Customer online engagement level
Strategic perspective
Marketing and sales perspective
Key performance question this indicator helps to answer
How well are we engaging our customers online?
Why is this indicator important?
Customer engagement (CE) refers to the engagement of customers with each other, a company or a specific brand, measured primarily by online interaction. The concept and practice of CE enables organisations to respond to the fundamental changes in customer behaviour that the internet has brought about.
CE considers several interrelated dimensions.
- CE is a social phenomenon enabled by the wide adoption of online mechanisms.
- The behaviour of customers that engage in online communities revolving, directly or indirectly, around product categories and other consumption topics. It details the process that leads to a customer’s positive engagement with the company or offering, as well as the behaviours associated with different degrees of customer engagement.
- Marketing practices that aim to create, stimulate or influence CE behaviour. Although CE marketing efforts must be consistent both online and offline, the internet is the basis of CE marketing.
- Metrics that measure the effectiveness of the marketing practices which seek to create, stimulate or influence CE behaviour.
A customer’s degree of engagement with a company lies on a continuum that represents the strength of his or her investment in that company. Positive experiences with the company strengthen that investment and move the customer down the line of engagement. CE expert Richard Sedley has defined CE as: ‘Repeated interactions that strengthen the emotional, psychological or physical investment a customer has in a brand.’
CE is an important measure for organisational leaders (and marketers) to track because in today’s fast-moving and highly competitive markets, the level of customer engagement is perhaps the most reliable leading indicator of customer loyalty and therefore financial success. Gallup has found that organisations that have optimised engagement have outperformed their competitors by 26% in gross margin and by 85% in sales growth. Their customers buy more, spend more, return more often, and stay longer. Recognising this fact, the online retailer Amazon recently re-branded into ‘serving the world’s largest engaged online community’.
Highly engaged customers:
- Are more loyal. Increasing the engagement of target customers increases the rate of customer retention.
- Are more likely to engage in free (for the company), credible (for their audience) word-of-mouth advertising. This can drive new customer acquisition and can have viral effects.
- Are less likely to complain to other current or potential customers, but will address the company directly instead.
- Regularly provide valuable recommendations for improving quality of offering.
How do I measure it?
Data collection method
Collecting data online revolves around quantitative analyses of customer ‘engagement’ with company websites (so will consider metrics such as page views and bounce rates as well as search engine rankings and click-through rates (see KPI on page 151) and a qualitative assessment of the content of the views of, and conversations between, current and potential customers on blogs, discussion forums, etc.
Formula
Being a new metric that aims to capture data from fast-evolving online sources (websites, communities, blogs, etc.), there is no single or generally accepted measure of customer engagement. As a work in progress, the World Federation of Advertisers has created a ‘Blueprint for Consumer-centric Holistic Measurement’, and the Association of National Advertisers, American Association of Advertising Agencies and the Advertising Research Foundation have put together the ‘Engagement Steering Committee’, to work on the customer engagement metric. Research firms such as Nielsen Media Research and Simmons Research are also all in the process of developing a CE definition and metric.
The following items have all been proposed as components of a CE metric:
Root metrics
- Duration of visit
- Frequency of visit (returning to the site directly – through a URL or bookmark – or indirectly)
- % repeat visits
- Recency of visit
- Depth of visit (% of site visited or number of pages viewed)
- Click-through rate
- Sales
- Lifetime value
Action metrics
- RSS feed subscriptions
- Bookmarks, tags, ratings
- Viewing of high-value or medium-value content (as valued from the organisation’s point of view). ‘Depth’ of visit can be combined with this variable
- Enquiries
- Providing personal information
- Downloads
- Content re-syndication
- Customer reviews
- Comments: their quality is another indicator of the degree of engagement
- Ratio between posts and comments plus trackbacks
Frequency
CE can be measured on an ongoing basis but will probably be reported to the senior team on a quarterly basis.
Source of the data
Data relating to an organisation’s websites as well as online communities.
Cost/effort in collecting the data
Collecting data on customers’ relationship with an organisation’s website and other online channels is relatively inexpensive as the medium is geared for such interaction. A qualitative analysis of how customers (current or potential) relate to the organisation (i.e. what they say about the company and/or its brand/s) is more expensive as it will require qualitative interpretation and may require specialist external consulting support.
Target setting/benchmarks
Being a new metric, CE benchmarks are still very much a work in progress. However, specialist consultants are creating their own benchmarks, as are relevant bodies.
Example
Shevlin (2007) states that measuring engagement needs to be done in the context of a firm’s strategy and its own theory of the customer – that is, the behaviours that the firm believes constitute an engaged customer. In one exercise Shevlin measured customer engagement of banks. He started with the following dimensions:
- Product involvement. A customer who doesn’t care about the product is likely to be less committed or emotionally attached to the firm providing the product.
- Frequency of purchase. A customer who purchases more frequently may be more engaged than other customers.
- Frequency of service interactions. Branding experts like to say that repeated, positive interactions lead to brand affinity. Shevlin states that this is correct to a certain extent, but . . .
- Types of interaction. . . not all types of interactions are created equal. Checking account balances is a very different type of interaction from a request to help choose between product or service options.
- Online behaviour. Time spent on a site might be very important. But, like types of interaction, not all web pages are created equal.
- Referral behaviour/intention. Customers that are likely to refer a firm to friends/family might be more engaged – a customer who actually does refer the firm, even more engaged.
- Velocity. The rate of change in the indicators listed above may be a signal of engagement.
Shevlin segmented the respondents into four categories, based on their level of engagement and the breadth of their relationship with their banks (based on the number of products owned). The result: a metric that helped marketers address some strategic questions about their marketing and customer strategy (Figure 34.1).
Tips/warnings
Customer engagement is more than just a metric to be collected; it is a core element of a broader relationship. As well as collecting data on how a customer relates to the organisation’s online vehicles (websites, etc.) and what they say in discussion forums, it is important to begin a full, honest dialogue with customers. Suppliers no longer own the communication channels with their customers, so communication must be two-way.
References
www.gallup.com/consulting/49/customer-engagement.aspx
World Federation of Advertisers: www.wfanet.org
Nielsen Media Research: www.nielsen-online.com
R. Shevlin, Customer Engagement Is Measurable, Ron Shevlin’s Marketing Whims, 2 October 2007, http://marketingroi.wordpress.com/2007/10/02/customer-engagement-is-measurable/