Monetary Linkage Between Customer Experience, Loyalty Initiatives, and Advocacy Behavior


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Having previously presented the research concept and foundations of customer advocacy, applications as a business health and performance metric, and how it compares to other customer measurement approaches –;;; – in this post the financial linkage between what customers experience and their resulting downstream behavior will be discussed.

As a prime example, financial services is a business sector where the direct, monetizing impact of customer advocacy behavior can readily be seen. We have been conducting retail bank customer advocacy research in the U.S., Canada, and the U.K. since 2010. Our advocacy framework clearly shows that retail banks have many opportunities for organic growth by building their portfolio of Advocates in key segments. It is no secret that organic growth is more profitable than new client acquisition. In an IBM global business services report, the issue has been accurately addressed:

“As mergers and acquisitions become less attractive, leading financial institutions look increasingly to their existing customer base for growth. Critical organic growth measures – cross-sell, attention and new customer acquisition – dominate nearly every retail bank’s agenda” (IBM Global Business Services – Unlocking Customer Advocacy in Retail Banking, 2006).

We completely agree. Further, the economic crisis of 2008 and the shrinkage of demand for financial products and services has put added pressure on customer retention.

In mid-2010, our company conducted the first groundbreaking National Retail Bank Customer Advocacy Study (National Advocacy Monitor) among 7,000 adult respondents. This research featured the application of a unique framework specifically designed to identify the most actionable, real-world attitudinal and behavioral drivers of customer decision-making. The core of this framework is determining of customer advocacy levels, the degree of kinship with, favorability toward, and trust of brands; but, principally, advocacy identifies the downstream customer communication and marketplace behavioral effects of word-of-mouth based on personal brand experience.

Major consulting firms such as McKinsey have determined that word-of-mouth drives 20% to 50% of customer decision-making, and as much as 90% in some industries; so our framework represents a valuable, contemporary technique for evaluating the impact of transactions as well as strategic brand strength based on peer-to-peer communication and brand perception.

In our U.K. results, for example, there was dramatic difference in the demonstrated share of wallet – over twice the level of investable assets – among the bank customers characterized as Advocates versus those identified as Alienated, or customers who are negative and negatively communicating. In addition, whether we were examining relationship-based performance attributes, such as trust, reputation and confidence, or functionally-based attributes, such as breadth of accounts available for customers and branch service, Advocates were significantly more positive when compared to Alienated customers. This same result was seen among U.S. bank customers.

In addition, for both the U.S. and U.K. bank customers, evidence of perceived problems was quite high among the Alienated group. Worse, a high percentage of the Alienated group with problems saw them as unresolved. As reported in many customer studies, unresolved problems are perhaps the single largest contributor of defection, so this is an important issue.

Frequency of negative communication was extreme among U.K. bank retail customers tagged as Alienated. Alienated customers reported having close to ten negative conversations about their banks to others during the previous six months prior to the survey. Conversely, positive conversations were held by Advocates at a rate of almost eight times over the past six months. And, given that word-of-mouth is so highly leveraging of the behavior of others, both numbers are significant in their potential impact.

In the U.S., where advocacy performance of the nation’s top fifteen banks was evaluated, there was a dramatic spread between the best performing and worst performing of these organization in terms of both advocacy creation (see below) and the creation of alienated customers (10% for the best performing bank, 25% for the worst performing bank).

Many studies conducted in the retail banking industry over the years have determined that there is a fair amount of inertia, i.e. willingness to remain with the present bank, among customers, almost irrespective of perceived performance. More recently, likely as a result to a perception of greater instability within the industry, there has been a marked increase in propensity to switch banks in both the U.S. and U.K. Given that half of retail bank customers in both of our banking studies were identified as either Ambivalent or Alienated, this is a major concern for bank marketers and executives.

Our most important research conclusion in these studies was that advocacy monetizes at a stronger, and more consistent, rate than other key customer research measures in active use. For example, customers whom our research framework identified as Advocates can contribute to significantly higher share of wallet growth for a bank than the Alienated or Ambivalent customers. Alienated customers added products and services at competitive banks, similarly, at several times the rate of customers who were advocates of their primary bank.

For financial institutions, and indeed virtually any organization, it means that the odds of selling a product to advocates versus losing these sales to competition is five times higher than the same odds of selling to alienated customers. This type of actionable polarity in findings between customers who were alienated and customers who were advocates sustained whether we were evaluating overall performance, trust and relationship, touchpoint (tellers, service representatives, etc.), functional elements such as ATMs, or key monetizing elements such as future purchase likelihood.

Among other key findings from our National Advocacy Monitor:

• In our study, the top two banks in terms of the percentage of their customer bases who were identified as Advocates through our framework were three times the percentage of Advocates of the bottom two banks (37% and 35% vs. 13% and 11%)

• One quarter of the customers of the two lowest performing banks were classified as Alienated, i.e., they are negative toward these banks and are disaffected, even angry, communicators

• Emotional elements (trust and confidence) and satisfaction with key touchpoints (bank staff, account manager, service culture, branch, and live rep) are highly correlated with overall bank advocacy levels

• Advocates (of their primary bank) are significantly more likely to have strong belief and emotional connections to their bank compared to Alienated customers. Polar results examples: ‘Always treats me fairly’, 84% vs. 2%, ‘I feel like I belong’, 70% vs. 1%

• Advocates have a strong willingness to explore new products from primary bank – 50% will consider vs. 5% of Alienated customers

• Advocates are virtually certain to have a continued relationship with their primary bank compared to Alienated customers who are virtually certain of not continuing.

In addition, our analysis showed that transactional and overall experience were extremely important contributors to bank customer advocacy:

• Frequency of interaction is a definite ‘marker’ of customer advocacy. Customers with 10+ interactions per month were almost twice as likely to be Advocates as those with 1 to 2 interactions, and four times compared to those with no interactions

• Customers who had no problems or issues with their primary bank were four times as likely to be Advocates as those who had experienced a problem. Also, one-third of the Alienated customers who had identified a problem or complaint said that these issues had not been resolved; and this is a cause for service-related concern.

• Having a business banking account with their primary bank was another ‘marker’ of advocacy, as well as an opportunity to build profit and deepen the relationship. Twice the percentage of customers with business accounts were Advocates, compared
to customers with no business accounts

Our advocacy results were also consistent with metrics typically applied in most bank strategic and transactional customer research, except that these findings were invariably much more polar and directional, thus yielding greater insight and actionability for organizations using these data.

The causation and direct linkage between customer experience and monetizing customer advocacy behavior is covered in greater detail in my book, The Customer Advocate and The Customer Saboteur (

Michael Lowenstein, PhD CMC
Michael Lowenstein, PhD CMC, specializes in customer and employee experience research/strategy consulting, and brand, customer, and employee commitment and advocacy behavior research, consulting, and training. He has authored seven stakeholder-centric strategy books and 400+ articles, white papers and blogs. In 2018, he was named to CustomerThink's Hall of Fame.


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