Finance:Customer engagement

Short description: Type of interaction

Customer engagement is an interaction between an external consumer/customer (either B2C or B2B) and an organization (company or brand) through various online or offline channels. According to Hollebeek, Srivastava and Chen (2019, p. 166) S-D logic-Definition of customer engagement is "a customer’s motivationally driven, volitional investment of operant resources (including cognitive, emotional, behavioral, and social knowledge and skills), and operand resources (e.g., equipment) into brand interactions," which applies to online and offline engagement.

Online customer engagement is qualitatively different from offline engagement as the nature of the customer's interactions with a brand, company and other customers differ on the internet. Discussion forums or blogs, for example, are spaces where people can communicate and socialise in ways that cannot be replicated by any offline interactive medium. Online customer engagement is a social phenomenon that became mainstream with the wide adoption of the internet in the late 1990s, which has expanded the technical developments in broadband speed, connectivity and social media. These factors enable customer behaviour to regularly engage in online communities revolving, directly or indirectly, around product categories and other consumption topics. This process 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 aim to create, stimulate or influence customer behaviour, which places conversions into a more strategic context and is premised on the understanding that a focus on maximising conversions can, in some circumstances, decrease the likelihood of repeat conversions. Although customer advocacy has always been a goal for marketers, the rise of online user-generated content has directly influenced levels of advocacy. Customer engagement targets long-term interactions, encouraging customer loyalty and advocacy through word-of-mouth. Although customer engagement marketing is consistent both online and offline, the internet is the basis for marketing efforts.

Definition

In March 2006, the Advertising Research Foundation announced the first definition of customer engagement as "turning on a prospect to a brand idea enhanced by the surrounding context." However, the ARF definition was criticized by some for being too broad. The ARF, World Federation of Advertisers, Various definitions have translated different aspects of customer engagement. Forrester Consulting's research in 2008, has defined customer engagement as "creating deep connections with customers that drive purchase decisions, interaction, and participation, over time". Studies by the Economist Intelligence Unit result in defining customer engagement as, "an intimate long-term relationship with the customer". Both of these concepts prescribe that customer engagement is attributed to a rich association formed with customers. With aspects of relationship marketing and service-dominant perspectives, customer engagement can be loosely defined as "consumers' proactive contributions in co-creating their personalized experiences and perceived value with organizations through active, explicit, and ongoing dialogue and interactions". The book, Best Digital Marketing Campaigns In The World, defines customer engagement as, "mutually beneficial relationships with a constantly growing community of online consumers". The various definitions of customer engagement are diversified by different perspectives and contexts of the engagement process. These are determined by the brand, product, or service, the audience profile, attitudes and behaviours, and messages and channels of communication that are used to interact with the customer.

Since 2009, a number of new definitions have been proposed in the literature. In 2011, the term was defined as "the level of a customer’s cognitive, emotional and behavioral investment in specific brand interactions," and identifies the three CE dimensions of immersion (cognitive), passion (emotional) and activation (behavioral). It was also defined as "a psychological state that occurs by virtue of interactive, co-creative customer experiences with a particular agent/object (e.g. a brand)". Researchers have based their work on customer engagement as a multi-dimensional construct, while also identifying that it is context-dependent. Engagement gets manifested in the various interactions that customers undertake, which in turn get shaped up by individual cultures. The context is not limited to geographical context, but also includes the medium with which the user engages. Moreover, customer engagement is the emotional involvement and psychological process in which both new and existing consumers become loyal with specific types of services or products. The degree to which customers pay attention to companies or products, as well as their participation in operations, is referred as customer engagement.

Ethics

Attempts to maximise user engagement at all costs have been compared to addiction on both the service provider and the end user side. Facebook and other social media have been criticised for manipulating user emotions to maximise engagement by presenting highly divisive content, even if it was knowingly false. Professor Hany Farid summarised Facebook's use of these techniques as "when you’re in the business of maximizing engagement, you’re not interested in truth". Various other techniques used to increase engagement are considered as abusive, such as FOMO (Fear of Missing Out), infinite scrolling and "Internet karma" in the form of various "experience points" gained by users for engaging with the service.

Online customer engagement

Offline customer engagement predates online, but the latter is a qualitatively different social phenomenon, unlike any offline customer engagement that social theorists or marketers recognize. In the past, customer engagement has been generated irresolutely through television, radio, media, outdoor advertising, and various other touchpoints ideally during peak and/or high trafficked allocations. However, the only conclusive results of campaigns were sales and/or return on investment figures. The widespread adoption of the internet during the late 1990s has enhanced the processes of customer engagement, in particular, the way in which it can now be measured in different ways on different levels of engagement. It is a recent social phenomenon where people engage online in communities that do not necessarily revolve around a particular product but serve as meeting or networking places. This online engagement has brought about both the empowerment of consumers and the opportunity for businesses to engage with their target customers online. A 2011 market analysis revealed that 80% of online customers, after reading negative online reviews, report making alternate purchasing decisions, while 87% of consumers said a favorable review has confirmed their decision to go through with a purchase.

The concept and practice of online customer engagement enables organisations to respond to the fundamental changes in customer behaviour that the internet has brought about, as well as to the increasing ineffectiveness of the traditional 'interrupt and repeat', broadcast model of advertising. Due to the fragmentation and specialisation of media and audiences, as well as the proliferation of community- and user-generated content, businesses are increasingly losing the power to dictate the communications agenda. Simultaneously, lower switching costs, the geographical widening of the market and the vast choice of content, services and products available online have weakened customer loyalty. Enhancing customers' firm- and market-related expertise has been shown to engage customers, strengthen their loyalty, and emotionally tie them more closely to a firm.

Since the world has reached a population of over 3 billion internet users, it is conclusive that society's interactive culture is significantly influenced by technology. Connectivity is bringing consumers and organizations together, which makes it critical for companies to take advantage and focus on capturing the attention of and interacting with well-informed consumers in order to serve and satisfy them. Connecting with customers establishes exclusivity in their experience, which potentially will increase brand loyalty, and word of mouth, and provides businesses with valuable consumer analytics, insight, and retention. Customer engagement can come in the form of a view, an impression, a reach, a click, a comment, or a share, among many others. These are ways in which analytics and insights into customer engagement can now be measured on different levels, all of which are information that allows businesses to record and process results of customer engagement.

Taking into consideration the widespread information and connections for consumers, the way to develop penetrable customer engagement is to proactively connect with customers by listening. Listening will empower the consumer, give them control, and endorse a customer-centric two-way dialogue. This dialogue will redefine the role of the consumer as they no longer assume the end user role in the process. Instead of the traditional transaction and/or exchange, the concept becomes a process of partnership between organizations and consumers. Particularly since the internet has provided consumers with the accumulation of much diverse knowledge and understanding, consumers now have increasingly high expectations, developed stronger sensory perceptions, and hence have become more attracted to experiential values. Therefore, it would only be profitable for businesses to submit to the new criteria, to provide the opportunity for consumers to further immerse in the consumption experience. This experience will involve organizations and consumers sharing and exchanging information, which will generate increased awareness, interest, desire to purchase, retention, and loyalty among consumers, evolving an intimate relationship. Significantly, total openness and strengthening customer service is the selling point here for customers, to make them feel more involved rather than just a number. This will earn trust, engagement, and ultimately word of mouth through endless social circles. Essentially, it is a more dynamic and transparent concept of customer relationship management (CRM).

Customer engagement on social media

Customer engagement on Twitter is a form of social power and is usually measured with likes, replies and retweets. A recent study shows that retweets are more likely to contain positive content and address larger audiences using the first-person pronoun "we". Replies, on the other hand, are more likely to contain negative content and address individuals using the second-person pronoun "you" and the third-person pronouns "he" or "she". While users with less followers tend to engage in interpersonal conversations to provoke customer engagement, influencers with many followers tend to post positive messages, often using the word "love" when addressing larger audiences.

Marketing value

Customer engagement marketing is necessitated by a combination of social, technological and market developments. Companies attempt to create an engaging dialogue with target consumers and stimulate their engagement with the given brand. Although this must take place both on and off-line, the internet is considered the primary method. Marketing begins with understanding the internal dynamics of these developments and the behaviour and engagement of consumers online. Consumer-generated media plays a significant role in the understanding and modeling of engagement. The control Web 2.0 consumers have gained is quantified through 'old school' marketing performance metrics.

The effectiveness of the traditional 'interrupt and repeat' model of advertising is decreasing, which has caused businesses to lose control of communications agendas. In August 2006, McKinsey & Co published a report which indicated that traditional TV advertising would decrease in effectiveness compared to previous decades. As customer audiences have become smaller and more specialised, the fragmentation of media, audiences and the accompanying reduction of audience size have reduced the effectiveness of the traditional top-down, mass, 'interrupt and repeat' advertising model. A Forrester Research's North American Consumer Technology Adoption Study found that people in the 18-26 age group spend more time online than watching TV. Furthermore, the Global Web Index reported that in 2021, YouTube beats any mainstream media platforms when it comes to monthly engagement. This is partly due to the fact that 51% of U.S. and U.K. consumers use YouTube for shopping and product research, a service that traditional media can't really provide.

In response to the fragmentation and increased amount of time spent online, marketers have also increased spending in online communication. ContextWeb analysts found marketers who promote on sites like Facebook and New York Times are not as successful at reaching consumers while marketers who promote more on niche websites have a better chance of reaching their audiences. Customer audiences are also broadcasters with the power for circulation and permanence of CGM, businesses lose influence. Rather than trying to position a product using static messages, companies can become the subject of conversation amongst a target market that has already discussed, positioned and rated the product. This also means that consumers can now choose not only when and how but, also, if they will engage with marketing communications. In addition, new media provides consumers with more control over advertising consumption.

The lowering of entry barriers, such as the need for a sales force, access to channels and physical assets, and the geographical widening of the market due to the internet have brought about increasing competition and a decrease in brand loyalty. In combination with lower switching costs, easier access to information about products and suppliers and increased choice, brand loyalty is hard to achieve. The increasing ineffectiveness of television advertising is due to the shift of consumer attention to the internet and new media, which controls advertising consumption and causes a decrease in audience size. This has shifted advertising spending online.

The proliferation of media that provide consumers with more control over their advertising consumption (subscription-based digital radio and TV) and the simultaneous decrease of trust in advertising and increase of trust in peers point to the need for communications that the customer will desire to engage with. Stimulating a consumer's engagement with a brand is the only way to increase brand loyalty and, therefore, "the best measure of current and future performance".

Consumer behaviour

CE behaviour became prominent with the advent of the social phenomenon of online CE. Creating and stimulating customer engagement behaviour has recently become an explicit aim of both profit and non-profit organisations in the belief that engaging target customers to a high degree is conducive to furthering business objectives.

Shevlin's definition of CE is well suited to understanding the process that leads to an engaged customer. In its adaptation by Richard Sedley the key word is 'investment'. "Repeated interactions that strengthen the emotional, psychological or physical investment a customer has in a brand."

A customer's degree of engagement with a company lies in a continuum that represents the strength of his investment in that company. Positive experiences with the company strengthen that investment and move the customer down the line of engagement.

What is important in measuring degrees of involvement is the ability of defining and quantifying the stages on the continuum. One popular suggestion is a four-level model adapted from Kirkpatrick's Levels:

1. Click – A reader arrived (current metric)
2. Consume – A reader read the content
3. Understood – A reader understood the content and remembers it
4. Applied – A reader applies the content in another venue

Concerns have, however, been expressed as regards the measurability of stages three and four. Another popular suggestion is Ghuneim's typology of engagement.

Degrees of engagement	Low	Medium	High	Highest
	Adoption	Collaborative filtering	Content creation	Social
	Bookmarking, tagging, adding to the group	Rating, voting, commenting, endorsing, favouritising	Upload (user-generated content), blogging, fan community participation, mash-up creation, podcasting, vlogging	Addition of friends, networking, fan community creation

The following consumer typology according to degree of engagement fits also into Ghuneim's continuum: creators (smallest group), critics, collectors, couch potatoes (largest group).

Engagement is a holistic characterization of a consumer's behavior, encompassing a host of sub-aspects of behaviour such as loyalty, satisfaction, involvement, word-of-mouth advertising, complaining and more.

• Satisfaction: Satisfaction is simply the foundation, and the minimum requirement, for a continuing relationship with customers. Engagement extends beyond mere satisfaction.
• Loyalty – Retention: Highly engaged consumers are more loyal. Increasing the engagement of target customers increases the rate of customer retention.
• Word-of-mouth advertising – advocacy: Highly engaged customers 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.
• Awareness – Effectiveness of communications: When customers are exposed to communication from a company that they are highly engaged with, they tend to actively elaborate on its central idea. This brings about high degrees of central processing and recall.
• Filtering: Consumers filter, categorize and rate the market from head to tail, creating multiple, overlapping folksonomies through tagging, reviewing, rating and recommending.
• Complaint-behaviour: Highly engaged customers are less likely to complain to other current or potential customers, but will address the company directly instead.
• Marketing intelligence: Highly engaged customers can give valuable recommendations for improving the quality of the offering.

The behavioural outcomes of an engaged consumer are what links CE to profits. From this point of view,

"CE is the best measure of current and future performance; an engaged relationship is probably the only guarantee for a return on your organization's or your clients' objectives." Simply attaining a high level of customer satisfaction does not seem to guarantee the customer's business. 60% to 80% of customers who defect to a competitor said they were satisfied or very satisfied on the survey just prior to their defection.

The main difference between traditional and customer engagement marketing is marked by these shifts:

• From 'reach or awareness focused' marketing communications and their metrics (GRP or pageview) towards more targeted and customised interactions that prompt the consumer to engage with and act on the content from the outset.
• From absolute distinctions and barriers between an organisation and its target customers towards the participation of consumers in product development, customer service and other aspects of the brand experience.
• From one-way, top-down, formal B2C and B2E interaction to continuing, dialogic, decentralised and personalised communications initiated by either party.

Specific marketing practices involve:

• Encouraging collaborative filtering: Google, Amazon, iTunes, Yahoo LAUNCHcast, Netflix, and Rhapsody encourage their consumers to filter, categorise and rate; that is, to market their products. They realise consumers are not only much more adept at creating highly targeted taxonomies (folksonomies) given that they are more adept at delineating the segment they themselves constitute, but, also, that they are willing to do so for free. And to the extent they cannot, they do it for them. If enough people like the band Groove Armada as well as the band The Crystal Method, there may well be a stylistic connection between them, despite the fact that one's categorised as 'downtempo' and the other 'beats and breaks'. Such strong associations tell Yahoo! to put the two on the same playlist more often, and if the positive ratings continue to come in, that connection is reinforced. Amazon does the same with their ‘customers who bought this item also bought…’ recommendations.
• Community development: Helping target customers develop their own communities or create new ones.
• Community participation: (See Communal marketing) Consumers do not filter and rate companies and their offerings within company websites only. Being able, with little effort, cost or technical skills, to create their own online localities, a large percentage of the filtering and rating takes place in non-sponsored, online spaces. Organisations must go and meet their target customers at their favoured online hangouts to not only listen but also participate in the dialogue.
• Help consumers engage with one another: Give them content (viral podcasting, videocasting, games, v-cards etc.) they can use to engage with one another.
• Solicitation of user generated content: Engage them directly or indirectly with your product by giving them the means or incentive to create user generated content.
• Customer self-service: Help them create a customer service FAQ in wiki or blog format. Create a blog where technical support staff and customers can communicate directly.
• Product co-development: Create a blog where product developers and consumers can communicate directly.
• Leading by teaching: Help customers in product selection by first teaching them practically, showing them a video about product use and then help them to select the product.

Metric

All marketing practices, including internet marketing, include measuring the effectiveness of various media along the customer engagement cycle, as consumers travel from awareness to purchase. Often the use of CVP Analysis factors into strategy decisions, including budgets and media placement.

The CE metric is useful for:

a) Planning:

• Identify where CE-marketing efforts should take place; which of the communities that the target customers participate in are the most engaging?
• Specify the way in which target customers engage, or want to engage, with the company or offering.

b) Measuring Effectiveness: Measure how successful CE-marketing efforts have been at engaging target customers.

The importance of CE as a marketing metric is reflected in ARF's statement:

"The industry is moving toward customer engagement with marketing communications as the 21st century metric of marketing efficiency and effectiveness."

ARF envisages CE exclusively as a metric of engagement with communication, but it is not necessary to distinguish between engaging with the communication and with the product since CE behaviour deals with, and is influenced by, involvement with both.

In order to be operational, CE-metrics must be combined with psychodemographics. It is not enough to know that a website has 500 highly engaged members, for instance; it is imperative to know what percentage are members of the company's target market. As a metric for effectiveness, Scott Karp suggests, CE is the solution to the same intractable problems that have long been a struggle for old media: how to prove value.

The CE-metric is synthetic and integrates a number of variables. The World Federation of Advertisers calls it 'consumer-centric holistic measurement'. 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)
• 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.
• Inquiries
• Providing personal information
• Downloads
• Content resyndication
• Customer reviews
• Comments: their quality is another indicator of the degree of engagement.
• Ratio between posts and comments plus trackbacks.

In selecting the components of a CE-metric, the following issues must be resolved:

• Flexible metric vs. Industry standard: According to some, CE "measurement has never been one size fits-all" but should vary according to industry, organisation, business goal etc. On the other hand, corporate clients and even agencies also desire some type of solid index. Internal metrics could, perhaps, be developed in addition to a comparative, industry-wide one.
• Relative weighting: The relative weighting associated with each CE-component in an algorithm. For instance, is subscribing to RSS more important than contributing a comment? If yes how much more important exactly? Relative weighting links up with the issue of flexible vs. standardised metrics: Is the relative weighting going to be solid – as will be required if the CE-metric is to be standardised – or is it going to differ depending on the industry, organisation, business goals etc.?
• Component measurability: Most of the components of a CE-metric face problems of measurement. Duration of visit for example suffers from (a) failing to capture the most engaged users who like to peruse RSS feeds; (b) inaccuracy arising from leaving a tab open during breaks, stopping to converse with co-workers, etc.
• Length of measurement: For how long must the various CE components be measured if CE is to reflect loyalty rather than short-term, faddish engagement?

See also

• Active users
• Marketing

Further reading

• Dvir, N., & Gafni, R. (2018). When Less Is More: Empirical Study of the Relation Between Consumer Behavior and Information Provision on Commercial Landing Pages. Informing Science: The International Journal of an Emerging Transdiscipline, 21, 019–039. When Less Is More: Empirical Study of the Relation Between Consumer Behavior and Information Provision on Commercial Landing Pages
• Cheung, C. M. K., Shen, X., Lee, Z. W. Y., & Chan T. K. H. (2015). Promoting sales of online games through customer engagement. Electronic Commerce Research and Applications, 14(4), 241–250. doi:10.1016/j.elerap.2015.03.001
• Dholakia, N., & Firat, F. (2006). Global business beyond modernity. Critical Perspectives on International Business, 2(2), 147–162. doi:10.1108/17422040610661316
• Dovaliene, A., Masiulyte, A., & Piligrimiene, Z. (2015). The Relations between Customer Engagement, Perceived Value and Satisfaction: The Case of Mobile Applications. Procedia - Social And Behavioral Sciences, 213, 659–664. doi:10.1016/j.sbspro.2015.11.469
• Hollebeek, L. (2011). Exploring customer brand engagement: definition and themes. Journal of Strategic Marketing, 19(7), 555–573. doi:10.1080/0965254X.2011.599493
• Ryan, D., & Jones, C. (2011). Best Digital Marketing Campaigns in the World: Mastering The Art of Customer Engagement.
• How marketers are measuring customer engagement. (2016, January 29). eMarketer.
• Sashi, C. M. (2012). Customer engagement, buyer-seller relationships, and social media. Management Decision, 50(2), 253–272. doi:10.1108/00251741211203551
• Marketers find success on social through customer engagement. (2013, December 2). eMarketer.
• To create engaging content marketers need tech. (2015, June 30). eMarketers.
• Trefler, A. (2014). Build for Change: Revolutionizing Customer Engagement through Continuous Digital Innovation.
• Trefler, A. (2014). Customer Engagement Today: A Revolutionary Approach [Video podcast].
• Why marketers haven't mastered multichannel. (2015, July 24). eMarketer.
• Chak, Andrew (September 30, 2002). "Submit now: Designing persuasive websites", New Riders Press, 368pp, ISBN:0735711704.
• Locke et al. (2001) "The Cluetrain Manifesto: The End of Business as Usual", Perseus Press Group, 190 pages, contrib. Rick Levine, Christopher Locke, Doc Searls, David Weinberger, Edition reprint, ISBN:9780738204314