How Valuable is Word of Mouth - Grooming Affluents, Advocates and Misers into Champions

Thanks to Chris on the most recent article from Harvard Business Review on "How Valuable is Word of Mouth?" (you're right, how did I miss this one?). 

Consistent with our not universally-accepted preachings, the HBR article has some very well-reasoned conclusions based on research of 15,000 customers at a telco and financial services' firm:

- Optimal word of mouth referral and the best overall value to a company doesn't come from your most  profitable customers but from the rung below them that drives significantly more value by championing quality word of mouth referral
- Referrals are extraordinarily valuable - the annual profit gained from a customer's referral far exceeds that customer's entire lifetime value
- Word of mouth programs designed to build advocacy are extremely profitable with 13x to 15x return on investment

The authors created an interesting 2x2 matrix of users broken down by customer lifetime value and customer referral value (over a course of one year). As shown above, Champions and Advocates were responsible for a much larger portion of customer referral value than their biggest customers (the affluents). The prescription for a heathy company is to reach out to these people.

They also offered up a prescription for how to deal with each segment:

 



Missed here is also an inherent opportunity among "champions" to turn them into formalized brand ambassadors/community members and enhance and improve their purchase experience and referral influence through innovation, value added services and formalized community building.