Tuesday, June 12, 2007

Referrals: Now 50% More Powerful !

Over the last number of posts, I have referred to the importance of customer reviews, and customer review sites (i.e. Bazzarvoice, Loudervoice,) They form an important part of the customers online search and evaluation strategy. Bazaarvoice claims that sales of a product go up from 16% to doubling just by adding customer reviews. The next stages are probably feature and price comparison and evaluation and customers are using tools for this as well, like Farecast. Going back to my old Marketing days, I'd say there is a great deal of brand-Halo effect going on, where we think we are getting good value, because the brand says so. With so much information, tools, and engines available, how on earth are we going to make decisions? It would seem to me that the overall Brand Reputation of a company will be paramount here, and Reputation will be driven by customer experience, the reporting of customer experience, and overall levels of customer advocacy. Customer advocacy is the result of customers getting exceptional service. 121media.com has a nice little piece on a US brokerage firm that uses direct personal contact to drive this sense of exceptional service. They don't have an IVR, or a cenralised customer service center. Calls are driven right through to the local branch where they are handled by trained and informed individuals. Now I am sure their are lots of infrastructure bells and whistles in the background to ensure that questions can be answered and clients serviced properly, but they key to the companies success is "driving contact", not "withdrawing from contact". So why do they want to draw the customers in?
financial services customers who make referrals tend to be worth 50 percent more than a typical customer, and a new referred customer is worth almost as twice much as a customer coming from other channels. Also, "advocates become more valuable and more loyal simply by making a referral, because they put their reputation on the line,"
Now back to some very old chestnuts: - how many of your customers would actively refer you to a friend? - do you know what interaction points provide the opportunity for exceptional customer service? - do you know how to identify, interact with, and leverage the power of advocacy? The Guys at BazaarVoice have a good entry on getting to grips with some of this stuff.

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1 comment:

Jason Williams said...

You make an interesting point about the halo-effect. Additionally you reference the one site that is getting a lot of hype that really fits the “Halo effect” you referenced. That site is Farecast. I’ve recently seen it get a lot of hype of how it’s supposed to be this great thing. I personally think that it’s a gimmick that won’t live up to its expectations. I mean it’s based on past data and it’s really hard to predict how things go (Based on past data) because the market is so volatile. Sites like Sidestep and Farechase that are on a meta search model don’t rely on that type of hype because their offering is straight forward. Now of course is Yapta which is a better model of Farecast, but I’m still skeptical about having to download something. It is interesting though, as you pointed out, that referrals from people or other media go a long way. Even if the product isn’t the greatest. Great article.

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