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How important is customer engagement for your organization? Many marketing professionals believe that driving deeper engagement across the ecosystems –customers, channel partners, direct sales and employees- is the key to achieving and even accelerating customer acquisition and retention.  This point of view has established engagement as a key Marketing performance indicator.  However, measuring engagement is difficult for several reasons. First, there isn’t a standard definition of engagement. Second, there is the potential for a slew of metrics for measuring it.

Some marketers define customer engagement as simply a prospective customer’s response to a call to action. Others believe engagement must include an element of advocacy. Do you define it based on the depth of the relationship you have with your customer, the frequency of interaction, or the type of engagement, a combination of these, something else?

There are a number of challenges to creating a customer engagement measure. Measuring customer engagement is difficult because for two primary reasons:

  1. There isn’t a standard definition of customer engagement.
  2. There is the potential for a slew of metrics for measuring it.

Therefore the first question to answer is, “How will define customer engagement? How you define customer engagement affects how you will measure it.

Some marketers define customer engagement as simply a prospective customer’s response to a call to action. Others believe customer engagement must include an element of advocacy.

3 steps to creating a customer engagement metric

Use behavioral measures to create your Customer Engagement metric.

What is Customer Engagement?

Engagement takes customer interaction to the next level to develop and cultivate consideration and preference. Engagement is more than satisfaction; it is something with a more emotional component that suggests potential behavior. As a result, the methods for measuring engagement vary leaving many organizations to take a “I’ll know it when they see it” approach. To measure something we have to be able to define it.

Successful companies addressing customer engagement focus on facilitating interaction between their customers and the organization to create a win/win scenario. Ron Shevlin, an analyst at Aite Group, LLC defines engagement as: “Repeated interactions that strengthen the emotional, psychological or physical investment a customer has in a brand.” Essentially customer engagement is a measure of relationship strength.

Metrics for Measuring Engagement

Whether you accept this definition or choose another, we recommend that you use behavioral metrics for measuring customer engagement because it is typically easier to capture and track behavioral measurements. The research suggests that meaningful changes in behaviors are indicators of changes in engagement. But not all types of behaviors are profitable.  For example, someone browsing your store or website to do price checking or product specification research but then purchasing the product elsewhere is not profitable for your company. It is also possible that there comes a point in time when you’ve optimized engagement as much as possible and additional investment to increase engagement will not improve the return. So the second question to answer is, “Which behaviors are linked to profitability?”

Should You Use Attitude or Behavior Measures?

If you want to measure customer engagement, one of the first questions to answer is whether your measure will be attitude or behavior based. Attitudinal metrics are derived from using research techniques to understand how people embrace a brand, recommend, or perceive a product or company. Attitudinal metrics are often difficult to link directly to business results such as profit. Therefore we recommend including behavioral metrics for measuring engagement. It is typically easier to capture and track behavioral measurements.

The research suggests that meaningful changes in behaviors are indicators of changes in engagement. But not all types of behaviors are profitable. The challenge then becomes which behaviors to track and measure that are linked to profitability. For example, someone browsing your store to do price checking or product specification research but then purchasing the product elsewhere is not profitable for your company.   It is also possible that there comes a point in time when you’ve optimized engagement as much as possible and additional investment to increase engagement will not improve the return.

Behavioral Measures for Customer Engagement

It’s probably not realistic to have just one behavioral measure as the basis of your engagement metric.  Too many attributes affect engagement. This means you need to be able to identify all the behaviors that are indicative of engagement and then determine which ones or combination affect profitability.  For example, tracking how many times a person comes to your site and downloads something may indicate engagement.  But what if this person never makes a purchase? So while you may have created engagement you have not created consumption and the investment associated with creating engagement is not profitable.

In fact, you may want to consider whether this is a behavior you want to continue to encourage with people sharing the characteristics of this person. The same is true for channel partners who may sell a tremendous amount of one of your products. They are engaged.  But what if they make these sales at the expense of up-selling higher margin products or services? This is why it is important to selecting the behaviors that reflect engagement that have the greatest impact on profitability.

While you may have created engagement, you have not created consumption, and the investment associated with creating engagement is not profitable. In fact, you may want to consider whether this is a behavior you want to continue to encourage with people sharing the characteristics of this person. The same is true for channel partners who may sell a tremendous amount of one of your products. They are engaged.

This is the risk of using customer engagement as a KPI.  You can create strong engagement and make sales and revenue but it may be at the expense of up-selling higher margin products or services. This is why it is important to select behaviors that reflect customer engagement you can tie to profitability. Even though there are challenges associated with defining and measuring engagement, our discipline has concluded that engagement is a critical measure.

Metrics for Customer Engagement

Link customer engagement to profitability

Three Steps to Using Customer Engagement as a Metric

Even though there are challenges associated with defining and measuring customer engagement, our discipline has concluded that engagement is a critical measure. The bottom line deploy these three steps if you want to use engagement as a metric.

  1. Identify behaviorally based metrics associated with engagement
  2. Consider the impact of each behavior on profitability (if possible create a model)
  3. Select two-three behavioral measures to create your engagement metric

If you decide to create a customer engagement metric, take a look at these 11 questions. 

It requires expertise to develop and select the right metrics.  Come tap ours.

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