Is It Time to Start Measuring Customer Engagement?

In the olden days, there was customer satisfaction. It was measured on a five-point scale, from “very satisfied” to “very dissatisfied.” And it was good. Marketers responded by identifying and addressing the variables that made more customers more satisfied.

Then researchers discovered that, while satisfaction was okay, it did not tell us anything about customer retention. As all businesses must retain customers to be successful, we switched our attention to loyalty, which was usually measured as frequency or repeat purchase. As a result, marketers turned their attention to loyalty marketing and promotions to get consumers to purchase again, more frequently, and at higher volume.

But that didn’t tell us anything about why people continued to purchase. Did they really love us? Or were they simply deal-driven? If we ended our frequent customer rewards programs, would they continue to buy from us? Or would they move to competitors?

“Aha!”, said, marketers. It’s not about volume or frequency, it’s about whether they feel strongly enough about us to recommend us to others. And Net Promoter Score (NPS) was born and became popular throughout the land.

Until researchers noticed that NPS was insufficient in predicting consumer behavior as well. It’s not about whether they will recommend us, it’s about being easy to do business with. So, we developed the Customer Effort Score (CES) to ensure that doing business with us was easier than with our competition.

Meanwhile back at the ranch, we were learning that engaged employees could deliver more profits. Further, we were able to identify and distinguish between engaged and disengaged employees. Could a similar case be made for customers? Is it possible that what we want are engaged customers?

And that is where we find ourselves today. Engaged customers are defined as those customers who are emotionally invested in your company, who are willing to engage and interact with your products and services, and who – because of this emotional connection or relationship – are less likely to leave you for your competitors. Gallup’s research has shown that engaged customers deliver to businesses a 23% premium in share of wallet, profitability, revenue and relationship growth. Conversely, disengaged customers represent a 13% discount in those same metrics. Here are some samples of how engaged customers behave in several industries:

  • Consumer electronics: Engaged customers visit their favored retailers 44% more often and spend an average of $84 more per visit than disengaged shoppers.
  • Retail banking: Customers who are engaged provide 37% more annual revenue to their primary bank. They have more banking products and a higher deposit balance.
  • Casual dining: Engaged customers visit their favorite spots 56% more often.
  • Hotels: Engaged guests spend an average of 46% more per year than disengaged customers.
  • Insurance: Engaged policyholders buy 22% more products than disengaged policyholders.

Adding the emotional element into the customer metric is key to customer engagement measurement. In general, if you are already using one of the more traditional, established metrics for tracking customer relationships, you might consider adding an emotional component to your metric. That can also deepen your understanding of satisfaction, loyalty, or recommendations, and lead to breakthrough insights to build those important customer relationships.

Unfortunately, our crystal ball is not working, so we cannot guarantee that Customer Engagement is the last stop in the evolution of overall customer metrics. However, with each iteration, we have gotten closer and closer to being able to predict how consumers will behave because we better understand their motivations. For no other reasons, you should probably give Customer Engagement Measurement a try.