73% of traditional supermarket customers feel antagonistic or have no loyalty to their store. Only one in four is positive about the experience. Only one in four could be an advocate. Yet across all store types advocates were more profitable. They bought more and shopped more in their preferred store.

Where Do Advocates Come From?

Advocates, customers who evangelized your company, are worth their weigh in gold. We have been saying this for years but now a couple of substantial studies provide the evidence. Some of it might surprise you.
A few years ago loyalty expert Fred Reichheld published a paper in the Harvard Business Review title "The One Number You Need to Grow." He argued that the most profitable companies had a higher percentage of customers who would recommend the company to others.

In another Harvard Business Review article V. Kumar and associates tracked what the recommender actually did and what the pay-off was to the company. Of the nearly 9,900 customers of a telecom firm and 6,700 customers of a financial services firm over two-third of the customers said they would recommend the firm to others but only 30 percent actually did. What’s more, only 10 percent of the referred customers became profitable new customers. These results don't make a great case for word-of-mouth or advocacy.
However, if we look at the relationship between how much a customer bought and the dollar value of their referrals, things get interesting. Surprisingly, the big spenders did not generate the greatest referral value.

They identified four categories of customers:
Champions: customers with high life-time value and high referral value.
Affluents: customers with high life-time value but low referral value.
Advocates: customers withlow life-time value and high referral value.
Misers: customers withlow life-time value and low referral value.

They designed three marketing campaigns to create more Champions. Did it pay off? You bet! The overall ROI of the campaigns was 15.4 times the cost (standard marketing efforts typically yield 4 to 6 times the cost).

The message: advocacy pays off, but customers need a little help getting it into gear.

Advocate and the Retail Food Business – Food for Thought

Here are some of the highlights from a recent IBM study of the grocery industry.

• Growth is shifting from traditional supermarkets to wholesale clubs and especially, specialty store. This shows up in market share and the average value of the basket on check-out.
• 73% of customers of traditional supermarkets feel either antagonistic or have no loyalty to their store. That means that only one in four are positive about their experiences and could be advocates.
• Across all store type, advocates were more profitable. The bought more each week and did a higher percentage of their shopping with their preferred store.

IBM compared Advocates with Antagonists on what their grocer did well.The big gaps showed up in these issues:

• Provides a convenient shopping experience.
• Happy with service from store employees
• Store employees are friendly and positive.
• Store employees are knowledgeable and attentive.

Not surprisingly, stores that ranked highest on these questions were also the most profitable. These stores found out what customer expectations were, took appropriate actions, and had a proportion of advocates. The less profitable stores never tried to find out what customers expected and had a lower percentage of advocates.

The top four in understanding customer expectations: Wegmans, Whole Foods Markets, Costco and Target. The bottom four: Wal-Mart, Stop and Shop, Albertson's and Safeway.

Wegmans focuses heavily on employee motivation and retention. The spend millions each year in training and education. The people in the cheese department, for example, know the difference between Brie and Gorgonzola. Many have been sent to France and Italy to find out. This creates enthusiasm at work and translates into much more engaging interactions with customers.

Whole Foods Market's has a decentralized operational model. Local managers, who are closest to their customers, make decisions about what items to carry and how to run the store. They also make a concerted effort to buy locally and engage in environmentally friendly practices, an increasingly important issue to customers.

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Check out two of our latest papers.

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For additional information on trust and customer relationships, check out John's book, Addicted Customers: How to Get Them Hooked on Your Company. www.AddictedCustomer.com.

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