Advocacy Index

The Advocacy Index is a telephone based customer survey technique[1] developed by VIRTUATel Ltd to measure the loyalty of a company's customers, using a 3-point scale and was based upon the Net Promoter Score (NPS) methodology, created by Fred Reichheld.[2]

Overview

The 3 point survey scale was developed as the traditional NPS survey scale of 0 to 10 was not always appropriate to be used during a telephone survey, as it is more difficult to understand aurally. In addition, telephones do not have a 10 on the keypad, so IVR systems would need to wait for a possible second digit, if the number 1 is pressed, causing delays in telephone based customer surveys.

As they had experience in the area of automated customer surveys, VIRTUATel incorporated the Net Promoter survey technique for driving up-sell, cross-sell and customer retention rates but simplified the 0 to 10 score to use a simple 3 option scale to determine if the survey recipient was an Advocate, Neutral or a Non-Advocate.

The Advocacy Index uses the survey question "would you recommend us..." to create a score showing Advocacy Index.

The value of the "Advocacy" question in customer a survey is confirmed in research by Dr Paul Marsden of LSE in "Advocacy Drives Growth" published in 2005.[3] This in turn, builds on extensive research in the US by Frederick F Reichheld, consultant to Bain & Co., who created the Net Promoter Score (NPS) methodology.

The research found that both word of mouth advocacy (as measured by net-promoter score) and negative word of mouth were statistically significant predictors of annual 2003-2004 sales growth:[4]

  • Companies enjoying higher levels of word of mouth advocacy (higher net-promoter scores), such as HSBC, Asda, Honda and O2, grew faster than their competitors in the period 2003-04.
  • Companies suffering from low levels of word of mouth advocacy and high levels of negative word of mouth, grew slower than their competitors.
  • A 7 per cent increase in word of mouth advocacy unlocks 1 per cent additional company growth.
  • A 2 per cent reduction in negative word of mouth boosts sales growth by 1 per cent.
  • In monetary terms, for the average company in the analysis, a 1 per cent increase in word of mouth advocacy equated to £8.82m extra sales.
  • A 1 per cent reduction in negative word of mouth for the average company in the study resulted in £124.84m in additional sales.
  • Companies with above average positive word of mouth and below average negative word of mouth grow four times as fast as those with below average positive word of mouth and above average negative word of mouth.

The report concludes by suggesting that asking a simple question; "Would you recommend this company?" the answer provides a measure of word of mouth advocacy that may be useful not only in predicting sales growth, but also in predicting share performance and employee productivity.

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References
  1. SourceWire
  2. Frederick F. Reichheld (December 2003). "The One Number You Need to Grow". Harvard Business Review.
  3. "Dr Paul Marsden and Alain Samson of LSE and Neville Upton, The Listening Company, in "Advocacy Drives Growth" published in 2005" (PDF). Archived from the original (PDF) on 2016-11-16. Retrieved 2016-11-16.
  4. Sourcewire
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