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March 18, 2011

Invest 10% of your advertising money in serving and cultivating customers

Next month, my column in Marketing News will recommend that you cut your ad budget by 10% and spend the money on customer service. Why? Because getting your customers to be happy will pay off far more than the advertising investment. You could also put that money into finding and cultivating fans. Both will spread word of mouth, which is more valuable than advertising.

Here are three pieces of research – one from Forrester, and two from other companies – that back this up.

First, as Kerry Bodine points out, satisfaction scores for call center interactions have fallen – in some industries, to below 60%. Customers are getting annoyed, and annoyed customers don’t say nice things about you. Invest more of your money in customers, less in advertising.

Cust sat falling

Second, you can’t buy positive word of mouth – you need to earn it. According to Search Engine Marketing/Optimization firm Covario, “Money Can’t Buy You Love.” Covario studied Twitter volume (number of tweets) and Twitter sentiment (positive/negative content) for 81 of the marketers that advertise the most, according to Advertising Age’s listing. According to this study, advertising spending doesn’t even correlate to volume. Digital spending can boost volume, though. But neither can get people to tweet things that are positive. Invest more of your money in customers, less in advertising.

Covario study

What’s the value of those tweets? For that, I turn to a third piece of research, by Syncapse, a social media management company. They just published a paper called “Increasing campaign effectiveness with social media,” which analyzes a survey of 4,300 people in North America (free download with registration).

Syncapse segments consumers into groups called “Producers,” “Engagers,” “Abstainers,” and so on – these segments are similar to our Social Technographics categories. The Producers – similar to Forrester’s Creators – are those who create and distribute new content through social networks, blogs, and discussion forums.

Syncapse figures that a recommendation from a Producer is worth $22.93. They calculate this based on the reach people have (similar to our Peer Influence Analysis) and the media value of impressions within the social networks people are using. Frankly, I think this number underestimates the value of a recommendation, since those recommendations are more persuasive than ads. Bottom line once again: Invest more of your money in customers, less in advertising.

Syncapse value
Let’s sum up. Your call center staff may be annoying customers. Advertising won’t help.  And if you could only get your customers to start sharing positives about you, the value of that sharing could be enormous.

Now can you see why I want you to put your advertising money into your customers instead?

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Comments

Email Marketing Services

This is a smart business move. It may seem like a waste but spending money on making sure your customers are treated well ensures repeat business and referrals.

Fletcher T.

Proposal Software

I think the percentage should be increased to 25% of the advertising revenue. I would convince that we stand out because of the referrals we get from our satisfied customers. So spending some money to satisfy them does not impose any big problem in our marketing activities. M I personally like to make a family relation with my customers. I talk to them almost daily i mean chat with them. It makes me and them very close to each other and i get alot of business from this move.

Brian O'Connell

Nice post, I like your idea. Retaining current customers is much less costly then advertising for new customers, so keeping them happy and talking positively about your company should be a high priority.

ecommerce website developers

I totally agree with your conclusions made on these topic. Customers are getting annoyed, and annoyed customers don’t say nice things about you. Invest more of money in customers, less in advertising.

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