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Customer engagement: A long engagement

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2nd Apr 2008
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In tighter economic conditions, customer engagement is more important than ever. And leading-edge firms such as Starbucks and Chrysler are embracing social networking technologies to ignite emotional connections with their customers.

Social networking and customer engagement

By Stuart Lauchlan, news and analysis editor

Customer engagement is ever more important, but not yet practised to best effect by the majority. Enterprise feedback management firm Allegiance defines customer engagement as "the emotional connection or attachment that a customer develops during the repeated and ongoing interactions with a company."

Once a customer is engaged, he or she does useful things such as referring people to the company or even remaining loyal in the face of poor customer service. They also buy more products and services, more regularly and provide feedback more freely, which allows companies the opportunity to address concerns and save potentially lost revenue.

"By embracing our heritage, returning to our core – all things coffee – and our relentless commitment to innovation, we will reignite the emotional connection we have with our customers and transform the Starbucks Experience."

Howard Schultz, CEO, Starbucks

“Engagement is needed more than ever during tough times, because it has a powerful impact on retention, growth and profits,” says Adam Edmunds, Allegiance CEO. “Historically engagement has been elusive and hard to measure. Our research shows that it can be measured, and it is not as difficult as companies think. In fact, we found that improving customer engagement by a small amount, as little as one percent, can have a dramatic impact on financial results.”

Overall, companies with more engaged customers outperformed those with less-engaged customers in terms of gross margin, earnings per share and return on equity, according to market research firm PeopleMetrics. The firm adds that a brand with powerful customer engagement in place has customers who promote the brand, come back in the future, go out of their way to do business with the company, and feel strongly for a brand.

It also suggests there is a strong link between engaged customers and engaged employees. "We know customer engagement matters in terms of financial performance," notes Kate Feather, executive vice president of PeopleMetrics. “But high performing companies are also deeply invested in building more engaged employees. They see that more engaged employees are creating better customer experiences and, as a result, more engaged customers."

Harnessing insights and dreams

Firms such as Starbucks are picking up on the importance of customer engagement with new outreach and rewards initiatives planned. Starting in April, customers who register a Starbucks pre-paid card or credit card online will be eligible for benefits that include free coffee refills, free extras like flavored syrup or soy milk and two hours of free Wi-Fi per store visit. Rewards members are also eligible for a free drink when they purchase a pound of roasted coffee from Starbucks. Starbucks has also launched an online social networking community called MyStarbucksidea.com, which aims to engage customers in dialogue with each other and the company.

“By embracing our heritage, returning to our core – all things coffee – and our relentless commitment to innovation, we will reignite the emotional connection we have with our customers and transform the Starbucks Experience,” argues Starbucks CEO Howard Schultz. “I am confident that the ground-breaking initiatives we've announced demonstrate our laser focus on living up to that commitment.”

"Through our online Customer Advisory Board, we have a new platform to engage our customers in two-way dialogue so we can harness their insights and vehicle dreams as we move quickly to develop and refine technologies and products."

Deborah Meyer, vice president and chief marketing officer, Chrysler

Elsewhere, car manufacturer Chrysler has launched what it says is the industry's first online Customer Advisory Board to “establish ongoing two-way dialogue with customers and gain their insights on product features and technologies”. The online Customer Advisory Board's closed forum uses on-demand customer collaboration technology from Passenger to engage customers in active collaboration about products and business efforts.

"Through our online Customer Advisory Board, we have a new platform to engage our customers in two-way dialogue so we can harness their insights and vehicle dreams as we move quickly to develop and refine technologies and products," said Deborah Meyer, vice president and chief marketing officer, Chrysler. "Chrysler designers and engineers have always had a pulse on the market to deliver segment-leading products, but the launch of the Customer Advisory Board gives us a new way to connect with our customers to be even more responsive and innovative."

Passenger will provide a combination of social networking, community-building and collaboration technologies. "The Passenger platform will help Chrysler spark innovation and satisfy a shared desire for meaningful change through ongoing collaboration with its customers," says Justin Cooper, co-founder and chief innovation and marketing, Passenger. "Involving customers in the process promotes active participation and those customers who feel more informed have the ability to share more favorable opinions about Chrysler with their peers, the truest form of advocacy."

Digital communications agency Organic, which has been heavily involved in settting up the Chrysler scheme, sees customer engagement activities as a major growth area. Joe DiMeglio, vice president of engagement management, Organic, notes: "Brands that listen thoughtfully to their customers and put them in the middle of their organisations will win in this era where the customer's voice is both strong and visible."

Find out more about Stuart Lauchlan

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