This week I received a note of appreciation from one of my reputed customer in the consumer goods space and this mail is kind of enlightenment to me and my colleagues and when we traced back all that extra mile things we have done for this customer it is nothing more than customer advocacy where we enabled him to make the right decision at the right time. So what this customer advocacy is all about ?
Advocacy means you faithfully represent your customer’s interests and provide them with honest information, even if that means they end up buying products from someone else. It requires that you have transparency and engage in a dialogue with customers. Advocacy also demands you invest more in Product/service quality and less in promotion and advertising. The traditional business model is companies market and advertises their products in an effort to get customers to buy. The customer is then expected to evaluate the offerings of all vendors and purchase whatever provides them with the best combination of price, value and quality. Each buyer is expected to look out for their own interests.
Advocacy means you provide customers and prospects with open, accurate and complete information about what you have to offer and what your competitors have to offer. You then provide advice so customers can find the best products, even if they buy from someone else. The point is customers will learn the truth anyway, so by providing them with accurate information and embracing honesty, you can earn their purchase. This will be a dialogue rather than a one-way monologue where you speak at customers. Advocacy effectively means you go into partnership with your customers in the expectation satisfied customers will tell others about the positive partnership you have formed with them.
In many ways, advocacy is a major step forward in the evolution of the relationship between a firm and its customers. Previous steps in this evolutionary process have been:
• Total Quality Management (TQM) means you develop products that are good enough for customers to be willing to recommend to others.
• Customer satisfaction programs focus on giving customers more of what they want.
• Customer Relationship Marketing (CRM) emphasizes one-to-one personalized marketing based on known preferences. CRM usually requires building a huge warehouse of information and then mining the data to present customers with offers they are predisposed to accept. If used too regularly, however, CRM can become intrusive and aggressive for customers.
• Advocacy – becoming a trusted representative of your customer’s best interests – is the next natural step. Under this approach, you give customers open, honest and completely transparent information. You will only earn a sale if your products are better than those offered by the competition. Your main focus, then, is to design and develop better offerings rather than spending money attempting to attract a prospective customer’s attention.
Advocacy requires a mutual and reciprocal dialogue to develop. You help customers buy the best products they can and in return they tell others about this positive relationship. Over time, this will
mean your customer acquisition costs will decline in sync with growing customer preference for your product. Push marketing was driven by the economics of mass production. Relationship marketing was propelled by the saturation of push marketing and the intense marketplace rivalries which have emerged. Advocacy will be driven by the accelerating growth of customer power in the foreseeable future.
The key benefits of customer advocacy are:
• Enhanced trust – advocacy increases customer loyalty because satisfied customers are more likely to be repeat buyers, and they are more likely to recruit their friends to buy as well. _ Reduced new customer acquisition costs – Advocacy relies on word-of-mouth endorsements, and each customer will do more business because of the trust factor. Customers are also more likely to stay in an advocacy-based environment.
• Higher profit margins – Greater trust means you can charge customers more because you can establish definitively you are providing more value.
• A foundation for future growth – Advocacy will help you diversify and expand your share of the customer’s wallet because you’ll be a trusted provider. This will facilitate up-selling and cross-selling opportunities.
• Long-term competitive advantage – Advocacy is based around a consultative relationship. Instead of needing to guess what additional products customers want, you can ask them. This will allow you to develop future products that will be very successful. This relationship will be especially valuable
• When the commercial environment as a whole is turbulent.
The increased customer power which underpins customer advocacy strategies is now being felt in a number of industries. A number of new ideas are being tried to respond to the decreasing effectiveness of the traditional push marketing tactics. You need to take on board the lessons already learned in the marketplace and move forward rather than futilely attempting to retain the status quo. Take for examples the Automobile and Travel Industry
The Automobile Industry
Long noted for pushy sales tactics, before the Web the dealer’s sales representatives had greater power because they had more information about inventory levels, dealer costs and quality ratings. With the Web, customers are much better informed meaning they can make better decisions. They can walk into a dealership knowing the vehicle they want, what stock level the dealer has on hand ready to sell, what the dealer paid and which other nearby dealers they are willing to go to if
negotiations at the first dealership don’t result in an acceptable deal. Research has shown that better informed customers now save on average $450 when purchasing a vehicle. To respond to greater customer power, vehicle manufacturers are attempting to cultivate better relationships with customers.
General Motors, for example, has created a Web site called AutoChoiceAdvisor.com in partnership with J.D. Powers, an independent third-party assessor of vehicle quality. The advisor asks a series of questions and then produces a ranked list of the top eight vehicles that will best fit the customer’s needs and preferences. The site advocates all models rather than just GM vehicles. Customers can then arrange to have a 24-hour test drive of the vehicles they are considering buying through the
Web site. The industry’s approach to marketing to customers is now shifting significantly towards trust-based ideas and initiatives rather than push tactics.
The Travel Industry
In the early 70’s business travelers were the mainstay of the airlines. This changed in the 1980s and 1990s when leisure travelers came to the fore and industry capacity grew. Airlines resorted to load management pricing which meant pricing became very complex and time sensitive. The entrance of discount airlines further intensified this trend. At the same time, Web-based third parties (Orbitz, Expedia and Travelocity) were established to help customers price-shop when it comes to planning their travel. This greater amount of information has meant many more customers:
• Decide their own trade-offs between price and quality.
• Do their own bookings rather than use a travel agent.
• Can aggregate their travel expenditure to get better deals.
The travel industry itself is responding to this increased customer power by offering open and honest information via the Web along with more options, better advice, simplified procedures
and more personalized service for those who want it. It does appear the Web based third-parties are here to stay, however, as these companies are profitable and some even have market capitalizations greater than many airlines. Consumers can now get better deals and can choose to use a travel agent, to use an online service or to go to each airline direct through its Web site.