The best marketing spend is the 5% you spend foolishly

Chewy and Eleven Madison Park show how memorable customer moments can turn preference into measurable referral value.

By Reid Holmes,
Founder, CEO, speaker, author, consultant
Published on October 15, 2026

Table of Contents

In 2022, a woman named Anna Brose contacted Chewy.com to ask if she could return an unopened bag of dog food. Her dog, Gus, had died.

Not long after, a box of flowers showed up on her porch in Madison, Wisconsin. They were from a Chewy rep named Jordan.

She posted about it. The post racked up more than 681,000 likes. Impressive, but the replies were the part that really mattered. Thousands poured in, many from customers with their own Chewy stories: sympathy flowers, handwritten cards, and hand-painted portraits of pets that had died.

One commenter summed it up in three words: “Customers for life.” That kind of reply thread is one of the most underrated assets in marketing. A crowd of strangers vouching for a company, in public, for free, with their own names attached.

Most marketers would file that under word of mouth and call it luck. It isn’t luck. It’s a system. If you know what you’re doing, it compounds.

Chewy says it’s sent gestures like this since its earliest days. When a customer cancels because a pet has died, the company typically refunds the order, suggests donating the food to a local shelter, and often follows with flowers or a card. It isn’t a guaranteed policy. It’s the regular work of a dedicated “Wow team.”

Every recommendation is a reputation loan

When someone recommends you, they’re not just sharing an opinion. They’re putting their judgment on the line, and their reputation with it.

Then one of two things happens.

If the person who got the recco has a mediocre experience, the recommender gets silence. Or an awkward “Yeah, I guess it was fine.” The loan, in a sense, defaults, and they’re less likely to stake their name on you next time.

If the person who got the recco has a great experience, the recommender often gets thanked. Their value increases. They look smart. The appreciation earned flows back to them. If or when they make another recco to you, you take it with more confidence. And trust in the recommender goes up. Wash. Rinse. Repeat.

That’s a compounding mechanism. It means the most important person in your growth model isn’t your next customer. It’s the current customer who will introduce you to your next customer.

Most marketing treats that person as a channel to “activate.” It’s more accurate to treat them as a reputation you’ve borrowed, and therefore one you owe a return on.

Evidence that referred customers are worth more

In a study published in the Journal of Marketing in 2011, Philipp Schmitt, Bernd Skiera, and Christophe Van den Bulte tracked roughly 10,000 customers of a German bank for almost three years.

Referred customers had higher margins and better retention. Overall, they were at least 16% more valuable than comparable customers acquired other ways, and at any given point, about 18% less likely to leave. The margin advantage faded over time. The retention advantage didn’t.

In other words, referred customers don’t just start better. They stay better.

The recommendation came with a bit of a kickback. The bank gave customers a €25 voucher for every new customer they brought in. The question then becomes: Is this spiff just grease for the gears?

What incentives can buy, and what they can’t

Do referral incentives really work? Partly. The €25 got people to make the introduction. What it didn’t buy is the reason the new customer stayed. The researchers point to two likely causes: referrers tend to send people who are a good fit, and having a friend at the same bank strengthens the new customer’s bond with it.

An incentive starts the conversation. It’s up to the recommended company to compound that investment with a story that’s worth sharing.

“Use my code, and we both get $20” is a transaction between two people. “You won’t believe what they did for me when my dog died” is a story.

Only one of those has an emotional core and makes the storyteller look good, and only one gets retold by the person who heard it.

That’s the difference between prompted advocacy and compounding advocacy. Incentives can fill the top of the funnel. Stories keep it filling itself.

There’s a quieter risk, too. When the listener knows the recommender gets a cut, the recommendation is worth a little less.

A kickback changes what the vouching means and the impact it can have.

The 95/5 rule

Will Guidara took Eleven Madison Park from No. 50 to No. 1 on the World’s 50 Best Restaurants list. In Unreasonable Hospitality, he lays out one of the rules that funded it: “Manage 95% of your business down to the penny; spend the last 5% ‘foolishly.’”

He says he puts “foolishly” in quotes because it isn’t foolish at all. It’s spent with great intention.

That 5% paid for his most famous gesture.

When he overheard a table of tourists lamenting that they’d never had a New York street-cart hot dog, he bought one. Chef Daniel Humm cut it into four precise pieces, plated it with a swoosh of mustard, and it went out as a course.

The restaurant eventually created staff roles called dream weavers, whose job was to help the team create moments like that. A really smart approach to “foolish” spending.

Think about what that hot dog cost, and what it produced: a story those guests could tell for years, one that made them the people who know where to eat in New York.

I’ve told clients for 30 years to set aside 5% of their media budget for “win or learn” efforts. One spring, a client was approaching their 75th anniversary, and to their credit, they wanted a fresh way to celebrate that milestone.

We suggested they start by having employees write and send thank-you notes to customers. It was an expense any CFO could get behind. Better still, it launched a summer of 75 nontraditional, unexpected acts that earned appreciation and word-of-mouth rather than CPM data.

I suspect Guidara would agree: It’s better to do things worth talking about than to talk about what you do and expect people to care. Unexpected acts create stories. Stories get retold. The appreciation compounds through word of mouth. Social media just gives that word-of-mouth a bigger megaphone.

Making preference visible to a CFO

Brand budgets get cut because preference rarely shows up on a weekly dashboard. Referral is one of the few places it does. Three measures make it visible:

  • Referral share: What portion of new customers arrived because someone sent them? Ask “Who sent you?” at the moment of purchase or signup, and store the answer as a field in your CRM, not a free-text afterthought.
  • Referred-customer value: Compare referred customers’ retention and margin against your other channels, the way the German bank study did. If they don’t outperform, your customer experience isn’t giving people a story worth telling.
  • Story signal: Track unprompted public mentions that describe a specific moment, not just a star rating. Chewy’s reply thread is that signal at scale.

Trend all three quarterly. Rising referral share among customers paying full price is what preference looks like on a spreadsheet.

The return on the 5%

Most marketing budgets are built to interrupt what you hope becomes your next customer. A small, compounding budget is built to make the current customer look good.

Chewy didn’t buy those 681,000 likes. It sent flowers. Guidara didn’t advertise a hot dog. He served one. We didn’t thank customers with a typical TV spot full of employees saying “thank you.” We had employees write, sign, and mail actual handwritten cards.

Manage 95% to the penny. Spend 5% on moments worth retelling. Then let your customers do what they want to do anyway when they have an unexpected story to tell: talk about it.

The only question that remains? What can you inspire them to say on your behalf?