Customer engagement is a critical driver of organic business growth.
While advertising campaigns, sales promotions, and promises of bargain prices are all great at generating leads and sales, they don't create the types of relationships that lead to strong customer loyalty and long-term profits. In truth, a business needs to invest in customer engagement to convert new shoppers into true brand loyalists.
While this may seem like common business sense, research shows that only 29% of business to business (B2B) customers feel fully engaged. The report also shows that 71% are at risk of abandoning B2B firms for their competitors.
What Is Customer Engagement?
Customer engagement is a catch-all term that refers to the process of engaging customers through a variety of channels. The idea is for a business to interact with its customers to strengthen its relationship with them.
For many organizations, the initial stage of customer engagement happens when a customer first interacts with them. This process can happen through social media, search engines like Google, a newspaper feature, or a TV ad. More importantly, however, the process of engaging a customer extends far beyond the point of purchase.
The goal of customer engagement isn't just to influence purchase decisions but also to nurture shoppers into becoming brand ambassadors - people who actively promote the brand to their network of family, friends, and acquaintances.
Benefits of Customer Engagement
With so many ways to define customer engagement, it can be easy to dismiss it and focus on a traditional sales and marketing strategy. It helps to understand the core benefits of customer engagement to see its full value.
Strong Relationships With Customers
The best customer engagement strategies empower brands to connect and maintain strong relationships with their customers. By putting in the effort to make customers feel important before, during, and after the purchase point, customers feel valued and have more reason to be loyal.
Better Customer Retention
Effective customer engagement is a tried and proven method used by companies to extend their relationship with consumers long after the point of purchase.
Multiple studies show that it's almost always more economical to focus on retaining existing customers. In one study, keeping existing customers was found to be 25 times more affordable than finding new ones.
Meanwhile, a Bain & Company study shows that a 5% increase in customer retention generates at least a 25% increase in profits.
Cross-Sell and Upsell Opportunities
Engaging customers generates opportunities to understand their behaviors and habits. Analyzing these interactions reveals customer segment insights, such as shopping preferences, average order value, and content usage.
This approach allows the business to shape and personalize their cross-selling and upselling offers, improving their average customer lifetime value.
Grow Subscriber Counts
Whether it's for a blog, email newsletter, or social media channel, brands that engage and provide value to customers can convince them to subscribe to their brand communications.
The key lies in providing a consistent stream of relevant, high-quality content that delights, entertains, or informs audiences. Doing so also reinforces a brand's position as a thought leader in its industry.
Faster Purchase Cycles
Engagement strategies can also shorten purchase cycles, helping move prospects along their customer journey much faster than usual.
Companies can inform and educate customers about best practices for using their product, helping them make a purchase decision. Brands can also establish themselves as industry leaders, producing content about their proprietary research to attract prospects.
Better Customer Service
On average, fully engaged customers generate 23% more revenue. Much of that has to do with how customer engagement can be an extension of customer service.
By engaging customers on channels where they are active, businesses can provide them with opportunities to share customer feedback and raise concerns without calling a support hotline.
How to Calculate Customer Engagement
Businesses can't improve their customer engagement if they don't know how to measure it. Fortunately, there are several metrics and key performance indicators (KPIs) that provide different ways to calculate engagement levels.
This metric shows how often customers complete a purchase. Businesses can use this formula to calculate the purchase frequency.
- Purchase frequency = Total number of orders over a period / Total number of unique customers over that same period
For instance, if a retailer had 25,000 purchases and 5,000 customers over four months, it would have a purchase frequency of 5. A high purchase frequency shows that a business is doing a good job engaging and retaining customers.
Guest Checkout Rates
This e-commerce metric shows the number of customers that completed a purchase at an online store without signing up to make an account. Management can use this formula to calculate guest checkout rates.
- Guest checkout rate = Number of orders completed by guests / Total number of orders
Low guest checkout rates are better for business because they show that more consumers are engaged enough to create accounts and make subsequent purchases easier. It means that shoppers are willing to be part of a brand's community.
Average Order Value
As the term suggests, this metric is the average amount customers spend when they complete a purchase. Businesses can use this formula to calculate the average order value.
- Average Order Value = Total revenue within a period / Total number of orders within that same period
Successful customer engagement strategies lead to repeat customers, who generally spend more money than one-time buyers.
Repeat Purchase Rate (RPR)
This metric shows the percentage of customers that have made more than one purchase within a defined timeframe.
- Average Order Value = Number of repeat customers / Total number of customers
A business's RPR offers a clear view of the effectiveness of its retention strategy. It shows how many customers were engaged enough to make more than one purchase.
6 Customer Engagement Strategies for SMEs
Small and medium-sized enterprises (SMEs) tend to have limited budgets for branding and marketing. The good news is that there are many cost-effective solutions for engaging customers.
1. User Generated Content
User-generated content (UGC) campaigns are a tried and proven method of encouraging audiences to interact with brands. By calling on prospects and customers to share their ideas, feedback, and content, businesses can provide an opportunity for audiences to join a community or participate in creative processes.
For example, a restaurant can run an online photo contest and invite customers to share a photo of their favorite dish on Instagram. To qualify, users simply need to tag the restaurant and use the branded hashtag. The user with the most visually striking image will then receive a voucher for a free meal.
2. Share Glowing Reviews
Glowing customer reviews are gold in almost any industry. Research shows that 87% of consumers read online reviews for local businesses.
Brands can leverage customer reviews as a tool for customer engagement by sharing screenshots or snippets of feedback (in verbatim) on all of their social media platforms, tagging the author for their positive review.
This tactic may seem simple, but it's enough to convince prospects in both B2B and B2C markets to pay attention. It also encourages existing customers to leave feedback of their own.
3. Launch a Customer Loyalty Program
Customer loyalty programs have been around for decades, and for good reason. Brands like DSW, Sephora, and Starbucks use loyalty programs to create and nurture communities with millions of ardent members.
At its simplest, a loyalty program allows members to enter an exclusive community and earn rewards (usually in the form of points) for every purchase they make. These points can then be used as in-store currency, giving members an incentive to shop more.
4. Corporate Social Responsibility Programs
In a time of global climate protests and growing awareness of the need for sustainable business practices, more consumers are becoming selective about the brands they engage with. While price tags are still important, it's often not the most important determinant of customer loyalty.
Brands have the opportunity to nurture higher levels of customer engagement by integrating a corporate social responsibility program into their business plan. For instance, fashion retailers can commit to using sustainable, non-plastic packaging.
5. Listen and Act on Feedback
Many companies claim to want feedback from their customers, only to ignore their suggestions.
Acting on complaints is one thing, but integrating feedback to make products and services better is what separates great brands from the rest. This shows that the business isn't paying lip service to its audience, but that it is genuinely interested in what consumers have to say.
6. Interact with Users
Sometimes, the simplest approach is the most effective. Big brands are often seen interacting with customers by replying to their comments on social media, retweeting feedback on Twitter, or showing a sense of humor to engage their audience.
In other words, businesses should use social media to socialize with prospects and customers. Be sure to remain active on multiple platforms, whether it's Facebook, Twitter, and Instagram or review sites like Yelp and Tripadvisor.
Using POS Solutions to Improve Customer Engagement
For brick and mortar businesses, the simplest way to improve customer engagement is by using point of sale (POS) solutions to communicate and interact with shoppers.
POS systems help create an engaging in-store experience by providing customers with convenience and speed. Below are four examples of POS solutions found in many brick and mortar stores.
- Digital Signages - Digital signages linked to a cloud-based POS system allow businesses to broadcast information about impulse buys, promotions, and other special offers.
- Digital Coupons and Vouchers - POS systems make it convenient for customers to redeem physical and digital coupons and vouchers stored on mobile devices. A POS platform can also display a QR code, which shoppers simply need to take a photo of using their smartphones in order to be redirected to an offer they can redeem at a later time.
- Digital Receipts - POS systems can provide shoppers with the option to have their receipts sent to their email, making returns faster and more convenient. This also eliminates the frustration of not being able to process returns due to lost paper receipts.
- Customer Engagement Surveys - POS systems can also act as touchpoints for businesses to engage customers with surveys and polls. This process can gather valuable feedback, which can then be leveraged as business intelligence. Retailers can use these insights to improve products, enhance the shopping experience, and segment customers for marketing activities.
Companies that do not have a customer engagement strategy could be missing out on opportunities to reach out to shoppers and nurture long-term relationships with them.
While there is no one-size-fits-all approach to engaging customers, businesses can still generate results by focusing on the basics. These include a genuine focus on empathy, being helpful, and simplicity when interacting with prospects and customers.