SPEAKER_01 0:16

Okay, today men and I would like to talk about customer advocacy. And last week I lied to you. I said it was the last episode in the value vert flywheel pillar, but we thought we better squeeze one more in, which is really around customer advocacy, as I said. A very important part, but then next week we'll get into the engine. So last week we talked about why the best customers quietly leave and we should have a system to capture feedback and improve processes, value, engine reach, all the vert flywheel pillars as a result of that feedback. And we talked about customer churn and dealing with that, but also customers, satisfied customers, could be your best source of future business as well. So you don't want to leave that to chance. And Mina, I believe that it really deserves a more deliberate approach in terms of leveraging those very happy customers that you spend a lot of time and energy delivering value to. And we think that there needs to be a system. Someone in your business needs to own that system and take responsibility for it, and really turn that satisfaction into recommendations. And that just doesn't happen by luck or chance. Well, it actually does, but to a much lesser extent than what it possibly could. So we think there's five things that we want to work through today. Why advocacy has to be earned first, the right moment to ask, a better question to ask than do you know list ten people that I could call upon to, you know, sell this product or service to. I think we've seen that written or we've heard it a few times. It's probably the worst question you can ask. And thinking about it from the customer's perspective in terms of the risk associated with making a recommendation or referral. And some people just think it's too risky, and that's fine, you've got to identify those people as well. And how it all works together, how you can put the system together to ultimately generate a referral system. So, as I said, you can turn those happy clients into future new clients as well. So, I mean, let's start with the common mistake where people don't really understand the process, I guess, and the trigger points for people to be happy to make referrals, and sometimes they ask for them before they're earned.

SPEAKER_00 2:26

So, a common mistake you often see in the inception of businesses or where people are trying to sort of spruok the business is that they try to buy advocacy and they try to spend enough on promotion, get enough people talking about it, and perhaps the quality of what they actually deliver doesn't actually match what they're actually promising. If you think about it, a lot of the businesses that start up, I see a lot of hospitality businesses, for example, do this or makeup brands, for example, will do this, is that they will hire influencers to look or use their products and advocate for the product. But the problem with those kind of advocacy is that if you're not actually delivering on that promise, then the enthusiasm quickly disappears. So you it's a short-lived honeymoon period for that business. Now, admittedly, the next example I'm probably going to give you is probably an extreme example, but it's probably one worth noting as to what can actually happen if you overpromise and underdeliver. And that's what the Fire Festival in 2017, if you recall it. Now, in that instance, the organizers created an enormous amount of excitement around a luxury music festival in the Bahamas. And Kendall Jenner was reportedly paid around US, I think it was 275,000 odd for an Instagram post promoting it. And if I personally think I'm in the wrong business with that, that kind of uh the revenue for just an Instagram post. But there was actually a subsequent lawsuit alleged because she hadn't disclosed that she was actually being paid for the advert. And but what actually happened is the organizers couldn't actually deliver on what they had promised, and so guests arrived to an inadequate sort of accommodation. There was really poor food there, and it was an unfinished site. And funny enough, the festival was actually cancelled the first day on the opening day. And the founder, Billy McFarland, was actually later sentenced to six years in prison for fraud offenses, including defrauding investors and a ticket vendor for more than 26 million US dollars. So the lesson applies to really every business of every size. You can buy the attention, but you have to earn the advocacy. You have to deliver on your product or your promise. Before you actually build out a referral system or start asking for reviews, you need to consistently deliver an outcome that's worth recommending. We often say in our business, you know, deliver a service that's worthy of remark, so a remarkable service. So if your delivery is inconsistent, fix that first. So everything we discussed in this episode assumes that you already deliver real value consistently. So we're talking about how you turn that value into recommendations. So Stuart, once you're delivering that value, when's the right time to ask?

SPEAKER_01 4:52

That's right, Mina, and that's where I think a lot of businesses get it wrong too, because if you ask too early before the customers experience value, it's gonna seem very selfish. You undermine trust. And remember, going back to the trust equation, the denominator, the only denominator, there were three numerators, only one denominator which was self-orientation. So it feels too self-oriented. Now, how do you get around the self-orientation? I will come back to that in a second. But also, if you leave it too long after the customers experienced value, you know, people move on, they forget things. You know, there's the idea that customers will you can do a hundred great things and do one bad thing, they'll always remember the bad thing, that'll stick in their mind. And I guess we're just hardwired to, you know, avoid problems or avoid anything that could kill us when we were cavemen and so forth. So, of course, we leave that stuff in our mind, but the good stuff we tend to forget. So, really, the right time is after the client has acknowledged, explicitly acknowledged the value they've received. So, you know, they might say something like, That's exactly what I needed, or that really made a real difference, or your service is outstanding, these sorts of feedback points. That's the best time to ask the questions that we're going to, that Mina's going to tell you in a second. So, uh Ollipop, which is a soda brand in the US, actually has some stats around this. So, what they did is they asked for a referral directly or immediately after someone left a five-star Google review. So that was kind of their trigger point, kind of smart, really. Their trigger point is, you know, a customer's recognizing that that they're really happy. And actually, it resulted in an advocacy rate of over 40%, which is four times higher than any other campaign that they've done. So, look, sometimes you need to help the customer see value, and it's something that we've been talking about over the last 14 weeks as we've been talking about the value pillar within the Vert flywheel. But really, it's about having reflecting back on your business, you know, whether it's a product, service, or service business. Really, when do you think the client actually recognizes value? When do you actually think you deliver value? And do you have a system and process to help the customer acknowledge or recognize it? And sometimes, you know, clients and customers need prompting around this. Sometimes they need reminders around, you know, what their situation was before they had your product on service and what it is post. Remember, we all have really busy lives. And in Australia, I know the culture tends not to be to toot our own horn to overplay things, but you know, sometimes we can take that sort of cultural value to our own detriment as well. So it's not, I don't think, a case of never mention it. It's mentioned in a way that fits your brand, that fits your culture and fits the way your business does things. So, of course, timing has to be right, and we've got to be able to deliver value, and you've got to pick that point where the euphoria really from enjoying your product and service is the highest point. But then what do you say? Because I think this is also where, you know, people don't want to turn into scripted salespeople. They don't want to seem too cheesy, but of course, they want to give customers and clients real tools or directions on, you know, how to make a referral. So, Mina, how do we go about doing that?

SPEAKER_00 7:57

I think most businesses fall in the trap of being too general in their approach. They start with a standard referral question such as, do you know anyone? And it sort of reminds me of a situation where, you know, when you're on a support call with a provider of some sort and they say, Can you hang on for three questions post-phone call, you know, just to give us some feedback or of your experience. It's just, I can probably say most people, the large population, probably wouldn't actually continue on with that three question survey. And and really, from my perspective, you know, the do you know anyone, it's it's really a lazy question because it leaves the customer to do all the work, it leaves the ball in their court, they're not very much inclined to really search their network or work out who might need your service or product and decide who will be a good fit. So without a useful prompt, most people draw a blank or they don't even bother altogether. So, from my perspective, you've got to really make the question specific to the value that you've just delivered or the pain point that you've really just solved. Ask rather than do you know anyone, ask who else is trying to achieve the result or who do you know who's dealing with the same problem so that we can actually provide a solution for them. Now you've actually given them something concrete to think about rather than something general nature. They're actually looking for someone in a particular situation which makes it much easier to bring a name to mind. I think Dropbox did this really well. Dropbox used the related principle when it launched their referral program back in September 08. It connected the request to something users already wanted. They wanted more storage. So that what they came up with, what Dropbox came up with is if you refer to a friend who signed up, you both received extra space. So over the following 15 months, Dropbox actually grew from 100,000 to 4 million users. So that the referral program was credited with a sustained increase of around 60% in signups. So the appeal was pretty clear. Referring someone's users get more of the one thing they already valued. So for a service-based business, the practical lesson is that you connect your request to the problem you've solved or the outcome you've actually helped the customer achieve. Give them a clear reason to think of a particular person. So Stuart, once we've got the question right, how do we make the customer comfortable acting on it?

SPEAKER_01 10:02

Well, referral's a risky manner, and I don't think necessarily a lot of business owners recognize it. And risk can come in a couple of different forms. Like what happens if I refer someone to your business or your product and they have a really poor experience. So the product doesn't really work or suit them, or the person they deal with is different to the person that I dealt with and the experience isn't consistent, or they waste their time or overcharge them, not deliver value, you know, just generally upset the person that I'm referring. So, in a way, it's probably less risky just to keep my mouth shut and not make the referral and let the person work it out themselves. You know, I worked out, I found your business myself as your customer, you know, let them do that as well. The flip side though is another way to look at it, and sometimes people look at this. Well, what is if I refer heaps of business to you and then you just become too busy and you don't look after me? You know, that is also another thing to think about. So for some people, that risk is just too high. And there's gonna be some people out there, some customers, they might love you, they might love your service, they couldn't be happier, but they're just not referral people. They just don't, you know, from their personality perspective, they'll never, never make a referral. And then there's gonna be a cohort that love referring, that love sharing within their network, and that's just who they are. And they find a great business, they're happy to really talk about them. And that's the old 80-20 rule at play here, by the way. So, you know, you need to find those that 20% in your client base that are really strong advocates, and then most people will sit somewhere in the middle. That of course they'll make a referral, but only to the people that they really care about. They're not going to talk to every everyone they know about your business. But the key thing is to try and reduce the risk as much as possible. So the first thing that you need to do or position yourself is that referrals don't need to necessarily result in business because that's the other thing. What happens if I refer someone to your business and they act like a complete dick and waste your time, don't end up buying, and just end up costing money to serve with no revenue. That's going to strain perhaps my relationship with that business, and you know, maybe it will reflect poorly on me. So that's the first thing to deal with is to put that self-interest and to put that risk aside and to say to your clients that, hey, look, you can introduce us as a second opinion or as an additional resource, and it doesn't have to result in business. If we can help someone, if we can point them in the right direction, if we can give them a little bit of advice, but we don't get any business out of it, we understand that's just the process, the normal process of being in business, and we'd much rather enjoy the introduction and be introduced and have that opportunity than not have the opportunity. And at least it takes that obligation off the table. You know, also mentioning that, you know, we might not be able to help everyone that you refer, and everyone might not be, you know, a perfect match with our business, but that's okay. We're always gonna treat them with respect and we're always gonna be upfront about that. And so it just depends on the type of product and service you have and how much trust is associated with that product or service as well, which is gonna depend on the type of product and service and then also the cost. So, of course, if you're selling, you know, a very low-cost, low margin product, you probably don't need to worry about some of these things. But if you've got a very high trust business, then that's the situation where you need to worry about it more. Also, people need to understand how to refer. So you've got to make that really simple. And so, for example, if you're a mortgage broker, you might say, look, use this as second resource. Doesn't need to result in a loan or refinance or a commission or a transaction, but we offer a free health check, you know, to anyone that you know, and it's completely obligation free. We're not gonna pester them, we're not gonna follow them up. There won't be any hard sales tactics or anything like that, but it's just a way for you, anyone that you care about, you know, that you can recommend us as an additional resource. And the process is they complete this form or we have an initial conversation and we deliver this report. So it make it makes it really clear on what you can then the person making the referral can set expectations with the person that referring, and also it reduces risk because it's really clear on how I make the referral and it's clear on sort of setting expectations and takes people off the hook. So, of course, it's gonna be different for different industries and different products, but you've got to put yourself in your customer's shoes, your client's shoes. Understand that firstly, that some people just won't make referrals, so that's okay, it's about acknowledging that and you know, not necessarily pestering those customers because if you're gonna pressure someone that just isn't comfortable, you're going to destroy your own trust with that customer. But for those that are willing to make referrals, it's really about reducing that risk, making sure they don't feel that you know everyone that refers needs to do business with you, and also make sure they feel comfortable that everyone they refer is going to be treated with the same respect and enjoy the same sort of level of service as they've enjoyed. So, Mina, once we've got all those things right, we've got the timing right, you know, we've we're positioning the referral right, we've removed trust. How do we pull it all together?

SPEAKER_00 14:59

Probably gonna sound like a broken record here, but it really comes down back to pricing power and willingness to pay, which we did cover a couple weeks ago. So when you actually win a customer at full price, you preserve the margin to invest in delivering a great result. Now, if the customer feels they've received more value than what they've paid for, then they've actually got something worth recommending. You know, I know in our business, and again, this isn't to toot our own horn or anything like that, but for example, we might have uh an accounting and tax client who's having some different sort of decision making or problems with decision making around some wealth creation items. And sometimes they could actually relate in a particular example today, actually, we had a it related to their parents. Now, their parents might not necessarily be an ideal client for us, and we've got nothing to win in that transaction by providing or offering that initial meeting, but we still did it because it establishes that trust, establishes that ability to refer on because now they've got they know that hey, we've got the willingness to help, they're getting a lot more value than what they've actually paid for, and now they're worth those recommendations. So though these recommendations results in case studies give the next customer more confidence in choosing you and makes it easier for them to win their business at full price, which funds the next great experience, so you're not paying for that advocacy, that advert that next transaction. And that's really the flywheel. Healthy margins support better delivery, and better delivery generates advocacy, and advocacy makes the next sale easier and you get traction. You know, ASOP again. I know you we've used this example a lot, but it's good to sort of establish consistency. ASOP itself illustrates what investing in the customer experience looks like. The skin bear care brand actually puts considerable thought into its distinctive stores, its knowledgeable staff, and experiencing of choosing the right products, and that's why customers go there and spend probably four times what the product actually would otherwise cost in a lower cost environment, such as a uh sort of general sort of conven uh general retail store. And because of that, they grew their sales from around 28 US million dollars in 2012 to 537 million dollars in 2022. So for me, that's a pretty useful lesson. It's the attention that it gives to the that gives customers notice and it gives them value that it might tell someone else. And I'd actually love to know their margins because I could probably say that as the revenue grew, their margins would have significantly grown as well because they've got that volume, they're not buying that at they're not buying that reach, they've actually that own that reach channel, but also the cycle can work against you. So discounting is often a sign of a lazy value strategy. Instead of giving customers a compelling reason to actually pay your price, you're reducing it. So you're discounting the value that you're actually providing them, and by doing that regularly, you train them to wait for the next sale. So while reducing the margin available when you actually deliver, if you recall our example of JC Penny back, I think it was three episodes ago now. The new CEO came in and he actually removed all sales. Whereas the consumers had already accustomed themselves to was that the number of sales they actually had throughout the year. And although they formed a uniform pricing, and sometimes the products were actually cheaper than what a sale price was, people were too accustomed to a discount. And what ended up happening was sales dropped dramatically. So if you actually want to reward loyalty and add value, you need to offer priority access, a faster turnaround or an additional service. The customer actually values, give them another reason to stay and actually recommend you while preserving the economics that support a great experience and your business, really. So Sure, it's probably enough rambling from my side. What should our listeners actually do with all of this?

SPEAKER_01 18:32

Well, before I get into that, Mina, I think it's really good to reiterate what you just said because it really comes back to customer acquisition cost. And so quite often we're, you know, in business, we think, well, we want to grow revenue, we want to grow our business. How do we find new customers? Sometimes the best source of new customers is the existing customers that we have, but we don't build systems around it, we leave it to chance. So hopefully, today's episode gives listeners a little bit more of a robust idea on what are the key components of customer advocacy and how do we build them out in our business. So it really begins with five questions that you need to be able to answer. And the first one is are you delivering a remarkable service? As Mina said, worthy of remark. You know, what's expected today in different industries is substantially more than what is expected what was expected 10 years ago. And the dial will move. I mean, in 10 years' time, it'll move again. So you don't want to have a business that is okay or average, you want to have a business that is remarkable. And we should be getting that customer feedback as was spoken about previously, and we want to be able to measure the health and satisfaction of our customer base. So that's the first point. There's no point talking about customer advocacy until we're delighting customers. The second one is have we identified or engineered the right time to ask? And sometimes, particularly depending on your type of product, it might be easy to ignore value if you're depending on what type of product or service that you're offering. So you then need to engineer it and create a situation where the customer has to reflect on value and even articulate value and communicate value to you. Then you've got thirdly, you've got to work out what am I gonna say? How am I gonna create that opportunity without seeming selfish, without seeming like it's a sales pitch, without putting my customer in a situation where they feel uncomfortable and do it in a way that it aligns to your brand and culture and your way of doing things. Doesn't mean don't do it at all. You've just got to choose the right way to do it. Fourth, make the introduction easy and low risk. Make sure that the customer understand there's no obligation that you'll always treat any referrals with exactly the same respect that you've treated them and you'll look to delight customers and you'll always be honest. If it's not a good fit for you or them or the customer, you'll always be honest about that. And finally, as Mina's just spoke about, make sure your whole pricing strategy works because discounting or incentivizing referrals is, I think, really lazy business. Now, in some markets, discounting, like supermarkets, for example, that's it's a hallmark of an industry. You can't have a supermarket and not have specials or discounting. So, of course, if if that's part of your industry, but I don't think the CEOs of Coles and Woolworths are necessarily listening to this podcast. I think for most people, discounting isn't really necessary and it shouldn't be part of the customer advocacy process. So, until you can answer all five of those questions, you probably don't have an advocacy system inside your business. And before you start, and we'll talk about REACH in weeks and months to come, but before you start spending money on borrowed inbound reach, you're probably better off to firstly make sure you delight customers and secondly use those delighted customers to your greatest advantage. Okay, we promise this is the last episode in the value for flywheel pillar. Next week, we get on to Engine. This actually celebrates our 200th episode. I can't believe we've been prattling on for that long. When Mean and I started this podcast a few years ago, we never thought we'd be it at 200 episodes. Anyway, here we are. So we've over the last few weeks with value, we've covered, you know, the offer, the pricing, building trust, retention, and now customer advocacy. But next week we want to get into the engine. And I think this is where a lot of business owners can get a lot of value. So, how do we build a business that doesn't rely solely on the owner to deliver a consistent product, consistent value at a consistent margin? So we look forward to doing that. Until then, bye for now.