How to Measure the ROI of Customer Advocacy

Champion

Customer advocacy, the act of building and nurturing relationships with loyal fans, users, and customers, isn’t just a feel-good endeavor — it’s a critical growth lever for B2B SaaS companies. With benefits like increased brand loyalty, customer retention, and satisfaction along with reducing customer acquisition costs, advocates can be a real game changer.

But what’s the real return on investment (ROI) from customer advocates and advocacy programs? How can you measure everything that’s involved within the scope of customer advocacy? (Spoiler — we’re going to look at three specific examples: references, tracking champions, and referrals).

Because advocacy can manifest in so many different ways, our recommendation for tracking ROI: start with goals in mind.

First, Form a Hypothesis and Calculate Impact

Calculating ROI is a relatively straightforward formula — ROI = Net income / Cost of investment x 100.

The simple formula breaks down into finding two main pieces: impact (or net income), and cost. When it comes to the former, things can get hairy fast — which is why it can be helpful to start to break customer advocacy down into smaller pieces.

As you know, there are a wide breadth of benefits associated with customer advocacy. Benefits like:

  • Improved customer retention, brand loyalty, and customer lifetime value for advocates and champions
  • Decreased customer acquisition costs through referrals, testimonials, case studies, and more
  • Increased brand awareness through advocacy programs
  • Increased community engagement
  • And the list goes on

Realistically, you can’t begin to think about how customer advocacy — which includes everything from participation in case studies and webinars to referrals and feedback — affects all of these before you first understand how it affects each of these.

To start calculating ROI, find a focus area and 

We’ll dive into a few examples.

Example 1: Calculating ROI from References

According to our research, 85% of sales and marketing professionals said that having the right customer speak to prospects helped deals close faster, or at a higher rate. So, part of your customer advocacy strategy may include using references in your sales process.

To calculate the ROI from bringing in references, you might look at some basic inputs:

  • Estimated opportunities per year
  • Annual Contract Value (ACV)
  • Win rate

Because we know that win rates increase when references are used, you can start to calculate:

  • New win rate using references — you might assume something like a 10% increase in win rate using references
  • Additional deals won with a higher win rate
  • Additional revenue driven with more deals won

If you know your inputs, the potential impact driven can help you get to your ROI. Here’s an example:

  • Estimated opportunities per Year: 1,000 
  • Annual Contract Value (ACV): $60k
  • Win rate: 20%

If these are true, then you’re looking at something like:

  • New win rate: 22%
  • Additional deals won: 20
  • Total revenue impact: $1.2M

Once you have the output calculated, then you’ll need to review costs associated with the campaign or initiative to find the ROI. To help with impact, check out our Referral ROI Calculator.

Example 2: Finding the ROI from Tracking Champions

One part of customer advocacy is identifying your champions, and being able to track engagement or specific actions they take. 

You might notice that a portion of your champions have gotten new jobs or changed roles (data says that up to 30% of the American workforce will change jobs each year), so one way you could drive impact through advocates could be to sell to former champions and advocates at their new gigs.

To calculate the ROI from tracking job changes, you might look at some basic inputs:

  • Annual Contract Value (ACV)
  • Total users
  • Average Net Promoter Score (NPS)

With these inputs, you can start to see impact from tracking job changes in the form of:

  • Leads — if 15% of your advocates change jobs every year, you can assume these advocates could become new leads
  • SQLs
  • Additional pipeline
  • Additional revenue

As before, an example of how this might play out might look like:

  • Annual Contract Value (ACV): $50k
  • Total users: 100,000
  • Average Net Promoter Score (NPS): 60

Which leads to:

  • Leads: 15,000
  • SQLs: 1,800
  • Additional pipeline: $45M
  • Additional revenue: $9M

To calculate job tracking impact, try our calculator.

Example 3: Finding the ROI from Referrals

Let’s pretend that you’re interested in activating your champions and advocates to help increase revenue and lower customer acquisition costs through a popular lever within customer advocacy: referrals.

You might start with the hypothesis that by reaching out to your champions and advocates and asking them to make a referral, you’ll increase sales pipeline and decrease customer acquisition costs.

Starting with the inputs:

  • Annual Contract Value (ACV)
  • Total users
  • Average Net Promoter Score (NPS)

And what impact referrals might drive:

  • Estimated champions or advocates discovered — estimating that up to 15% of your users could be champions or advocates, depending on your NPS score
  • Potential referrals — estimating that 15% of your champions or advocates provide at least one referral
  • Additional pipeline
  • Additional revenue

An example of inputs:

  • Annual Contract Value (ACV): $25k
  • Total users: 75,000
  • Average Net Promoter Score (NPS): 70

And the outputs:

  • Estimated champions or advocates discovered: 9,562
  • Potential referrals: 1,434
  • Additional pipeline: ~$17.9M
  • Additional revenue: ~$2.6M

Calculate the impact from referral using our Referral ROI Calculator.

Then, Find Associated Costs

Once you’ve calculated the impact of customer advocacy goals or initiatives, you’ll need to find associated costs, which you’ll use to determine the final ROI. 

Technology

Whether you’re doing custom work to manage customer advocacy within your CRM (which might add costs if it requires more time spent managing the system) or plan on purchasing a customer advocacy platform (like Champion), this bucket takes into account budget for technology. 

Rewards or Incentives

If you’re incorporating monetary rewards and incentives in your advocacy campaign, those costs would also need to be added up to find you ROI. These are things like gift cards, merch, etc.

Finally, Punch In the Numbers

Now that you have estimated impact and estimated costs, now you can start to see what the ROI can look like for different advocacy campaigns. 

Using our earlier formula (ROI = Net income / Cost of investment x 100), an example for simply implementing a job reference program that costs $50,000 to implement, and would return $680,000, comes out to an ROI of 1360%.

To wrap things up — customer advocacy encompasses a lot, which inevitably means that showing the impact can be challenging. Focus on different focus areas within customer advocacy, and go from there.

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