Customers to replace marketing departments?

Suddenly everybody wants me to be their brand ambassador. Direct Line kindly sent me a set of dinky little cards with the telephone numbers of its product hotlines plus the instruction: “Give one of these cards to your friends so they can find out how Direct Line can help them.”

AOL pop-ups keep reminding me that if I recruit a friend or family to AOL, there’s money in it for me. Royal Bank of Scotland recently offered the same.

Mere loyalty isn’t enough anymore, it seems. I’m now being recruited as a brand advocate by virtually every brand I do business with.

Marketers from these brands are in good company. On the conference circuit, talk of the so-called loyalty ladder – which rises from customer interest through to acquisition, loyalty, “delight” and brand advocacy – is ubiquitous. All brands have got to climb it, we’re told.

No less an authority than Fred Reichheld – inventor of today’s notion of loyalty – recently weighed in to tell us: “The only path to profitable growth may lie in a company’s ability to get its loyal customers to become, in effect, its marketing department.”

According to Reichheld’s research, there is a very close correlation between profitable growth and “net promoters” (the number of people willing to recommend the product or company to a friend minus those not willing to). Forget “customer satisfaction”, willingness to recommend “is the one number you need to grow. It’s that simple, and that profound”, he wrote recently in the Harvard Business Review. You need to energise your company and incentivise your managers around improvements on that score.

There’s just one problem. It’s not exactly balderdash. It’s just that, apart from a few member-get-member marketing gimmicks, it’s operationally useless. Knowing a “willingness to recommend” score is like knowing how profitable you are: it’s a good indicator as to how well you’ve done but tells you little about how to do better. As systems thinker Peter Senge pointed out years ago, coaches who manage their teams by looking at the scoreboard never get very far.

So is there any viable alternative? Perhaps there is.

Competitive pressures are indeed pushing companies up a ladder through acquisition to retention and beyond: few brands nowadays want their customers’ money and nothing else. They want something more. The nature of this “more” is taking many forms, however.

In addition to straightforward repeat purchase, brand managers dream of a certain degree of emotional commitment to their brand. One hopes, it will translate into increased cross-selling and up-selling (signs of a healthy relationship that’s deepening over time). They also want to be trusted – and to be forgiven for mistakes.

They want preferential access to customers’ attention, even if it’s just being willing to open and read the mail. They want preferential access to customers’ time. That’s because increasingly money follows time: we decide what we want to do with our time, and we spend our money accordingly. And they want preferential access to customer information.

Two things stand out about this little list. The first is that it is multi-dimensional, spanning the six core “currencies” of modern consumer life. They are:

Physical energy or work. How hard do I have to work to get the value I want from this product or service, and for what return?

Emotional energy. What are the emotional costs and benefits of this relationship or course of action? Do I mainly feel anxious, humiliated, frustrated and irritated, or do I feel “met”, recognised and reassured?

Time. How much time do I have to invest to realise this value, and for what return?

Information. How much information do I have to hand over, or acquire, to achieve my objectives?

Money.

Attention or mind time. How hard do I have to think about this to get what I want? Is paying attention to it an interruption or distraction from my life, or a welcome opportunity?

As individuals we constantly trade across all of these currencies, balancing one against the other in all our activities, “exchange rates” often fluctuating wildly.

Most value propositions represent unique mixes of benefit across these six currencies: helping customers save on the use of some currencies while enriching the returns they get from others. IKEA trades lower prices for more work and more time. Home-delivery food operators offer higher prices for less work and saved time.

Different customer segments distinguish themselves by the profile and content of their currency “signatures”. We also judge each touchpoint with a brand according to these currencies: did they waste my time, treat me rudely, intrude into my privacy in their quest for information?

But when it comes to companies, whether we invest a currency in a relationship is almost entirely discretionary. This is the second crucial point. A brand can require us to pay money for a product; but it is up to us whether or not we pay attention to marketing messages, or feel an emotional affinity with it. Companies want consumers to invest their discretionary personal assets in relationships. So the next step up the loyalty ladder is not “advocacy” but earning discretionary customer investment.

Note the word “earn”. Because investors naturally seek a good return on the investments they make. So if there is one number companies need to focus on it’s not “willingness to recommend”, it’s customer ROI: return on investment for the customer.

That’s the emerging challenge for brands. Earning additional voluntary consumer investments across these six currencies, on the back of the ability to deliver superior returns on these investments. The trick is to analyse value delivered and gained across all six currencies, at every stage. Thus British Gas wants me to sign up for paperless billing. If I do so, I help to save the company a bomb. But doing so costs me time and energy. Why should I? Because it’s offering me a return of &£5 for my work and my time. The nature of the trade is clear.

There’s a lot of cynical stuff out there about analysing customer lifetime value, and focusing on those customers who offer the greatest lifetime value to the company. But customers are a pretty cynical bunch too. Increasingly, they also judge companies by lifetime value: the ROI delivered by the company to them, over time.

Tesco’s slogan of “earning” customers’ lifetime loyalty gets the relationship the right way round. A company that delivers customers good returns on their investments wins their loyalty. If the ROIs are really superb, they might recommend the company to their friends. So yes. There is one number to focus on improving. It’s not advocacy. It’s customer ROI. The one is simply a reflection of the other.

Alan Mitchell’s book, The New Bottom Line, explores the issue of ‘customer ROI’ in detail