Flip the Funnel: How to Use Existing Customers to Gain New Ones

SO WHAT’S A SATISFIED CUSTOMER WORTH?

Another consideration of customer loyalty and evangelists’ economic effects is the comparison of promoters to their evil twins—the detractors—in terms of both repeat business (or lack thereof) and positive or negative referrals.

According to Satmetrix—creators of the Net Promoter methodology—word of mouth’s incidence and impact on sales is on the rise. Promoter referral rates increased by 8 percent from 2006 to 2007, and by another 14 percent from 2007 to 2008. Based on the methodology, most self-reported referrals came in the physical world, that is, face-to-face, over the phone, or offline referrals. In other words, they did not factor in digital sites like Amazon.com and, more specifically, a social media lens, or multiple. If they had, this number would be considerably higher and not just the absolute number, but from the exponential number or networked community that it could potentially reach over time.

From a sociological perspective, there’s a profound cultural shift taking place, wherein people are more apt and open to share than ever before. It’s more than just having an expanded set of tools (megaphone); rather, it’s about a renewed sense of connectedness and a genuine desire to share knowledge with and help others.

Satmetrix attempted to calculate total worth of a customer based on two prime variables: buyer economics (past behavior as a proxy for future purchases) and referrer economics (word of mouth) as they both related ...