Businesses, especially of the B2B kind, are always looking for new and genuine ways to connect with their customers. The measure of customer engagement gauges the financial repercussions of customers’ relationship with the businesses they patron.
This article will define the concept of customer engagement, and explore its implications for your business’ profitability and bottom line. Its companion article is more practical, and explains how to develop an effective customer engagement strategy.
What is customer engagement?
Depending on who you talk to, CTO , CMO, or CIO, the definition of customer engagement may vary. For the purpose of clarity, we define customer engagement in relation to customer loyalty and customer experience.
Customer engagement, CX, and customer loyalty: oh, my!
Like many industry terms, “customer engagement” can seem difficult to precisely define. To do so, it’s helpful to contrast the term with “customer experience” and “customer loyalty”.
Some consider customer engagement to be the collection of ways in which customers interact with an organization (purchases, support, social media, referrals, reviews , etc.). That definition, while not incorrect, fails to account for the systemic nature of customer engagement.
“Customer engagement [is] the representation of the relationship between your brand and your customer.”
–Ian Golding, CCXP at CustomerThink
“Customer experience” refers to a customer’s perception of all the interactions they have with your organization. “Customer loyalty” is the behavior of repeatedly favoring a brand, due to consistently positive interactions with that brand. And somewhere in the middle of the causal link between the previous two concepts, is customer engagement.
Engagement is the end result
Customer engagement isn’t synonymous with customer experience, rather it is a consequence of a spectacular CX.
Customer engagement is something different, it’s a behavior and attitude, an outcome of customer experience.
–Bruce Temkin, CCXP at Temkin Group
Overall, it’s sensible to consider customer engagement as a metric to be the sum of a customer’s usage of your product, involvement with your services, feelings towards your brand, and likelihood to give you repeated business. The quality of the customer experience influence these factors, but they are separate from CX as a concept.
The difference between customer engagement and loyalty is subtle, but makes for a better sound bite: loyalty is an emotional state for a customer, and engagement encompasses the actions and behaviors which result from that emotion. Customer engagement depends in part on a great experience, and is the expression of the resulting loyalty.
The real value of customer engagement
The notion of customer engagement is a necessary concern for B2B businesses precisely because it is related to but separate from CX and customer loyalty. The latter especially, is an overwhelmingly important metric for many businesses. Nevertheless, it’s often a headache to track and draw actionable insight from its data.
The limitations of interpreting customer loyalty
Customer loyalty is difficult to measure, and it’s even trickier to draw predictive conclusions from its analysis. The reason for this is that there is quite a gap between customers’ intent and their actual behavior, to the point where the two can sometimes express themselves in contradictory ways.
For instance, people who respond to surveys are usually outliers with strong, polarized opinions. A customer’s willingness to give you an NPS score of 10 doesn’t increase their likelihood to actually recommend your services.
That’s where customer engagement comes in: to more adequately and concretely gauge a customer’s willingness to interact with a business in way that will enable both their success and the business’.
Striving for advocacy and involvement
The measure of customer engagement lies at the intersection of involvement and advocacy.
Involvement pertains to customers’ active interaction with your brand, product, events, website, and content. From reading your newsletter to responding to surveys to participating in events and giveaways, engaged customers will keep their finger on your pulse; they know that remaining involved in your business’ evolution is very much in their interest.
Advocacy refers to a customer whose loyal, emotional attachment to your brand compels them to actively endorse it. Word of mouth recommendations, referrals, serving as references, and speaking at conferences on your behalf are all possible for an engaged advocate. Customer advocacy is the holy grail of advertising, since a heartfelt customer recommendation carries great weight in the eyes of prospective clients.
Examples of advocacy and involvement are tangible shows of both loyalty and of an incredible customer experience. The manifestations of customer engagement are varied, but very concrete. So are the consequences of customer engagement for your business:
Moreover, companies that successfully engage their B2B customers realize 63% lower customer attrition, 55% higher share of wallet, and 50% higher productivity. Conversely, a waning interest in advocacy and involvement on the part of your customers signals problems ahead.
Committing to customer engagement is less of a choice than you think
Given its actionability and very real repercussions on your company’s potential, investing in the engagement of your customer base is a huge opportunity to gild your image, differentiate your brand from competitors, and benefit your bottom line.
Your brand = its reputation
Consumers are wont to talk about their experience with a business. However, the echoes of negative opinions are louder and longer lasting than those of positive ones. When browsing for reviews of a prospective purchase, we all tend to give more credence to the harsh ones; even discredit fawning reviews as disingenuous or biased.
A typical business only hears from around 4% of its dissatisfied customers; 96% of them remain silent and 91% churn without looking back. Most unhappy customers won’t even complain, but the ones who do are sure to be vitriolic. What’s more, peer reviews are taken extremely seriously by prospective clients, so acrimonious critiques can be a strong deterrent.
Your product and your brand’s reputation irrevocably determine one another. Disengaged customers’ disappointment and frustration can reach far enough to cause real damage to your reputation. However, working on engaging your customers can bring them to become evangelists whose word is more perceived as more trustworthy than any manner of traditional advertising.
Being dedicated to customer engagement doesn’t just matter in the race to acquire new business. Indeed, engaged customers are the gift that keep on giving. They are less sensitive to price, more likely to make repeated and more onerous purchases, more prompt to give you valuable feedback, and susceptible to recruit more advocates to your cause.
For B2B businesses especially, customer churn is always a looming threat. Finding ways to curtail churn is of paramount importance to not only staying afloat but also turning a profit.
Improved customer retention by as little as 5% is shown to increase profits by anywhere from 25% to 95%. Truly engaged customers are the least likely to churn, because they feel valued and rewarded by continuing their patronage of your business. Keeping your customers engaged will make it easier to retain them and let you reap the benefits of a mutually gratifying relationship over time.
Millennials crave engagement, but are demanding
Gen Y is in the process of overtaking Baby Boomers and Gen X both in sheer numbers and in purchasing power. This emerging generation threatens the status quo in terms of consumer expectations. Millennials have different values and priorities than their predecessors. Rather than alienating this demographic, it would behoove businesses to accommodate Millennials, and fast.
When it comes to customer engagement, Millennials are a complex breed. Generalizations of any kind are meaningless, since as a group, Gen Y resents such sweeping statements. However, one can consider Millennials in terms of observable phenomenons and overarching trends.
Members of Gen Y are more likely to be actively disengaged after a disappointing experience with a brand, thus becoming vocal detractors. They have high expectations for the brands they consume, and yet are refractory to being the target of traditional marketing techniques. A tall order, then.
Millennials expect specific qualities from their consumer brands, such as speed, efficiency, agility, and an alignment with their own values (71% consider the latter to be the most important characteristic of the brands they select).
Yet, Millennials are no less engaged than other age groups, once their interest has been piqued and their involvement galvanized. The fact is, Millennials simply have a wider, one could say overwhelming, choice in brands than any generation before them. The very nature of loyalty precludes multiple and possibly conflicting emotional attachments.
In the end, Millennials only seem less engaged than their predecessors. Brands just have to work that much harder to earn that engagement.
How to cultivate customer engagement
Clearly, keeping customers engaged through every leg of their journey with your organization is a necessity. Without engaged customers, your professional relationship can easily deteriorate, resulting in a considerable loss of earnings.
To find out how to set up a worthwhile and effective customer engagement strategy, be sure to check out this article’s companion, which will walk you through the process.
Published on January 2, 2024.