Customer engagement in a box - everything a retailer needs to know to better develop customers

Customer engagement may be one of the most valuable measures of trust and loyalty towards a brand.
Customer engagement in a box - everything a retailer needs to know to better develop customers

Sure, there are many other ways to quantify success, such as financial returns and profits. However, with competition high in the retail landscape, customer engagement is important to retailers that don’t want to play in the little leagues.

2 minutes, 5 minutes, 18 minutes on hold… and I was still on the line, hearing the same annoying music, while containing my anger because I had to explain for the third time that I’d been charged more than expected that month. And I should consider myself lucky I didn’t need to drive to the store and waste half a day. Ugh!

Yes, customer service often ranges from neutral to outright appalling, and that is why good service still makes my day.

Customer service, customer experience and customer engagement are separate but interdependent concepts.

  • Customer service: Is the support you offer your customers before and after the buy your products.
  • Customer experience: It is how customers perceive their interactions with your company. For customer experience to be great, every interaction along the customer journey must be exceptional.
  • Customer engagement: At its most basic, customer engagement is the interaction a company has with its customers over multiple channels in order to strengthen the relationship.

In other words, the goal of customer engagement is to deliver value beyond the potential transaction of products or services, and it’s mostly done through excellent customer service, valuable content, top level customer experiences, etc.

If a retailer provides good customer service, this leads to positive customer experiences, and their customers will become more engaged. The opposite is also true.

Customer engagement

Most retailer CMOs are increasingly pressured to deliver incremental customer engagement results. What many of them forget is that to achieve those extraordinary results, their focus should be on providing extraordinary experiences.

In this article, you will learn:

  • Reasons to focus on customer experience and customer engagement
  • The product-centric approach to profitability
  • Understanding profitable customer engagement
  • The challenge in customer engagement metrics
  • How to ensure your customer engagement plan works
  • Conclusion

There are good reasons to focus on customer experience and customer engagement.

You can use customer engagement to achieve many of your retail business goals. For example, you can use customer engagement to:

  • drive sales for specific promotions
  • increase brand awareness
  • generate referrals
  • boost loyalty
  • increase lifetime value

Now, if you need some hard numbers in order to be fully persuaded, check these out:

  • A high-quality customer experience can lower the overall expense of serving customers by one-third
  • After a single positive experience with a brand, customers spend up to 140 percent more with it
  • 96% of customers report that customer service significantly influences their loyalty to a brand
  • After getting a more personalized experience, 49% of purchasers state that they have made impulse purchases (unplanned buying)
  • A study had even predicted that customer experience would get ahead of the two primary brand-differentiating factors- product and price, by the end of 2020. It drives more than two-thirds of customer loyalty
  • Three main parameters influencing customer engagement  are convenience (55%), quality (80%), and price (81%)
  • 67% of consumers prefer self-serve over conversing with a customer representative.
  • More than 75% of marketers say that maximum engagement occurs in the middle or end-stage of the marketing funnel
  • Omnichannel customer engagement is preferred by almost 78% of customers

Obviously no customer wants to do business with a company that treats him or her poorly. But doing well is not good enough. Customer experience has become a top priority for many retailers in order to differentiate themselves, tackle aggressive competitors and discounters and lower the risk of losing share of wallet.

But there’s a problem—many retailers don’t know how to do it right.

In fact, you’ve probably interacted with those retailers.

Those retailers have a product- and sales-centric philosophy. Let’s take a look at this concept.

The product-centric approach to profitability

The underlying principle of a product-centric philosophy is to sell products to whoever is willing to buy.

This graphic illustrates a product-centric approach to profitability:

Product-centric approach

While it might be useful in some situations, the pitfall of such a focus is that retailers overlook customer-specific needs that are crucial in determining their relationship with the company.

When retailers do not factor in customer relationship needs, customers are likely to defect to the competition.

That is why retailers are constantly looking to improve their customer relationship management (CRM) strategies and practices.

The goal of CRM is to optimize the current and future value of the customers for the retailer. This pursuit towards higher profits has led to thorough analysis of all avenues of customer profitability.

There are a few questions that dominate the agendas of marketing managers and C-level executives in the boardroom.

  • Who are our most profitable customers?
  • How can we manage and reward customers based on their profitability?
  • How do we identify the right products to sell to the right customers, and at what time?
  • How do we hold on to our profitable customers?
  • How do we allocate marketing resources to maximize profitability?

Understanding profitable customer engagement

The customer engagement philosophy advocates developing a portfolio of customers (valuable customers) and nurturing relationships with them. Under such an approach, retailers typically focus on:

  • How many products can we sell to this customer?
  • How can we highlight the product benefits that align with the customer needs?
  • Which customer segments can we focus on and how should we develop relationships with them?
  • What customer metrics should we use to measure performance?

Research has shown that profitable customers show important characteristics such as:

  • buying intensively over time
  • buying multiple product categories
  • returning a moderate amount of purchases
  • responding to marketing efforts
  • membership in the company’s loyalty program

When customers do not contribute profits through their purchases, companies should revisit their product catalogue to ensure that it fits in with the needs, wants and expectations of their customers. In case of a mismatch, identifying and promoting the right products (through offer personalization) will go a long way in increasing customer profitability. Limitations to this approach can happen when customers are constrained by their personal income levels, in other words, the size of wallet.

Apart from purchases, there are 3 other ways customers can contribute indirectly

  • by referring others, which in turn reduces acquisition costs and brings in future revenue.
  • by interacting with other customers online, which will in turn affect other’s behavior through increased conversion of others to customers, increased retention or changes in their share of wallet.
  • by actively seeking their feedback on their products. Customer input can be a valuable resource in product development, quality improvement efforts and helping the company understand customer preferences.

In this graphic, you can see the Customer-Engagement approach to profitability:

Customer-engagement strategy

And here you can see the core dimensions of customer’s contribution to retail profits:

Customer’s contribution to retail profits

The challenge in customer engagement metrics

Customer engagement principles have been studied for a long time, but many retailers have yet to quantify their efforts and results.

The challenge has always lied in quantifying customer experiences and deriving value out of it through customer management strategies.

That makes objective measurement and evaluation of customer engagement metrics quite challenging.

In other words, using credible metrics in customer engagement efforts will go a long way for retailers to identify sources of profit contribution and nurture, grow and maximize customer engagement.

These are the 5 customer engagement metrics that will help you move the needle:

Customer engagement metrics

Let’s walk through tips and strategies for executing impactful customer engagement strategies.

How to ensure your customer engagement plan works

In its basic form, an effective customer engagement strategy requires three essential elements

  1. Clearly defined customer engagement goals
  2. A set of strategies that positively influence the 5 core customer engagement metrics
  3. The technology that enables the execution of customer engagement

To execute your customer engagement strategy, your strategies, technology and goals must be aligned. Then, you can get to work.

Of course, the initial step is to segment your customers based on transactional and behavioural data, because no strategy made for the whole customer base can appeal to each one of the individuals. Your customer engagement strategies shall always be targeted and personalized.

Then you can roll up your sleeves and design, plan and execute your customer engagement strategies. For example, prepare a series of communications, offers or promotions that are valuable, relevant and fun (don’t forget entertainment is a powerful driver in today’s day and age) and include a compelling call to action.

Finally, use your technology to send our your targeted and personalized communications to those customer segments.

Here are the top features your should look for as you evaluate your options

  • Make sure you prioritize customer engagement solutions built specifically for the retail industry
  • Ensure their customer data platform truly collects and unifies data from all online and offline sources, to have accurate customer profiles
  • Ask about their data activation capabilities
  • Examine what omnichannel features and capabilities it offers
  • Make sure they work with leading retailers
  • Ask how strong their development team is, and how frequently they add new features
  • Make sure they give you full control and ownership over your customer data
  • Make sure they are GDPR a CCPA compliant

Conclusion

Many companies spend millions of dollars in an effort to attract customers. But to attract customers and not keep them falls nowhere short of a crime. Profitable customer engagement, which leads to long-term retention and increased LTV, starts with carefully selecting the right customers – those that are profitable.

It is followed by an understanding of what engages the customer so they are happy with your products and are likely to become repeat customers of your retail business. But, there is a greater value of customers beyond their purchases – how they influence others to engage with your products as well.

The basic elements of profitable customer engagement is customer lifetime value, customer referral value, customer influence value and customer knowledge value.

Customer lifetime value is directly linked to the retailer’s profits, while the other 3 are linked indirectly.

These components are not merely concepts, but can be measured and tracked.

With the emergence of technology we now have the opportunity to start tracking which of our customers are offering what value. And in turn, what, how and when we communicate with them to increase profitability today.

If you’re a retailer and you’d like to talk about any of the customer engagement strategies outlined in this article in more detail, then get in touch with one of our team – we’ll be happy to show you examples or talk through your brand’s unique challenges.