The term “customer engagement” has gained a lot of attention over the years. And for good reason. Companies are beginning to recognize the importance of customer engagement as something that plays a huge role in creating a successful customer-first strategy. But why is customer engagement important and what does it stand for in the first place? Let’s find out!
What is customer engagement?
If you google “customer engagement”, you will find more than a dozen different definitions and meanings. The reason behind that is that customer engagement has been viewed as a multidimensional compound. This means that customer engagement consists of cognitive, behavioral, and emotional components.
That’s why you may stumble upon more complex definitions like this one:
Customer engagement is a psychological state that occurs by virtue of interactive, co-creative customer experiences with a focal agent/object (e.g., a brand) in focal service relationships. (Brodie, 2011.)
Or this one:
Customer engagement is the level of a customer’s cognitive, emotional and behavioral investment in specific brand interactions. (Hollebeck, 2011.)
However, as profound as that sounds, we would rather keep the things simple and focus on the following one:
Customer engagement is the interaction between the customer and the brand.
In general, customer engagement covers all the actions that lead to making a connection — from reading a company’s article, leaving a review, to following a profile on Instagram. One doesn’t have to purchase from you in order to engage with your brand.
This means that Mercedes fans can still interact with the company by discussing the newest car features with friends, even if they don’t have enough financial resources to buy one at the moment. It is not excluded that one day they will become a buyer, and that’s why customer engagement is important in all stages of customer journey.
Interaction between the customer and the brand is an opportunity for building a stronger relationship and making a connection. For that reason, it’s important to encourage customer engagement through different channels to maximize its benefits.
Why is customer engagement important?
1. Boosted profitability
Many people will say that the ultimate goal of every business is to make a profit. As superficial as that may sound, it is true - if you are not profitable, your business won’t last. Customer engagement has a direct impact on your business’s profitability.
Studies have shown that companies that increase customer engagement can increase cross-sell revenue by 22%, up-sell revenue by 38%, and order size in a range from 5% to even 85%. If you are not convinced by now, another research shows that almost ⅔ of a company's profit depends on the effectiveness of customer engagement. One thing is clear, the link between profitability and positive customer engagement is unquestionable.
2. Increased customer retention
The second reason why customer engagement is important is that it helps you retain more customers. A well-known research by HBR showed that by increasing the retention rates by 5%, your profits can increase from 25% to even 95%. With this in mind, it’s crucial to examine all the factors that can lead to retaining more customers. Customer engagement is one of them. By informing, educating, and communicating regularly with your customers, you are closer to discovering their pain points, and presenting the right solutions. And that’s how you keep customers!
3. Improved customer loyalty
The first and most important step of the customer engagement process is listening. Remote Bob - an online outsourcing platform - emphasizes the value of listening in their company. They spend the majority of their sales meetings being quiet so they can properly understand what the client is actually trying to accomplish. It is easy to get carried away with closing the deal, but let’s not forget about the overall customer experience.
Customers who receive a positive and engaging customer experience are more likely to become a loyal customer. That makes perfect sense, because customers who are willing to interact with your brand and share their thoughts are identifying with you in some shape or form. Finally, since they share the same vision as you, they are more likely to buy from your company as well.
4. Unique brand identity
Another reason why customer engagement is important is that it is a great opportunity to differentiate yourself from your competitors. By discovering your unique voice when communicating with customers, you will stand out and help your customers identify themselves with you even more.
An inexhaustible source of inspiration for the original approach in customer communication is Wendy’s. They are well-known for their tweets (that had gone viral) where they are roasting, well, pretty much everyone. They have chosen to stand out and people are noticing that. It’s something that you may like or not, but you cannot overlook it.
5. Built trust and customer relationship
Finally, having a strong customer engagement strategy will help you build trust and a personal relationship with the customer. After all, customers are human beings who can sense when they are being appreciated and valued, and when they are being used for the money they spend. By engaging with your customer in every customer journey phase, you are presenting yourself as the one they can trust. If a customer trusts your brand, they will turn to you every time they are in a need of something you provide and most likely become your brand ambassadors.
To sum it all up, there are plenty of reasons why customer engagement is important, especially if you’re trying to adopt a customer-first mindset. Not only it helps you grow a valuable base of loyal customers, but it also helps you retain them. Consequently, that has a direct impact on your profit. However, it’s important not to get too carried away with numbers and statistics and forget the one you are doing this for. After all, when you make that real connection with a customer, everything else will follow.
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