BCG Index Documents The Power Of Brand Advocacy
A new index developed by The Boston Consulting Group (BCG) underlines the powerful roles that word-of-mouth recommendations play in driving sales growth for brands.
The Brand Advocacy Index (BAI) research "definitively" shows that brands with high levels of advocacy significantly outperform heavily-criticized companies, according to BCG.
Specifically, among the sample of brands studied, the average difference between the top-line growth of the highest- and lowest-scoring brands was 27 percentage points.
BCG surveyed more than 32,000 consumers in the U.S., France, Germany and Spain about their actual brand advocacy behaviors, rather than their intentions, in order to eliminate cultural differences and yield more meaningful results than existing metrics, according to the research report, "Fueling Growth Through Word of Mouth."
With the same goal, the methodology factors in the influence of customers of the brand, customers of other brands in the category who also know the brand, and non-customers for the entire brand category. It also weights the influence of spontaneous versus prompted advocacy and criticism, reflecting that spontaneous advocates and critics tell more people, and are more influential, than those who respond only when prompted, the researchers report.
The index is designed to identify the factors most relevant in driving advocacy within a category (and by geographic area) and how a given brand performs on those factors, to enable brands to take concrete actions to improve their advocacy performance, according to BCG.
The report breaks out the most-recommended brands within five of the industries that BCG has studied: non-luxury automobiles, smartphones, grocery retailers, mobile telecommunications companies, and retail banking [see below].
Among the key overall findings:
*Consumers are losing trust in traditional mass media. Confronted with an important purchasing decision, they seek recommendations from friends, family, coworkers and, increasingly, other
consumers. While social media is a quickly-growing resource, an estimated 90% of consumer conversations about brands still take place in the "real world."
*66% of respondents consult friends and family before purchasing, and 50% consult consumer opinions online — two to 10 times more often than they consult the media or refer to company Web sites. Nearly half (47%) of consumers surveyed cared enough about a brand either to recommend or criticize it.
*Positive advocacy tends to be higher in industries whose products or services evoke greater emotional involvement, such as smartphones and automobiles (versus, say, toothpaste). Positive advocacy is also higher for "aspirational" categories, or categories that consumers associate with a desire to improve their social standing (like luxury automobiles), and for very visible purchases that involve significant money and research time. People are much more likely to have conversations with friends and colleagues about such purchases.
*Negative advocacy tends to be much higher in service businesses, such as retail banking and telecommunications, where companies must struggle to maintain a consistent customer experience. Whereas the experience of a product remains largely the same with each use, in service industries, every customer touchpoint has the potential to create a negative impression.
*Among the industries studied, automobiles and smartphones had much higher levels of both spontaneous and non-spontaneous (prompted) advocates, and significantly lower levels of spontaneous and non-spontaneous critics.
*In general, criticism damages a brand much more than praise helps it (criticism tends to drown
out praise). Further, spontaneous advocacy has much greater impact on positive word-of-mouth than recommendations that are prompted.
*Companies often overlook the importance of advocacy and criticism from non-customers. Non-customers can be particularly influential in industries or segments in which only a small number of consumers purchase, or in which consumers make purchases relatively infrequently. For example, relatively few people own luxury autos, but a large number of people feel entitled to share their opinions about the leading brands.
The leading brands in automobiles and smartphones have invested heavily in making their brands "aspirational," which helps drive advocacy even among non-customers.
Also, in industries with high churn, like mobile services, the non-customer population may include large numbers of former, frequently dissatisfied, customers who drag down a company's overall BAI score. (Sixteen percent of one major U.S. telecomm company's non-customers are critics, notes BCG.)
*In all five countries studied, value for money -- the right combination of price and quality -- was consistently among the three factors that most influenced recommendations. Customer service was in the top three for grocery, mobile telecommunications, and retail banking, and both performance and design were in the top three for the smartphone and automobile industries. Some factors are relevant primarily to a subset of industries (for example, product assortment in the grocery business, or network quality in mobile telecommunications).
*However, while companies can't achieve strong advocacy without outstanding performance on such top drivers, these are often "table stakes," or the price of admission, in terms of consumer perception.
In many industries, the most-recommended companies and brands are those that fulfill consumers' rational needs but then go beyond this, to establish emotional connections with consumers. These brands are much more likely to receive non-prompted, spontaneous advocacy, which is by far the most powerful type, according to BCG. For example, comparing two retailers that offer good value for money, the one that connects emotionally and treats consumers as individuals will generally realize more word-of-mouth recommendations, and more unprompted advocacy, in particular.
*Successful advocacy-driving strategies vary by Individual business market, and innovation sometimes provides a competitive edge (for instance, offering superior value for money in markets traditionally driven by customer service, such as retail banking and mobile services).
*Once brands have identified their advocacy-driving strengths and weaknesses using BAI, they can use these to prioritize changes in operational, marketing and communications strategies (with both customers and non-customers), in order to maximize the consumer advocacy that drives sales/revenue, says BCG.
Most-Recommended Brands In Five Industries
*Non-luxury automobiles: The average industry BAI found in the surveys, across countries, was 50%.
In the U.S., the highest-scoring brands -- each with 63% BAIs -- were Kia, Honda and Hyundai.
Overall, the highest-scoring brands included Volkswagen and Toyota (which each had 65% BAIs in France), and Skoda (63% in Germany).
*Smartphones: Average industry BAI across countries was 46%.
In the U.S., the highest-scoring brands were iPhone (54%), Samsung (43%) and Motorola (38%).
Overall, the highest-scoring brands included iPhone (60% and 57% in France and the U.K., respectively) and Samsung (55% in Germany).
*Grocery retailers: Average industry BAI across countries was 24%.
In the U.S., the highest-scoring brands were Trader Joe's (49%), Wegmans (48%) and Publix Super Markets (42%).
Those outscored all but one non-U.S. brand: Mercadona, with a 54% BAI in Spain.
*Mobile telecommunications: Average industry BAI across countries was 20%.
In the U.S., the highest-scoring brands were Virgin (43%), TracFone (35%) and Verizon (27%).
*Retail banking: Average industry BAI across countries was 10%.
In the U.S., the highest-scoring brands were USAA (44%), Ally (24%) and American Express (23%).
Overall, the highest-scoring brands included First Direct (52% in the U.K.) and ING Direct (43% in Spain).