We discuss the benefits of increasing customer engagement and look at the impact it has on customer retention and expansion.
It’s no great revelation that a company’s success is driven by increasing the number of sales. But increasing, and retaining, those customers is a far more complex equation. How do you convince your audience that they’re best off staying in business with you? You’re an expert in your respective field and have spent years designing the perfect product or service. But sometimes, that isn’t enough.
Herein lies the greatest pitfall: Thinking of your relationship with your customer as purely transactional.
A customer is, after all, a person. The experience a person has when they buy something from your company comprises various factors: Ease of store/website access, friendliness of customer service representatives, the speed in which they receive their item, the outcome of a marketing initiative, etc. Your customer will remember and consider these experiences when it’s time to make another purchase.
This is customer engagement: The interactions that your customers actively have with your company during the purchasing process.
Of course, this process can either strengthen or weaken your relationship, which leads to increasing or decreasing customer engagement.
The process, in a nutshell, works like this: You acquire new customers, retain them, and grow your overall audience of advocates. The bottom line is that this is hard. But the rewards are there.
A Harvard Business School study showed that increasing customer retention rates by 5% increases profits by anywhere from 25% to 95%. Positive customer engagement leads to positive reviews, which are vital when 81% of consumers trust advice from friends and family over businesses. In this post, we explore the benefits of increasing customer engagement and look at the impact it has on customer retention and expansion.
How do you measure customer engagement?
Before you improve your customer engagement, you have to understand how to measure it.
In terms of raw, quantitative data, consider some of these:
- Customer lifetime value (CLV) - How much income an average customer generates for your company during the lifetime of your relationship. Is this value too low or too high? Are you happy with your CLV but you need more customers? Do you have enough customers but need to generate more value on average per customer?
- Customer conversion rate - The number of new customers generated by marketing campaigns, newsletters, and other outreach initiatives. Low conversion rates mean you need to reassess your marketing campaigns to ensure they’re tuned for the right audiences.
- Social media sharing rates - Tweets, likes, shares, views, comments, etc. This will depend on the social media channel you’re advertising or creating content in. Remember that not all of the users interacting with your socials are necessarily customers. If improperly interpreted and utilized, social media will be little more than a vanity metric. The quality of posts matters just as much as quantity.
- Customer referral rate - How often are customers referring you to friends and relatives? What incentives are there for your audience to tell others about your business?
- Customer attrition/churn - This is the number of customers that have stopped doing business with you over a period of time you’ve defined. Churn is inevitable, but it should be understood so it’s not damaging. Feedback forms/surveys on why a customer left as well as understanding their satisfaction with your product may help you minimize churn.
- Loyalty program engagement rate - We’ve discussed loyalty schemes in detail before. They’re generally designed to encourage repeat business. A customer loyalty program can be a strategy for increasing customer engagement, but remember that engagement doesn’t always mean loyalty. The percentage of your audience that engages with your loyalty schemes will inform its success.
Beyond raw metrics, analyzing what people say about your company can help understand why customers do or don’t engage with you. Non-numerical data to look out for include:
- Survey responses - Surveys are a great way to get focused feedback from your customers about certain areas of your operation. You can also understand more about the demographics of your audience from a survey. That said, response rates to your surveys matter to collect accurate data. Small incentives can be used to increase response rates.
- Customer reviews - A good or bad review can make a big difference in whether or not someone shops at your company. Research the chatter on popular review sites about your company to see what customers are saying about you. Remember that the average dissatisfied customer will tell 11 others about their experience.
- Focused feedback - Taking time to understand an individual, or several individuals, customers can inform their journey through engaging with your company. Why not interview a customer or a focus group about your brand to better understand how it’s perceived?
The role of engagement in customer loyalty
Customer engagement helps build loyalty. And a loyal customer is extremely valuable: Repeat customers spend 33% more than new customers. But a loyal customer can’t be made overnight. The customer loyalty flywheel helps illustrate the journey an individual goes through to become a loyal customer.
In this model, improving customer engagement helps convert first-time customers to repeat customers. Repeat customers often turn into brand advocates. An advocate is someone who trusts your brand enough to refer other people to you. With many consumers distrusting advertising, brand advocates are absolutely essential for acquiring new customers. Brand advocates also create user-generated content (UGC) that refers potential customers to your brand and increases web traffic. UGC can be reviews, videos, discussions, and any other web content that drives traffic about your brand upward.
More customer engagement can lead to creating loyal customers that advocate for your brand. So what are some of the best ways to engage with your customers?
Amplifying customer engagement
How do your customers engage with the content they enjoy? Preferences for how customers interact with brands has changed over time as new communication channels emerge and develop. For example, today’s younger audiences are digital natives and experience oversaturation across all digital channels.
Many social media sites have trained their audiences to expect instant gratification/rewards for engagement. Our previous post highlighted some of the trends that have emerged in loyalty programs that address these changing preferences.
Here are a few key ways your brand can engage with your audience:
- Active listening - Collecting data on customer needs, preferences, and issues is only half of the equation. Ensure that your audience knows their feedback and grievances are heard and being addressed.
- Personalization - Customers like to be thought of as real people. They enjoy rewards and benefits that are personalized to their needs and interests. In fact, 87% of loyalty program members are interested in having details about their activity and behavior monitored in order to receive more personalized rewards and engagement.
- Customer service - Customer service is one of the primary ways that your customers will engage with your brand. It should be no surprise, then, that it is absolutely vital to have an excellent customer service experience. 58% of American consumers will switch companies because of poor customer service but also, 89% of consumers are likely to make another purchase after a positive customer service experience.
- Community building - Brand communities allow customers to have deeper engagement with the companies they regularly make purchases with. Many companies seek to build and reward communities with Web3 technology. The adoption of Web3 allows companies to tokenize rewards and interactions, revolutionizing engagement by providing incentives more tailored to an individual customer’s interests and preferences. Building and rewarding communities for engaging with brands is one of the pillars of Web3 marketing.
It is becoming more difficult to acquire new customers. In the last five years, customer acquisition costs have increased by 50%. This is due to a wide range of factors, including some of the changing customer preferences, oversaturated channels, and rising advertising costs that you may have already noticed. Now, more than ever, it’s important to keep those precious customers that are interested in your brand.