The Four Drivers of Customer Engagement

by: on 13 August 2015

Quantifying customer engagement is not an easy business, Rosetta's research has found four ways that brands can drive loyalty

Highly engaged customers buy 90% more frequently, spend 60% more per transaction, and have 3x the annual value compared to other customers

Customer engagement can be difficult to define and even harder to quantify. How do you put a number on how your customer feels? And how do you determine the ROI of creating a close relationship with customers? Rosetta Consulting’s Customer Engagement Consumer Survey identified four tangible and measurable ways that engagement drives brand value: stronger loyalty, reduced competitive threat, greater advocacy, and increased opportunity for upsell and cross-sell. As a result of these four drivers, the study found that highly engaged customers buy 90% more frequently, spend 60% more per transaction, and have 3x the annual value compared to other customers.

About the Survey

The Rosetta Consulting Customer Engagement Consumer Survey polled 4,800 U.S. consumers about their experiences with 83 market-leading brands in 15 different industries. Respondents were surveyed on attitudes (including perceptions, feelings and opinions), as well as behaviours (including advocacy, interactions and transaction history). Highly engaged consumers were identified using a predictive scoring mechanism that selected the respondents that best demonstrated a broad range of key engagement characteristics.

The study identified four key attributes among highly engaged consumers that deliver increased value for the brand. Brands that focus on these objectives will be better able to create highly engaged customers and drive business impact. 

Stronger Loyalty

94% of highly engaged customers describe themselves as loyal vs. 19% of others

Highly engaged consumers exhibit stronger loyalty, both in terms of what they say (stated loyalty) and what they do (repeat transactions).  Brands seeking to drive loyalty through higher engagement should understand and track both the attitudes and the transactional data of their customers.  This provides a more complete measure of loyalty, not only in the traditional behavioural sense, but also incorporating the emotional commitment their customers have to the brand.

While not appropriate for every brand, loyalty programs are one of the most common ways that brands generate repeat purchases and emotional commitment. Birchbox, an ecommerce shop and monthly subscription service (recently deemed the “next generation beauty magazine”), fulfills consumers’ needs for fun and self-expression by letting them try out new, and often otherwise cost-prohibitive, beauty products. Customers are rewarded with gifts and surprises when they shop, refer friends, and submit product reviews. By making the world of high-end beauty more accessible and by driving loyalty, Birchbox reports its 2014 sales are on track to triple, with more than 50% of monthly subscribers making additional purchases from the shop.

Reduced Competitive Threat

Highly engaged customers are 2x more likely to purchase their preferred brand even when a competitor is more convenient or has a better price

Beyond simple measures of repurchase rates and stated loyalty, highly engaged consumers also experience narrowed consideration sets, meaning they are less likely to consider and evaluate competing brands. As a result, they are less likely to consider switching and are more likely to re-purchase.

While this narrowed consideration set is a key element of reducing competitive threat, highly engaged consumers are also “sticky.” A sticky consumer will remain loyal even in the face of viable (e.g., cheaper or more convenient) alternatives, and is surprisingly willing to overlook minor shortcomings to purchase their favourite brand.  These shortcomings may include occasional functional and convenience-related mishaps, a negative experience, or even higher prices.

This kind of devotion and stickiness can act as a buffer from the promotional and acquisition efforts of competitive brands.  As a result, brands that succeed at creating high engagement levels are less prone to competition on the basis of price and may be able to reduce their investment in marketing (e.g., advertising, promotions, etc.) and traditional consumer services (e.g., physical locations, 24-hour support, etc.) to stay competitive. 

Greater Advocacy

Highly engaged customers are 4x more likely to have advocated to colleagues and acquaintances

Highly engaged consumers are excited about their favorite brands and want to share their positive experiences. Advocacy is a key factor in enhancing brand value, as customer recommendations have a “halo effect” - generating consideration, trial and new customer revenue, among other benefits.  And in today’s empowered age, a customer’s social voice is an increasingly important factor in their value to the brand. Those who love and recommend the brand can be just as valuable as customers with the highest spend.

Highly engaged customers are so enamoured with their chosen brand, they even feel comfortable recommending it to people they are less close to, such as colleagues and acquaintances.  Furthermore, brands with a greater percentage of highly engaged customers have significantly higher Net Promoter Scores (NPS, a standardized measure of advocacy). In fact, top-performing brands (i.e., brands where 15%+ of their customers are identified as highly engaged) showed an impressive average NPS score of 41%, as compared to others brands who scored an average of 14%.

Increased Opportunity for Upsell and Cross-sell

Highly engaged customers are 6x more likely to say they would try a new product or service from the brand as soon as it comes out

Finally, highly engaged consumers actively seek to deepen their relationships with the brands they love. To grow their connection to the brand, they are more open to promotional efforts and discovering additional products the brand might offer. This behaviour partially manifests in increased willingness to try new products, upgrade their current experience or buy other products from the same brand – all of which provide increased value to the consumer, as well as financial value to the brand.

For example, highly engaged airline customers are 3x more likely to pay for additional in-flight services such as a meal or extra legroom, and are 3.5x more likely to open an airline credit card. Likewise, highly engaged mobile service customers are 3.5x more likely to upgrade their service for benefits like more talk time or phone damage protection, and are 2.5x more likely to purchase a data plan for an additional device such as a tablet.

Any way you look at it, engaged customers are your best customers. Cultivating and retaining engaged customers, and optimizing to deepen the relationship between the brand and the customer at every touch point is the foundation of customer-centric growth.

By Chetna Bansal, Partner of Rosetta Consulting