As a follow-up to my previous post about investing in customers vs. advertising, I uncovered some interesting data to support this position further while reviewing our upcoming Net Promoter benchmark study for the European market. The benchmark study was conducted with nearly 14,000 European consumers across Germany, France and the UK. There were two data points that illustrate the point.
1. When asked the question – “When choosing products or services, which of the following sources of information do you trust the most?” – 57% of the respondents were most influenced by recommendations. Personal recommendations accounted for 40% and consumer opinions online accounted for 17%. Only 3% were influenced by advertising!
2. When asked the question – “What was the primary reason that you left?” – referring to leaving a service provider or not repurchasing a product , 51% of respondent cited their experience. 24% referenced product/service quality, 17% referenced rude or disinterested employees, and 11% referenced frustration with not being able to get ahold of anyone!
Do we really need more proof that we live in an experience economy? While advertising revenues are still declining, there are still billions of dollars spent annually on advertising! If even a portion of that money was redirected to improve the customer experience imagine what a better world we would live in.
On a similar note, check out this podcast by 1to1 Media where they debate different kinds of loyalty. Interestingly, they discuss emotional loyalty (mostly created by advertising), behavioral loyalty (demonstrated by repeat purchase), and profitable loyalty (creating profitability). While I am a fan of profit, the professor on the podcast suggests that talking to customers is expensive and you should find other ways to serve them. I would argue that not talking to customers is more expensive and costs you churn and negative word of mouth. Liz Miller from CMO Council gets it right; it’s about the experience! Anyhow, judge for yourself.
Very interesting finding indeed Deborah. I guess larger companies are often blinded by having to meet unrealistic revenue numbers (Investor centric) and focus on acquiring too many customers that will be lost in any case. Do you perhaps have some economics of this research – cost of acquiring through reference versus advertising or direct marketing?
Deborah
Putting the overwhelming methodological problems of Net Promoter to one side.
In reality you need both marketing communications and recommendation. Marketing communications to get the early communications effects started. Recommendation will start if the product is god or bad enough to be worthy of talking about. You need both to do well in today’s competitive marketplace.
Look at, e.g. the Bass Diffusion Model, to develop a better understanding of why you need marketing and recommendation to work in concert.
http://www.frankmbass.org/BassModel/Default.aspx
It’s not an either/or proposition. It likely never will be.
Graham Hill
Customer-centric Innovator
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