Customer Engagement

Customer Engagement Definition

Engagement is a state of being involved, occupied, fully absorbed, or engrossed in something – sustained attention³. Many scholars have defined customer engagement in different ways. Researchers have collected and analysed definitions of customer engagement¹. They have concluded that each description focuses on psychological, behavioural, or both aspects. A few definitions to mention are outlined below.

Customer engagement is not limited to the transaction of purchasing a good or service. Customer engagement means the customer pursues regular discussions with the brand.

Researchers explain that customer engagement describes up to what level customers relate themselves to the brand⁵. In other words, customer engagement is the quality of the relationship between customers and the brand. The relationship may be negative or positive, rare or frequent.

Customer Engagement Marketing

There was once a time when companies used to put advertisements in newspapers, posters around the city, or run vehicles with brand colours. There were few marketing tools, and market segmentation was broad and limited as few businesses had international reach. As a result, companies used to implement mass marketing.

Even though marketing tools such as newspaper advertisements and billboards still exist, companies combine these efforts with digital tools to create impactful marketing campaigns. Digital tools may include websites, social media, or video ads. As a result, companies use digital and social channels to engage customers.

Facebook, Instagram, Snapchat, and YouTube provide businesses with a platform to reach many new customers and engage current customers.

Social media has empowered customers. Customers can access information about a product, compare similar products from different companies, get involved in discussions about a brand or product, and ultimately make an informed decision. Thanks to social media, companies benefit from marketing their products and increase sales due to social media word-of-mouth termed electronic word-of-mouth (eWOM). It is defined as:

eWOM is a type of user-generated content (UGC). UGC can be pictures, reviews, or fanart of the product. Google asks users to review places they have visited recently. Users enjoy participating in the process and feel good about the association. Some customers connect better with UGC rather than with advertisements. Hence, word-of-mouth, electronic or not, holds power. Whose advice will you take about buying a car? A car salesman advertising a car or your friend who is passionate about cars?

Importance of Customer engagement

Customer engagement marketing has enormous benefits. An engaged customer can provide better feedback about products, they may advocate for the brand on social media, and may influence others to become customers of the company. Hence, many marketers, along with promoting the product, try to enhance customer engagement on social media. Thus, customer engagement is essential for enhancing loyalty, improving brand image, spreading word of mouth, gaining valuable feedback, and understanding customer behaviour.

Customer Engagement Strategy

A customer engagement strategy is a plan to motivate current and potential customers to interact with the brand. These interactions can be online or offline. The strategy aims to provide positive experiences, improve quality, and increase the frequency of interactions. Let's take a closer look.

1. Improving customer experience: Customers may interact with the brand online or offline. Providing a better user experience increases the chances of positive user engagement. A business must understand the customer journey and identify points of contact with customers. Once contact points have been identified, the business can integrate elements that customers can interact with. One example is asking customers if they want to receive future offers on items in their cart. Customer engagement solutions can be chatbots, automated surveys, or complete software that track customer activities to provide the best experience.

2. Starting a customer loyalty programme: A loyalty programme provides incentives to loyal customers that occasionally engage with the brand. The loyalty program may include gifts, special discounts, cashback, etc. Loyalty programmes also help businesses study customer purchase behaviour. Members of loyalty programmes may also provide active feedback on different products. The data collected and analysed from such customers can help businesses understand purchasing patterns, customer needs, and other vital parameters.

3. Personalisation: Data collected from different sources can be used to send personalised offers to customers. Personalised offers increase the chances of purchase by giving customers what they are looking for. Many brands use chatbots to help customers navigate the website or as a first level of customer support. It is particularly beneficial as marketers can use chatbot interaction data for analysing customer needs.

4. Efficient customer communication: Customers who receive adequate pre-and post-sales support are more likely to interact positively and frequently. Efficient customer support conveys that the brand cares about its customers. Customer support should not be limited to customers using the company's helpline. Brands should reach out to their customers via social media platforms, actively listen to discussions about the company, and guide customers accordingly. Companies can also organise interactive events like product launches or Q&A sessions with customers.

One of the advantages of information and communication technology (ICT) is better communication. Companies use ICTs not only for internal communication efficiency but also to engage customers. The customer engagement strategy is generally designed in such a way that businesses communicate with customers through social media, emails, service agents, etc.

5. Strong branding: Eye-catching marketing campaigns motivate customers to engage more with the brand. A unique logo is essential for a brand as it lets customers quickly identify the brand. Additionally, many successful brands, like Ben & Jerry's, have been outspoken about social issues. A company that presents its views and comments about social problems may see better customer engagement. Another way brands can increase customer engagement is by sharing helpful content with customers. The content can be user manuals, preventive measures, customer success stories, and new developments in the relevant field.

6. Communicating with customers through a wide variety of channels: One of the advantages of information and communication technology (ICT) is better communication. Companies use ICTs not only for internal communication efficiency but also to engage customers. The customer engagement strategy is generally designed so that businesses communicate with customers through various channels, including social media, emails, service agents, etc.

Customer Engagement Metrics

Customer engagement is essential for determining whether a customer will stay with or refer the business to others. Once a business has implemented a customer engagement strategy, it is crucial to measure its success. Customer engagement metrics are tools used to quantify the results. We will discuss the five most important ones to look out for out of the many customer engagement metrics and key performance indicators (KPIs).

1. Customer satisfaction score (CSAT)

CSAT is a crucial matrix for any business. It quantifies satisfied customers. It is calculated according to the feedback given by the customer after interacting with any service. You may have seen a question like, "Are you happy with our service today?" or a chatbot asking you to give a rating between 1 and 5 about how satisfied you are. Calculating CSAT is relatively simple. Generally, a rating above 3 (on a scale of 1 to 5) is considered satisfactory. CSAT is calculated as follows:

2. Net promoter score (NPS)

NPS predicts how likely a customer is to recommend the product to others. You may have filled out a product survey before. It is usually small and does not take more than 2 to 3 minutes to finish. The main question is, "How likely will you recommend our products to your friends and family?". The responder may have to choose a number between 1 and 10 (ranging from 'would not recommend at all' to 'would highly recommend'). Depending on the score, customers are grouped into three categories: promoters, passives, and detractors.

The net promoter score is the difference between the percentage of promoters and detractors.

$\mathrm{NPS}=\%\mathrm{Promoters}-\%\mathrm{Detractors}$

Example survey questions for CSAT and NPS, StudySmarter Originals

3. Stickiness

Stickiness measures regular customers. If customers are happy with the product or service, they will keep engaging with the business. Repeat customers 'stick' to the brand. Stickiness is the ratio of daily active users (DAU) and monthly active users (MAU).

$\mathrm{Stickiness}=\frac{\mathrm{DAU}}{\mathrm{MAU}}$

An increase in stickiness means a website is growing. It is an essential parameter for businesses in the growth phase.

4. Churn rate

The churn rate is an essential parameter for services based on subscription models. A subscription model is when customers pay monthly charges to use the service. Gym memberships, newspapers, on-demand video streaming companies like Netflix, and many software as a service (SaaS) companies implement this model.

The churn rate is the number of customers who stopped the subscription during a given period. It is calculated using the following formula:

$\mathrm{Churn}\mathrm{rate}=\frac{\mathrm{Total}\mathrm{number}\mathrm{of}\mathrm{customers}\mathrm{lost}\mathrm{during}\mathrm{the}\mathrm{period}}{\mathrm{Total}\mathrm{number}\mathrm{of}\mathrm{customers}\mathrm{at}\mathrm{the}\mathrm{beginning}\mathrm{of}\mathrm{the}\mathrm{period}}\times 100$

The lower the churn rate, the more successful the company is at maintaining customers.

5. First-week engagement

New customers are super active in the first week. Analysing their behaviour in the first week tells the company whether they will engage with it for a long time. Companies can improve customer experience in the first week by extending support during onboarding. Customers with a better customer experience will likely stay longer with the business. Customer experience can be elevated by using chatbots and other service tools. Many companies allot experienced service agents for this initial week of onboarding so that new customers are not demotivated during the initial phase of the contract.

Customer Engagement Examples

Engagement can be of different types depending on the objective of the business. Here are some examples of companies using various customer engagement practices.

1. Vodafone customer care - You have moved to a new flat and ordered a Vodafone broadband connection. Vodafone has sent you a broadband device, but it has not been installed yet. In this situation, you, as a customer, reaching out to Vodafone about a complaint is customer engagement. After resolving the issue, you will be asked several questions about the service to determine whether you are satisfied and whether Vodafone handled your complaint effectively.

2. Amazon product rating and review: You have ordered a T-shirt from Amazon. Amazon has sent you a survey after the successful delivery of the product. The survey asked you to rate the product. You are engaging with Amazon if you choose to leave a review.

3. Fossil advertisement on Instagram: Many companies advertise their product on Instagram. Around Father's Day, you saw an ad for a well-designed Fossil watch. You clicked the advertisement and visited Fossil's website. You engaged with Fossil.

4. Tesco Clubcard loyalty programme: Tesco grocery stores have a loyalty program called Clubcard. Clubcard holders get certain items for a reduced price and collect points in their accounts. On the other hand, Tesco uses this data to identify the purchase patterns of cardholders.

5. Lego: Lego Idea is a platform where Lego enthusiasts present their unique ideas and gather support from others in the community. If the idea reaches a certain level of engagement and is compliant with Lego policy, Lego launches the product in the market, and the original creator gets credit for it.

Customer engagement is valuable for any business. Wise use of customer engagement metrics can give businesses a glimpse into the current state of their product/brand and suggestions on where it's headed.