Customer Engagement and Loyalty

Every marketer is tasked with increasing engagement and consideration among current and prospective customers.   Many organizations are focused on Measuring Customer Engagement.  A quick search on Amazon surfaces over 4,000 books on the topic. So, we were not surprised to receive this recent question: “Is there a way to link engagement to brand equity?”

The link between engagement and brand equity was explored in a study conducted by The Advertising Research Foundation (ARF). The specific purpose of the study was to understand the level of brand engagement that results from advertising and communications efforts and the impact of engagement on the brand’s equity. Both engagement and brand equity were defined in the study as follows:

1. Engagement: “the consequence of any marketing or communications effort (through any media touch point) which results in an increased level of ‘brand equity’ for the brand”.
2. Brand Equity, “the degree to which a brand is believed by the target audience to be able to meet or exceed consumer expectations they hold for the category in which the brand competes.”

The study found that the more engaged prospects and customers are, the more attention they will pay to your messages and the more highly they will consider your brand and be predisposed to purchase and/or use.  This, and other research, helped establish that emotional engagement and loyalty metrics are what we would call “leading indicators,” something that signals a future event or outcome. A common example of a leading indicator is traffic lights: an amber traffic light indicates the coming of the red light.

These two metrics that serve as Key Performance Indicators, engagement and loyalty, indicate the pattern of how a customer will behave toward a brand, positively or negatively, in some time frame down the road. So, if you want to positively impact brand equity in the future, you need to positively impact engagement and loyalty NOW. By the way, the results suggest the reverse is also true. If engagement and loyalty decline NOW, over time, brand equity will decrease.

If your company has a business outcome tied to brand equity, Marketing can move the needle by improving engagement and loyalty. So, what do you need to do to build your model and put this construct into play?

1. Know the current levels of customer engagement, loyalty, and brand equity, ideally by customer segment.
2. Analyze your current engagement and loyalty data and determine what marketing programs are impacting both of these.
3. Understand the brand equity target, again ideally by customer segment.
4. Establish how much engagement and loyalty need to change in order to achieve the equity target.
5. Define what channels and touch points will best impact engagement and loyalty, and establish performance targets for these.
6. Document, implement, and monitor your plan.

Many organizations rely on their brand equity to survive and thrive. If your organization is in a similar position and seeks to drive the Brand Equity Needle, it is important to remember that first you need to improve loyalty and engagement. Start improving and measuring your customer engagement.

Wrapping Up with A Word About Customer Equity

Equity is often thought of in terms of brand equity. Acting in the best interest of brand equity isn’t necessarily the same as acting in the best interest of customer equity.

Customer-centric companies emphasize growing customer equity. Once a company decides its focus is to grow the customer base, then the metric of customer lifetime value becomes front and center. A shift to customer equity fundamentally changes how management thinks about goals, roles, and metrics.  Customer equity can only be achieved by maximizing customer lifetime value (the net profit accrued from transactions during the time the customer has a relationship with your company). Customer equity is the sum of the lifetime values of all of your company’s customers across all of your brands. Brand equity, on the other hand, is the sum of all your customers’ assessments of your brand’s intangible positive and negative qualities.

In fact, in a recent study, when a group of clients was asked to rate loyalty to their professional service providers, 50% said they were indifferent; they would switch without hesitation. By shifting the emphasis to customer equity, your focus will be on the customer relationship rather than the brand. Your emphasis on customer preferences enables you to introduce them to another brand/product more suitable as their requirements change,  thus keeping the customer and ensuring longer lifetime value.

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If you accept the metric of customer equity over brand equity, you will likely manage your brand differently. Brands will be built around customer segments rather than the other way around. Brand extensions will be based on customer needs and wants. This focus on customer equity doesn’t make brand equity unimportant: it just puts brand equity into context. Let’s talk about how to build customer equity for your company.

FAQ:

• Engagement: “The consequence of any marketing or communications effort (through any media touchpoint) which results in an increased level of brand equity for the brand.”
• Brand equity: “The degree to which a brand is believed by the target audience to be able to meet or exceed consumer expectations they hold for the category in which the brand competes.”

1. Establish current levels of engagement, loyalty, and brand equity—ideally by segment.
2. Analyze engagement/loyalty data to determine which programs influence each.
3. Define the brand equity target—again by segment where possible.
4. Determine how much engagement and loyalty must change to reach the equity target.
5. Identify the channels and touchpoints most likely to influence engagement/loyalty and set performance targets.
6. Document, implement, and monitor the plan.

• Customer equity is the sum of customer lifetime values across customers and brands; it is built by maximizing customer lifetime value and strengthening relationships.
• Brand equity is the sum of customers’ assessments of a brand’s intangible positive/negative qualities.
  This distinction matters because acting in the best interest of brand equity is not always the same as acting in the best interest of customer equity.

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