The value of one advocate over a year, calculated properly

4 days ago
3 min read

Updated: 2 days ago

Introduction

Advocacy gets discussed in general terms — good for the business, builds reputation, worth encouraging — which is precisely why it loses to channels with a spreadsheet behind them. When budgets are set, the thing with a number attached wins, and word of mouth arrives without one.

The number is not difficult to produce. If you have been recording who sent each enquiry, an advocate's annual value is the revenue from the work they introduced, plus their own purchases, minus almost nothing, because the acquisition cost is a thank-you message.

Doing the arithmetic once tends to change how the relationships are treated.

1. The value of one advocate over a year starts with their own purchases

The first component.

Advocates are usually customers as well, and their direct spending is the baseline. Take it from the accounts. This part is easy. Use the last twelve months rather than a calendar year.

2. Add the revenue from work they introduced

The second and larger component.

Every job traceable to their recommendation, for the year. This is where the number becomes striking. It requires the source field to have been kept. If it was not, start now and calculate next year.

3. Include the second generation where you can trace it

The compounding part.

People they referred who then referred others. This is genuinely hard to track and worth attempting for your top two or three. It roughly doubles the figure in some businesses. Ask new referrals who sent the person who sent them.

4. Subtract almost nothing

The cost side.

There is no media spend, no commission unless you chose to offer one, and a small amount of time. The acquisition cost is close to zero. That is the entire point of the calculation. Count an hour or two of your time if you want to be strict.

5. Compare against your cost per customer

The decisive comparison.

Set the advocate's annual value against what you pay to acquire one customer through any paid channel. The ratio is normally dramatic. This is the number to put in front of whoever allocates budget. Present both figures side by side.

6. Note that referred customers behave better

The quality premium.

They convert more often, negotiate less, stay longer and refer more themselves. So the revenue is worth more per pound than the same revenue from a cold enquiry. Adjust upward if you want to be precise. Or note the difference and leave the figure conservative.

7. Look at the concentration

The risk view.

If two advocates account for a third of new work, that is both an opportunity and an exposure. Name the dependency. It changes how much attention those relationships deserve.

8. Use the figure to justify the time

The practical use.

An advocate worth several thousand a year justifies a phone call, a lunch, a genuinely fast response. Without the number, that time never gets allocated. With it, the case makes itself.

9. Recalculate annually

The maintenance.

Advocates change, and a year-old figure describes a relationship that may have cooled. Recalculate with the rest of your annual review. The trend matters as much as the level.

Be careful about turning the figure into a formal reward. Once an advocate is treated as a channel with a cost per acquisition, the relationship changes character, and the thing that made it valuable was precisely that it was not transactional.

Conclusion

Work out what your best advocate was worth last year.

Start with their own spending, add the revenue from work they introduced, attempt the second generation for your top few, subtract a cost that is close to zero, and compare the total against what a customer costs you through any paid channel. Allow for the fact that referred customers convert better and stay longer, note any concentration risk, use the figure to justify the time those relationships deserve, and recalculate each year.