Customer Engagement- A New Tool To Gain Customer Loyalty
Posted in Marketing & Strategy Articles, Total Reads: 1018
, Published on 19 February 2016
An article by Jeb Dasteel on Forbes where he says that customer loyalty is a lost battle has sparked huge debate in the world of marketing with almost 22490 views and comments from top executives of different companies. The article clearly vouches for customer engagement as a better tool to measure customer satisfaction and to increase brand recognition and revenue as against customer loyalty.
The question lies, is customer engagement and customer loyalty truly at loggerheads with each other or for that matter is loyalty completely dead? Or do they describe the same thing with different connotations. To find a relationship between the two, if any, I would start my write up with the definition of both the terminologies.
Customer engagement is the process of engaging customers with one another or with the company, the brand or its offerings. It is an interactive process, resulting in co-creation of value for both the parties and is multidimensional having expression in all the three attributes: cognitive, behavioural and emotional.
Customer loyalty, on the other hand is a positive emotional experience as perceived by the customer, resulting in repeat purchase of the brand. These customers also provide positive testimonials about the company or its brands or its offerings to his/her peer group. Since loyalty brings in new customers as well as repeat purchase from existing ones, it is assumed to be highly linked with profitability. As stated by Kotler, loyalty is often used as a basis for customer segmentation (shown in the image below).
Going by the two definitions, one can say that customer loyalty can be pursued through customer engagement. Repeat purchase requires repeat interaction. Keeping the customer engaged or involved is thus the key!
Having said that, let us now see some real life examples across different sectors where popular brands have leveraged on customer engagement strategies to increase their profits.
Brands and Customer Engagement
“Meri Maggi” was an ad campaign used by Nestle through which customers could send stories of their association with the brand. These stories were later converted into advertisements. Customers and Maggi co-created the marketing campaign.
This popular jewellery brand from the Tata Group invited customers to submit ideas for their new jewellery line “Mia”. The winner got a chance to collaborate with the designers to create their new collection.
The online furniture retail has an option whereby users can submit looks and designs of rooms. The same is displayed on their website for reference of others.
The online retail giant has recently launched “Ping”, a chat window through which customers can engage in discussion with their peers while purchasing.
Remember the launch of windows 10? Interested existing users of windows had to register a month before its launch. Microsoft then gave a free update to these users. Indeed, a brilliant move taken by Microsoft to engage its customers!
Courtesy call: Every time I visit ICICI, I get a courtesy call the following day by their executive asking about my experience at their branch. Not only this, every year on my birthday I get special offers on my Debit and Credit cards as gifts.
Loyalty Programs: Loyalty programs are an age old method to engage customers. Some of the popular ones are by Pantaloons, Shoppers Stop, airlines like Jet Airways, hotels like JW Marriot, Club Mahindra, salon chains like Naturals and many more.
The wave of customer engagement has reached the entertainment industry as well. A recent example is the launch of the Hindi film Wazir. Apart from engaging the viewers with trailers on TV and YouTube, the production house for the movie has even launched games on Android platform.
Is Loyalty Truly Dead?
The above examples imply that companies spend huge to maintain customer engagement. Why so? An article on Inc.com says that 70% of Americans are willing to spend 13% more if they experience above average customer service. The same article says that brands engaging with their customers online has seen an increase in spend of these customers by 20% to 40%.
Customer engagement is thus done to increase the loyalty amongst customers. Loyalty therefore cannot be dead. Here are my 5 reasons why I believe that loyalty still matters:
1. Research by Bain & Company says it takes around $51 to acquire a customer. The revenue generated by this customer in year 1 is $30 and in year 2 it is $52. It thus takes a company at least two years to earn profit from a customer. If this customer can be kept for an extended time period then profit will tend to climb. Retention is thus important. With start-ups and new businesses proliferating every day, it has become imperative for brands to strategize on retention mechanisms. Customer engagement has become an important tool to increase retention.
2. Secondly, loyal customers are more likely to enter into collaboration. Such is seen mainly in B2B marketing.
3. Loyal customers are less price sensitive
4. They make business planning easier. Businesses find it easier to understand these customers and thereby make customized products/ services.
5. Loyal customers are more likely to act as advocates, giving referrals and bringing in new customers.
An interesting point to note here is that a loyal customer need not always be an engaged one. One may buy a product from ABC brand once every year but dislikes receiving promotional mails. Similarly, an engaged customer is not always a loyal one. One may surf through different online fashion retail websites but in the end does not buy anything.
Hence customer loyalty or customer engagement alone is not full-proof. They need to work together.
Through customer engagement the emotional, physical and psychological bond between a brand and its user is strengthened and it ultimately results in increasing customer loyalty.
Customer Engagement Strategies
Customer engagement can be done in 4 ways :
Apart from these, below strategies can be used:
1. Use analytics to understand customer behaviour and provide user specific offers
2. Provide free upgrades
3. Offers for bulk buying
4. Provide add-ons
5. Provide rewards and loyalty programs
6. Birthday and anniversary wishes
7. Prompt grievance mechanism system
8. Exclusive and special events for the most profitable and loyal customers
As a concluding note, it can be said that customer engagement and customer loyalty hold a strong relation with each other. One is the cause and the other its effect. None can be disregarded and are equally important.
This article has been authored by Alolika Ray from Xavier Institute of Management