Editor’s note: The Rules of Engagement is a series of five articles written by Paul Butcher, director of research at Populus, a Treasure Valley research firm. Populus, in conjunction with the Idaho Business Review and Price Associates, is in its fifth year of conducting the Best Places to Work in Idaho program. Best Places to Work in Idaho is an annual, free and confidential employee survey-based competition open to any Idaho business with 20 or more workers. Organizations that score well on the surveys are eligible to be named one of the top employers in the state. Winners will be featured in a special publication produced by the Idaho Business Review and will be recognized at a special awards ceremony in April 2012. For more information and to register for free, go to www.bestplacestoworkinidaho.com by Jan. 31, 2012.
This article is the second in a series of five articles in which I outline a step-by-step approach to achieving higher levels of customer engagement. The case for doing this is compelling. Actively managing and increasing customer engagement is often the single most powerful thing an organization can do to improve its sales and profit margins.
What is customer engagement? And, more importantly, why should you or I care about it?
The second question is easier so I’ll answer it first. For those of you that missed last week’s first article in this series, Rule #1 states that “Customer Engagement = $.” More engaged customers are more profitable for your business.
In fact, Ed O’Boyle, practice leader, Marketplace of Gallup Consulting, has shared the following findings from Gallup’s economic tracking survey, where they quantified the performance of customers based on their levels of engagement.
“Fully engaged customers provide a 23 percent premium in performance, whereas fully disengaged customers create a 13 percent discount in performance.”
“The overall consumer mix of engagement:
26% Fully Engaged – Performance Index 123%
27% Engaged – Performance Index 107%
27% Not Engaged – Performance Index 99%
20% Actively Disengaged – Performance Index 87%”
This information was reported in the Colloquy Blog (http://www.colloquy.com/blog/blog_view.asp?xd=8992).
Defining customer engagement is a little trickier. Customer engagement refers to an active and deep-seated relationship between an organization and a customer. It is often used interchangeably with loyalty.
Engaged customers are easy to identify. They are characterized by the following behaviors:
• They purchase from you more frequently than most.
• They spend more on each purchase than most.
• They take less money to service as they are more familiar with your product.
• They advocate for you more than most.
• They stay with you longer than most.
• They are more willing to help you succeed.
• They are less price sensitive.
Engagement is longer lasting and more strongly correlated to organizational profit than satisfaction. Satisfaction is more transaction-related, whereas engagement is more relationship-related. Customers can be very satisfied but not demonstrate any of the engagement behaviors outlined above and consequently not be profitable customers.
I’m not advocating that an organization should disregard customer satisfaction. Customer satisfaction is still important. But satisfaction should be viewed in the context of customer engagement in order to make it more relevant and actionable.
Where do you start? Maybe your organization has decided to focus on improving its customer engagement for 2012. What’s the first thing your organization needs to do?
Not an accident
Another way to think of this is that organizations with high levels of customer engagement don’t get there by accident. Organizations with high levels of customer engagement have leaders that took action to implement a process and set of tools that enable their organizations to measure and manage the level of engagement of their customers on an ongoing basis.
Don’t miss next week’s installment where I continue to layout the roadmap for organizations to help them achieve higher levels of customer engagement, one rule at a time.
Paul Butcher is director of research for Populus, the research company behind Best Places to Work in Idaho. Contact him at email@example.com. For more information about Best Places to Work in Idaho, visit www.bestplacestoworkinidaho.com.