Customer Engagement: 4 Types and New Maps

Brands today: seeking relationships, not just transactions.

To compete effectively in a fast-paced environment, companies are realizing they need to build deeper attachments with customers. They want customers who will do more than just shop — who will influence others, make referrals and even co-create new products. The umbrella term is customer engagement, and it has become a strategic imperative for many companies. But to really leverage engagement, argues Darden Professor Rajkumar Venkatesan, companies and researchers need to study the buying journey in new ways.

Engagement in Action

Customer engagement is a relatively new area of research, but what’s abundantly clear is how valuable engagement is to the bottom line. In terms of wallet share, profitability, revenue, and relationship growth, engaged customers are worth 23 percent more than average customers, according to Gallup research. In a 2016 survey by Convero, three out of every four executives said they planned to boost spending on customer engagement in 2017, a commitment that will likely continue into 2018. Research has identified four different forms of engagement, which interplay with each other:

Customer Lifetime Value (CLV)

The most studied form of engagement, CLV predicts how much revenue a new customer will likely produce over the lifetime of buying. Amazon has been out in front creating new technologies that embed in customers’ lives and boost CLV, such as Amazon Dash, a device that allows reorders of staple products with a single button tap.

Customer Referral Value (CRV)

CRV comes from customers who promote products and may be financially rewarded for doing so. They might be YouTube stars, bloggers, Instagram tastemakers and others. In its early years, the energy drink Red Bull focused on CRV, visiting college campuses to recruit and train charismatic students as brand ambassadors, many of whom they paid.

Customer Influence Value (CIV)

Though there may be some overlap in technique, the big difference between CRV and CIV is that influencers have no direct monetary incentive to call attention to the brands they do. They most likely have big social networks, talk about their experiences in a positive way and write reviews online. Fashion brands have aggressively courted influencers to share, post and link products, which often sell out fast or to bring new cachet to a declining brand. Similarly, many retailers encourage consumers to recommend products to their friends.

Customer Knowledge Value (CKV)

CKV is found in customers who have deep product knowledge (early adopters, rabid fans, app developers and designers, among others.) LEGO has Ideas, a large community of devoted builders who propose and design new kits. Starbucks’ online forum, where customers can submit product and service ideas, has generated significant innovations for the company, such as the green lid and free in-store Wi-Fi.

New Maps

Because engagement is the cumulative result of experiences layered over time, it needs to be studied in new ways. The customary approach of estimating CLV by looking at how new customers experience the traditional buying journey isn’t enough. A dual map, in which the customer’s relationship stage (acquisition, growth, retention and win-back) is mapped alongside the buying journey (pre-purchase, purchase and post-purchase), allows for companies to cultivate engagement more effectively.

By putting the two frameworks together, the firms stand a better chance of identifying “the ideal customer types to target, and the objective of the customer experience,” writes Venkatesan in an editorial published in the Journal of the Academy of Marketing Sciences. This overlay approach helps companies discover which kinds of engagement — and which customers — are the most valuable at different stages. It also helps businesses and researchers identify critical questions to investigate.

Stand for Something

Finally, in today’s world in which the news cycle is frenetic, engagement strategies are bolstered by identity. Many of the firms successfully engaging customers have done so by rounding out brand identity beyond products. Patagonia, for example, has touted environmental conservation efforts for decades. Recently, it took stands against some Trump administration policies, including a protest of a decision to reduce two national monuments in Utah. That Instagram post garnered five-fold more likes than the brand’s average posts.  Engagement via identity can help bridge the reluctance many consumers feel to engage with business, Venkatesan observes.

“Customers inherently don’t want to be in conversations with brands,” Venkatesan says. “When you understand what your identity is and how it ties in with your customers’ lives, those conversations are much stronger.” Stronger, and more welcome.

Rajkumar Venkatesan authored “Executing on a Customer Engagement Strategy,” which appeared in the Journal of the Academy of Marketing Science.