Customer Engagement

Insight: Do customer engagement metrics matter?

Customer Engagement MetricsForbes Insights and CRM provider Pega have released their list of the “50 Most Engaged Companies.” The list is chock-full of the usual suspects – we’ll give you one guess as to the company that tops the list – and is based on typical engagement metrics such as Net Promoter Scores. While “increased customer engagement” tops the wish-list of most CMOs, some of the same criticisms that have historically been leveled at loyalty marketing – the concept of loyalty is ill-defined, loyalty marketing is disconnected from the bottom line, and loyalty marketing simply subsidizes existing behavior – can be applied to customer engagement as well. What does customer engagement mean – and does it matter? Let’s go to the experts.

By Rick Ferguson

The Pega-Forbes list of the most engaged companies is, for the most part, filled with the names you’d expect: the Top Ten most engaged companies include Amazon, Google parent Alphabet, Starbucks, Foot Locker, Alaska Air, FedEx, Southwest Airlines, Lowes, and Nordstrom. To compile the list, the report relies on three metrics: Social media engagement, Net Promoter Scores (NPS), and year-over-year sales growth.

The immediate question: How important are those metrics, and what do they mean to a company’s bottom line? Social media engagement, as any marketer will tell you, can be positive or negative; let’s assume that the report filters for positive social media connection. Net Promoter Score, critics of that metric will tell you, provides a snapshot of customer satisfaction, but can vary wildly and is more useful as an easy metric to sell to the C-Suite than it is a predictor of growth. Year-over-year sales growth, meanwhile, might not have anything to do with the other two metrics. Several of the companies on the list are retailers – and any of them who made the list might wonder when that high NPS is going to translate into increased sales, or provide them with competitive insulation against Amazon, the list’s most engaged company.

So how useful is this list, and what lessons can we learn from it? Fortunately, Forbes and Pega produced a companion report, “The New Rules of Customer Engagement,” which surveys 200 C-suite executives to determine what they think of customer engagement as a business imperative. The survey separates customer engagement “leaders” versus “followers” based on respondents’ self-reported satisfaction with their own customer engagement efforts and metrics. Here are a few key insights from the report:

  • 93% of executives do not think of customer engagement as simply “industry jargon.”
  • 88% of “engagement leaders” have created a position responsible for customer engagement in the past 12 months.
  • 69% of “leaders” have developed new programming to engage customers (such as a loyalty program).
  • 56% of “Leaders” Reorganized internally to get rid of silos/improve customer engagement.

These are all worthy activities for any customer-centric organization, and we may surmise that most successful companies, whether or not they made the “Top 50” list, engage in them. Interestingly, large percentages of “followers” also engage in these activities. The only challenge, really, with “customer engagement” is understanding how to define it, and how to measure it. The report appears to equate customer engagement with customer-centricity, and then to measure success via traditional customer satisfaction metrics. The problem with relying solely on customer sat metrics is that it’s difficult to tie customer satisfaction to incremental behavior. You might invest millions of dollars in improving customer engagement metrics without motivating increased frequency, purchase size, or retention in your key customer segments. Absent moving the needle on those metrics, what demonstrable impact on revenue can you attribute to increased customer engagement?

Here’s another way to measure the success of your investment in engagement: define and measure its impact on the value of your customer relationships. First, define what a best customer relationship looks like. What is the tenure of your best customers? How valuable are they on an annual basis? How often do they purchase? What does their buying cycle look like? Where are their most crucial touch points? Most importantly, what is the lifetime value of that relationship to the organization?

Once you’ve defined what a valuable customer relationship looks like, you can target your engagement efforts not solely on improving NPS, but also on changing customer behavior, so that new customers follow the same customer journey as your longtime best customers. It becomes possible to measure each offer, each communication, and each interaction by its ability to dive incremental behavior. NPS is only as important as its ability to get a customer to buy more, and buy more often.

One more key point: Customer engagement efforts typically focus on organization on improving two key relationship drivers: Trust and Commitment. Companies that deliver excellent customer service, personalized experience delivery, and targeted, relevant communications will deliver higher customer satisfaction by increasing feelings of trust and commitment in their customers. Increasing incremental behavior, however, typically requires a focus on a third relationship driver: Reciprocity. Your customers must feel that, if they give a little more, you will, too—in the form of rewards and recognition.

Combine traditional customer engagement initiatives with reward and recognition tactics, and you have loyalty marketing. It’s the focus on incremental behavior change, rather than customer satisfaction alone, that will drive the success of most customer engagement efforts. The Forbes/Pega list is a useful starting point, one that highlights the importance that senior executives place on customer-centricity. Engagement metrics, however, only tell part of the story.

Rick Ferguson is Editor in Chief of the Wise Marketer Group and is a Certified Loyalty Marketing Professional (CLMP).

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