Customer engagement

Customer engagement can be measured as the strength of the overall customer relationship and through specific behaviours in websites, communities and other channels. The KPI must state whether it captures perception, emotional attachment, rational loyalty or observable participation.

When to use it

• Answer the key performance question: “To what extent are our customers engaged with our organisation?”
• Assess this KPI within the Customer perspective.
• Plan data collection, formula use, reporting frequency, and data-source requirements for this KPI.
• Compare results against the targets, benchmarks, examples, or trend guidance available for this KPI.

Origins

Customer engagement grew from relationship marketing, service-dominant logic and interactive media. Marketing scholars began treating it as a distinct construct in the mid-two-thousands, and the Advertising Research Foundation proposed an influential practitioner definition in 2006. Current practice distinguishes a psychological state from behaviours such as participation, referral, content creation and repeated interaction.

What it is

Perspective: Customer perspective.

Key performance question: To what extent are our customers engaged with our organisation?

This KPI uses the broader, traditional meaning: the strength of a customer’s relationship with the organisation across every relevant online and offline touchpoint.

The commercial objective is a loyal customer base that generates superior returns. The simple chain “satisfied customers 5 loyal customers 5 profit” is unreliable: customers can describe an offer as satisfactory and still defect.

In the mid-1990s, Xerox found that more than a quarter of “satisfied” customers left when their contract ended. Loyal customers were more often “very satisfied,” usually because of how they experienced the relationship—what would now be described as engagement.

Enterprise Rent-A-Car similarly moved beyond a conventional satisfaction measure. Its Enterprise Service Quality metric counts only “completely satisfied” customers because internal research found they were three times more likely to return and recommend the company.

Gallup’s 11-question measure classifies four relationship states:

Fully engaged:

emotionally attached and rationally loyal; normally the most valuable customers.

Engaged:

beginning to form emotional attachment.

Disengaged:

emotionally and rationally neutral.

Actively disengaged:

emotionally detached and antagonistic.

Gallup’s historical database covered almost three million customers, 47,000 workgroups, 16 industries, 53 countries and four years. Fully engaged customers represented an average 23% premium in share of wallet, profit, revenue and relationship growth; active disengagement represented a 13% discount. Organisations with optimised engagement outperformed competitors by 26% in gross margin and 85% in sales growth. These are associations and benchmarks, not a guarantee that changing a score causes the full financial difference.