Harris Interactive Loyalty Executive Brief Pdf

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Advocacy enables organizatins to link the impact of purchase experience and future intent, brand impression and favorability, recommendation, and positive/negative imformal communicaiton (offline and online word-of-mouth) with downstream customer behavior

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Harris Interactive Loyalty Executive Brief Pdf

  1. 1. Leveraging Informal Communication to Optimize Customer Loyalty Behavior Abstract Neural, informal communication on behalf of a preferred brand or vendor can have significant, far-reach- ing impact. If the communication behavior is positive, the resulting return on customer (ROC) effect can create a corps of advocates who can readily attract others to the brand or vendor. When communication is negative, this behavior reflects indifference, and even sabotage, where the brand or supplier is concerned. Author Strengthening Bonds and Building We identify these relationships at four levels, Michael Lowenstein, CMC Relationships: A Quick Customer based on the type and degree of involvement and Vice President, Senior Consultant Commitment ‘How To’ personal ‘investment’: Harris Interactive Loyalty Word-of-mouth. Commitment. Advocacy. These Acquaintance – Relationship that is fairly discon- mlowenstein@harrisinteractive.com are words, as well as concepts, that are on the lips nected, shallow and impersonal, expecting little and minds of virtually every marketer and cus- tomer market researcher today. Achieving the Contractual – Relationship based on ability to highest customer loyalty behavior is the desired provide rational, tangible, and functional ele- ‘holy grail’; and the reality is that it’s remarkably ments of value easy to reach. You just have to know the code. Romance – Relationship characterized by empha- The ‘code’ is quite straightforward. It consists of sis on emotional (trust, assurance, support, com- defining and understanding the emotional and munication) elements of value rational bonds which make up a supplier’s value Commitment – Relationship which combines proposition, as well as defining and understand- both rational and emotional elements of cus- ing a customer’s reasons, conscious and uncon- tomer value scious, for having a relationship with that suppli- So, the model can help identify the relative er. The emotional bonding elements are based on impact of each relationship driver: corporate trust and a customer’s sense of personal assurance image and equity, policies and procedures regard- in purchasing and using a company’s products or ing customer transactions, service delivery levels support. It is very much a function of touch and breadth of coverage, product performance point process effectiveness and the strategic, and (quality-based elements such as accuracy, reliabil- tactical, result of service experiences. Rational, or ity, completeness, timeliness, etc.) and costs, both tangible, elements are those things that we associ- actual and relative to competition. The sum of ate with cost and functionality: original price, understanding relationship components comes cost to maintain, accuracy, completeness, reliabil- back to trust and satisfaction conditions, leading ity, and the like. to commitment on a rational and emotional The conceptual framework of our commitment basis. Ultimately, as can be seen in the following model is that these emotional and rational bonds graphic , customer relationship, through com- are the foundation of customer relationships. mitment, leads directly to desired customer mar- Customer relationships with suppliers have a ketplace behavior. great deal in common with human relationships. www.harrisinteractive.com 877.919.4765
  2. 2. 2 HARRIS INTERACTIVE EXECUTIVE BRIEF The Word-of-Mouth, Commitment, and Customer day – and average ten brands in their discussions! Another major Advocacy Connection finding is that 15% of every conversation in America includes It would be hard to argue against the idea that word-of-mouth, as something about a product or service. both a communication medium and method to leverage customer Advocacy, which we define as the active expression of commitment, actions in the marketplace, is a hot topic. Books like The Tipping is seen in such expressions and actions as positive, frequent, and Point, BuzzMarketing, Grapevine, and The Influentials have painted voluntary informal communication on behalf of the preferred background scenery for a play in which the featured characters are supplier. Active commitment, i.e. advocacy behavior, is at the the customers, their peers (friends, colleagues, and relatives), and crossroads of where word-of-mouth is trending. As presented in the the companies which are trying to influence their behavior. following graphic, when the emotional and rational relationship elements of the value proposition are extremely positive, conditions Conceptual Framework: are ripe for advocacy to be created. In addition to being strong The Commitment Model purchasers themselves, advocates can ‘dial up’ brand awareness and momentum within the marketplace through their social networks and voluntary referrals. On the negative side, it must also be recognized that disconnected and disaffected customers can become saboteurs, undermining brand and supplier perceptions. Identifying, and acting on, the drivers of negativism is at least as important as leveraging the positive drivers. Conceptual Framework: The Role of Advocacy Why has word-of-mouth become so central to marketplace success? Understanding societal change and hyper-marketing can provide some important clues. Marketers, whether b2b or b2c, are now bombarding customers and prospects with messages and impres- sions at the rate of more than 2,000 per day. Of course, the rise of the Internet as a communication, purchase and information-gather- ing mega-source has had a lot to do with this; but, it has also become clear that people simply can’t, and won’t, absorb much of what advertising and promotional clutter creates. When they are making product and service, or supplier, decisions, increasingly customers and prospects turn away from traditional print and electronic advertising and editorial content. What do Inside-Out and Outside-In Customer Advocacy they believe? Whom do they trust? If you answered peers, give We believe it’s important to understand that customer advocacy yourself an ‘A’. Studies conducted over the past thirty years have behavior can result in one of two ways. The first way, which we shown that the level of trust and value in information received via identify as ‘inside-out’ customer advocacy, is where companies word-of-mouth has increased by 50% to become dominant, while endeavor to manage and influence attitudes and perceptions of traditional marketer-driven communication impact has declined. customers (and prospects), as well as where, how, and when Simply put, people don’t trust advertising and promotion. They communication takes place. Glen Urban, professor of marketing at believe it is supplier-serving and untruthful. People trust other MIT, outlined this very well in his recent book, Don’t Just Relate – people, especially those ‘like themselves’. Word-of-mouth informa- Advocate; and the role of private and public communities, a key tion is considered more interesting, understandable, reliable, rele- word-of-mouth vehicle, has been spelled out by Drew Banks and vant, objective, credible, and engaging. Studies show that three- Kim Daus in their book, Customer. Community. quarters of Americans, for example, talk about at least one brand a www.harrisinteractive.com 877.919.4765 ©2007, Harris Interactive Inc. All rights reserved. 02.07
  3. 3. 3 HARRIS INTERACTIVE EXECUTIVE BRIEF Here are several quick examples of inside-out customer advocacy: ships (WOW Zone activities and financial training for kids, American Express (Red) – This is a new U.K. program designed Penny Arcade for counting coins, etc.). Until recently, the com- for high net-worth ‘Conscience Consumers’ (a.k.a. ‘Cappuccino pany did almost no traditional media advertising. Liberals’, as American Express defines them). This market seg- ‘Outside-in’ advocacy occurs when customers informally influence ment is estimated at 1.5 million now, growing to 3.5 million by the behavior of others (customers and prospects) on behalf of 2009. The American Express (Red) program affiliation is through selected, i.e. strongly preferred, suppliers. This takes place through Bono and Robert Shriver (chairman of AIDS/Africa group). one-to-one or group communication, including direct or indirect When cardholders spend up to $10,000 per year through use of recommendation. Our technique for measuring customer advocacy, this credit card, 1% goes to the Global Fund for HIV/AIDS; and which exists as an extension of our commitment model, enables the amount rises to 1.25% above $10,000 per year. Special events clients to identify what is driving both true advocacy behavior, for (Red) program members are held on a regular basis, which leading to high wallet share, as well as indifferent, or even sabotage, represents millions of dollars in promotion for American Express behavior. and the program, with almost no advertising. The following impact grid identifies the components of word-of- Harley-Davidson – Harley-Davidson, which was almost bankrupt mouth communication, as well as each component’s potential in 1985, is now the most successful motorcycle company in the impact on brand/supplier perception and customer behavior. world, with over $14 MMM in capitalization ($2MMM higher than General Motors). The organization spends under $1,000,000 Word-of-Mouth Communication on advertising each year, instead depending on ‘mystique’ and Impact Grid customer engagement, with direct customer input into company operations for new products. Harley-Davidson’s recipe for prof- itable growth has been largely through Harley Owner’s Group (H.O.G.) Clubs, where new members have their first year free. Since its formation in 1983 with 50 original members, the club has now grown to almost 1 million members in 25 countries, with 1,200 local chapters. Importantly, half of the H.O.G. members attend H-D events and rallies at least once a year. LEGO Group – Based in Denmark, LEGO Group is one of the top five toy companies in the world. They produce over 15 billion ‘bricks’ a year, covering 2,400 products, with 90 colors. Word-of-mouth is essential for LEGO Group. They have, for example, created clubs for kids, ages 6-12, which now has over two million members; and they have a magazine for children Summary printed in four languages. In addition, LEGO Group has clubs, Our research into the underpinnings and drivers of customer and an active blogging and event program for adult LEGO loyalty behavior show that commitment and advocacy can identify enthusiasts; and its website has over five million visits per year. the strength of a brand or company’s value proposition franchise. Also, the company sponsors the FIRST LEGO League for kids 5 Commitment, with advocacy at the top end of commitment, is the through 14, where teams of ten build LEGO robots in tourna- most actionable method of understanding what steps need to be ments; and there is a LEGO Learning Institute for educators to taken, and in what order of priority, for organizations to optimize study how children learn best. both employee and customer behavior. Commerce Bank – Identified as ‘America’s Most Convenient Word-of-mouth, now taking center stage as both a major commu- Bank’, this is the nation’s fastest-growing financial services com- nication medium and method of customer decision-making pany, with over 400 ‘stores’ in eight states along the Eastern influence, requires incorporation into any concept or model of Seaboard. Commerce Bank has a unique retail concept, built on understanding customer behavior. We have created such a model; an advanced service model (including seven day branch banking, and, through it, the effect on share-of-customer, i.e. level of extended weekday and weekend hours, and staff trained at commitment and advocacy, can be both identified and leveraged WOW University). This is a highly proactive, customer-centric for messaging and experience optimization. culture, with programs aimed at building family-based relation- www.harrisinteractive.com 877.919.4765 ©2007, Harris Interactive Inc. All rights reserved. Other product and/or company names used herein are trademarks of their respective owners. EOE M/F/D/V 2.07

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