Jane, who spends $200 per month on dry cleaning, but has never recommended a new customer to her local dry cleaner. Now think about another customer, Jackie, who spends only half as much -- $100 a month -- but has also brought you five other customers, as well, and they all spend about $100 on average. Jackie and her network of customers are worth $600 per month in dry cleaning. Remove Jackie from the equation and your monthly revenues would be $600 lower, while removing Jane would reduce your revenues by only $200 per month.
Today, businesses are more focused than ever before on the social value of customers, thanks to the rapid rise of online social networking tools like Facebook, Twitter, and Linkedin. But what many don’t realize is that social value comes mostly from offline relationships and communication. Our research finds that 90% of all word of mouth recommendations are made either face-to-face (75%) or over the phone (15%). Online word of mouth is only 10%, including email, texting, and social media. That means you shouldn’t rely only on a Facebook “fan page” to deliver business through your customer’s social relationships.
So what should you do?
For starters, identify your Customer Advocates. The best way to do this is to ask every new customer how they heard about you, either informally or through a survey of some kind. You’ll find out the impact of your advertising, promotion, and customer recommendations. Ask them for the specific customer who recommended you, and add that piece of information to your customer files.
Next, spend more time designing marketing to be aimed at your current customers. It’s easier to convince somebody who already likes you to recommend your company than it is to convince a non-customer to end some other business relationship and bring their business to you instead. Send your customers emails they can forward to friends. Organize events to which your highest “social value” customers may bring friends. Find ways to help your customers signal their relationship with you—clothing items or signage containing your name/logo, etc. Be creative.
Finally, open up a dialog with those customers that have higher than average social value. Find out why they like you and recommend you—and use their words in your marketing. Ask them what improvements they would like to see, and try to accommodate them. Then let them know you’ve listened, and they’ll likely tell others about the recommendations they made.
Your best customer is the one who invites you into their circle of friends. Treat them like your true VIPs.
