Changing the Conversation: Engaging Customers Creates Revenue
Changing the Conversation: Engaging Customers Creates Revenue By Caroline Smith
A lot of companies focus on employee engagement to boost their bottom line, but many don’t realize that customer engagement is equally important when it comes to boosting revenue. According to a recent Gallup study titled State of the American Consumer, “companies that engage both their employees and their customers gain a 240% boost in performance-related business outcomes.” Measuring the level of employee engagement can lift productivity and commitment to company goals, which leads to exponential increases in profit. Gallup’s study shows that measuring and focusing on improving customer engagement can lead to a larger share of “wallet, profitability, revenue, and relationship growth.” In fact, customers who are fully engaged with a company’s brand can mean an average 23% premium of that share versus actively disengaged customers (representing a 13% discount in those same measures).
Since the financial collapse in 2008, followed by the Great Recession, American consumers have started questioning the businesses they give their money to. The trust they once had in the businesses they visit every day has morphed into a more cautious and demanding attitude, and consumers are looking at their own financial habits with a more critical eye. Since 2008, on a daily basis, Gallup has polled U.S. adults on the nation’s economic conditions and whether they believe those conditions are getting better or worse. (Note: the index has never been positive). “Just before Lehman Brothers filed for Chapter 11 bankruptcy protection on September 15, 2008, the index sat at -39. A month later, it had tumbled to -65.” This chart shows the yearly averages of the U.S. Economic Confidence Index, which has been slowly improving over the past few years until 2013 when it reached a six-year high of -16. The more concern for the nation’s economic condition, the less a consumer will spend on a daily basis.
With the changing economy, companies must meet the new needs of their customers. Consumers expect more for their money and many are willing to take their wallets to companies with similar interests and values to themselves – “they [consumers] expect businesses to earn their dollars; they won’t just hand them over.” In this study, Gallup identifies three different types of consumers:
Fully Engaged Customers are emotionally attached and rationally loyal. They’ll go out of their way to locate a favored product or service, and they won’t accept substitutes. True brand ambassadors, they are a company’s most valuable and profitable customers. Indifferent Customers are emotionally and rationally neutral. They have a take-it-or-leave-it attitude toward a company’s product or service.
Actively Disengaged Customers are emotionally detached from a company and its products or services. They will readily switch brands. If switching is difficult or impossible, they may become virulently antagonistic toward the company. Either way, they are always eager to tell others exactly how they feel. These three types of customers are all defined by emotions. In the theory of classical economics, consumer decisions are based solely on rationale. In actuality, rational considerations account for less than one-third of human decisions and behaviors. The emerging science of behavioral economics recognizes that the majority of a consumer’s buying decisions are made from the heart rather than the head. So, how do you capitalize on this as a product or service provider?
Your greatest tool can also be your biggest weakness: the brand promise. A brand promise tells the world what a company stands for, what makes its products or services different from the competition’s, and why it’s worthy of being chosen by customers. However, if you spend too much time sharing the promise without soliticing feedback and involving customers, the message will fall flat.Too often, companies fall into the myth of social media traction, and believe that more followers will get them more customers. Followers on Facebook, retweets on Twitter and likes on Instagram do not necessarily indicate an engaged customer. In fact, check out the insights below on social media use:
94% of people report that their number one reason for social media use is to connect with friends and family, while less than one-third of respondents indicated they use social media to find product reviews or information. The influence of social media on purchasing decisions is decidedly weak, with 62% of people saying that social media has no influence at all on their decision making. Gallup’s findings even suggest that “consumers are highly adept at tuning out brand-related Facebook and Twitter content.” In other words, organizations are using social media to talk at their customers instead of engaging them in the conversation. The study explains how social media is not a solution, but rather a tool:
These channels do not motivate prospective customers to consider trying a brand or recommending a brand to others. Therefore, if companies want to acquire new customers, their best bet is to engage their existing customers and inspire them to advocate on their behalf. Customer engagement drives social engagement – the degree to which consumers will work for or against an organization within their social networks – not the other way around.
So What’s the Bottom Line?
Find a way to align your employee and customer engagement strategies. Gallup has found that when organizations find a way to successfully engage both customers and employees, the result is a 240% boost in performance-related business outcomes. If you’re focusing on maximizing only one form of engagement or the other, your company may still experience growth in the short run, but long term growth is only sustainable if you align your efforts to improve both customer and employee engagement.
All quotations, facts and statistics are taken directly from State of the American Consumer: Insights for Business Leaders, 2014. A Gallup Study. Can be accessed at: http://products.gallup.com/171722/state-american-consumer.aspx.