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December 27, 2006
Customer evangelism is profitable
Amy Barrett of Businessweek took a deep look at customer loyalty from the vantage point of customer evangelism and ended up with a great piece: "True Believers: Passionate customers can transform your company."
She kicks off her story by examining Karmaloop, a clothing maker with a business model not unlike that of Threadless, and unearthed some tantalizing data:
Karmaloop has an 8,000-strong army of customers who proselytize the brand and get discounts or cash when they, or someone they've referred, make a purchase. Members of this "street team," called reps, also upload images, photos, or artwork to Karmaloop's site to make company stickers or banners other reps can download. "The reps are evangelists for our site," says [founder Greg] Selkoe. And they're doing their job: Fewer than 1% of Karmaloop's customers are reps, but their purchases and those they inspire account for 15% of sales.
Karmaloop has its own One Percenters, and they account for 15% of sales. For a $4 million company, that's an astounding $600,000 in contributed revenue. I would love to know the company's estimate of the cost of sales for that $600k. (If anyone from Karmaloop cares to jump in, we'd love to hear from you.)
For all of you customer-community evangelists, those are great numbers to show your boss(es).
Bonus: As a sidebar to Amy's story, Businessweek reporter Jeffrey Gangemi compiled a list of customer loyalty do's and don'ts from a list of experts (although I'm not sure how one guy got in there).
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It's great to see customers be able to contribute ideas about products and services. One advantage a smaller firm like Karmaloop has is their ability to respond quickly to changes in fashion and customer demand. Larger retailers don't have that flexability and are not nimble enough.
I would be curious to hear some thoughts on how these concepts could be implemented in a service industry like payment processing. My company offers companies services such as credit card processing, electronic check conversion, and ecommerce abilities, but it's not a service that typicaly get's people overly excited. We do get a lot of referrals from customers because of our differented products and customer service but I wouldn't label our customers 'passionate'.
Any thoughts on how these concepts could be applied to a business like mine?
Bryan Johnson
www.braintreefinancial.com
