Advocacy is a major step forward in the evolving interaction between a firm and its customers. Push/pull marketing is driven by the economics of mass production—efficient processes that created mounds of low-cost goods. Relationship marketing is impelled by the saturation of push marketing and intense rivalries, particularly around quality and price. Advocacy will be the next imperative because of the accelerating growth of customer power.
The Advocacy Pyramid: Figure 1-2 shows the pyramid of advocacy that defines the underpinnings of this strategy. Total Quality Management (TQM) and customer satisfaction are at the base of the pyramid. They are necessary conditions for trust and advocacy. If your company wants to honestly recommend its own products, then it must have products that are good enough to recommend. Advocacy is supported in the middle by relationship marketing because CRM provides the tools needed to personalize your company’s advocacy relationship with each customer. The pinnacle is advocacy.
Figure 1-2 The Advocacy Pyramid
As you reach the top of the pyramid, you won’t use CRM as you did in the past. Instead of targeting promotions and company communications at your customers, you will design CRM to build trusted and partnering relationships with your customers. You will use CRM and related systems to provide balanced, transparent, and relevant information plus unbiased advice on how to make the best decision. CRM, seen in this light, would be better called a "Dream CRM" strategy since it makes the dream of CRM real. Likewise, one-to-one and permission marketing shifts in the company’s intentions toward customers. But instead of creating more micro granularity in spewing out promotions and hyping tangentially relevant company product information, these methods should become a mutual dialogue between individual customers and your firm to maximize customer interest over the available products in the market.
Benefits of Advocacy: Advocacy builds trust. Trust is more than just a self-congratulatory adjective to be appended to a company’s press releases. Trust means advocating for the customer’s long-term interests. Trust is hard to earn—and easy to lose—but if your company earns trust, it will enjoy sustained benefits. Trust increases customer loyalty because satisfied customers buy repeatedly, purchase a wider variety of products, and recruit their friends to become customers. This can mean profitable growth. Advocacy creates business benefits in four areas:
Reduced Customer Acquisitions Costs: Advocacy can reduce your customer acquisition costs in two ways. First, it lowers the cost of acquiring each new customer. Instead of wasting money on ads that play to empty couches, a trustworthy company enjoys a beneficial word-of-mouth reputation. Second, trust lowers the number of new customers that a company needs to acquire to maintain top-line growth. Acquisition costs are much lower than retention costs for most industries. With advocacy, a company is not constantly forced to acquire new customers to replace the departing dissatisfied customers. The advocacy-based company retains loyal customers.
Higher Profit Margins: Trust can increase the prices that your company is able to charge. Customers are willing to pay more for a quality product from a trustworthy supplier. Although some customers are deal-prone, many are willing to pay more to get more. In a busy world, consumers will pay to buy a brand they can trust to avoid the aggravation of problems.
Growth: Advocacy can also help your company diversify and expand its share of wallet (percent of total expenditure by customer) with satisfied customers. When a company becomes a trusted provider, customers will look to that company for more products and services in more categories. Although push-based companies can engage in up-selling and cross- selling, trust-based companies will be more successful because customers are more likely to believe the company’s recommendations. Advocacy-based companies are also more likely to understand and respect each customer and therefore make meaningful suggestions that lead to higher conversion rates.
Long-Term Competitive Advantage: Advocacy lays the foundation for long-term competitive advantage. A better, more consultative relationship with valued customers helps the company to innovate in market-leading directions. Instead of guessing what customers might want, a trust-based company has a good understanding of its customers and their buying patterns. Customers will help advocacy firms to create successful new products. Trust also builds the brand by fostering a better reputation for the company. When times are turbulent, customers will stick with firms they trust.
These benefits are even more applicable when the customer is a business rather than an individual consumer. In industrial marketing, the 20% of salespeople who sell 80% of the total sales volume for the firm owe much of their success to building trust-based relationships with clients. Moreover, customer power is also rising among industrial customers. Companies ranging from Wal-Mart to Sony to GM all have supplier performance programs. Such systems entail a range of tactics, such as supplier scorecards, supplier pre-certification, requirements for adhering to ISO 9000 quality management standards, and software systems to track supplier performance.
Many companies use software, such as ERP (Enterprise Resource Management), SCM (Supply Chain Management), or other specialized SPM (Supplier Performance Management) software packages to track and evaluate suppliers. In some cases, the customer company might even have better quality and performance data about the supplier than the supplier itself does.
The sales of commodity items may be done on a cost-based push approach, but sales of the strategic raw materials and component parts that go directly into manufactured goods are a different matter. In fact, trust is far more important in the supply chain, where companies establish long-term relationships with strategic suppliers. Collaborative development of products—co-creating the supplier’s products to mesh perfectly with the customer’s products—is a good example of a trusted-based strategic relationship in the supply chain. As companies move to lean production methods, just-in-time manufacturing, or outsourcing, they become even more dependent on suppliers. Thus, good suppliers must be trustworthy.