Why does customer engagement matter for retailers?
The retail industry is a fiercely competitive one. The rise of eCommerce means that consumers can, and do, easily shop around for better deals, while today’s desire for speed and convenience risks eroding any sense of customer engagement and loyalty. In 2016 we saw a number of high street casualties falling into trouble as they struggled to keep pace with customers’ expectations and offer the right products.
This means marketers need to find ways to both retain their existing customers and attract new ones. According to a report from Webloyalty, only half of consumers (52%) in the UK tend to use the same retailers on a regular basis. Moreover, if all dissatisfied consumers were to abandon the retailers they currently use, the cost in the UK would amount to £120bn with the biggest impact in the food and grocery sector (£85bn).
So, it is no exaggeration to say that customer engagement, the vital pull factor that keeps consumers coming back for more, is what can make or break a retailer. Its importance, however, is being ignored – misunderstood, even. With that in mind, we were keen to explore the psychological journey that consumers go on when building relationships with businesses.
Our customer engagement study, partnering with Oxford Brookes marketing and consumer psychology professor Janine Dermody, involved a survey of more than 18,400 people globally, outlines why understanding customer engagement better could significantly improve customer relationships. For the first time, it also puts forward a model for measuring and mapping customer engagement – invaluable for marketing departments the world over.
A lack of awareness and understanding around customer engagement is, I believe, a major sticking point. All too often marketers fall back on above the line advertising to draw in new customers, without thinking about their existing customer base and how to make them more engaged (and, as a result, loyal). Our research provides the missing link – a step-by-step academic overview of the customer journey and an overview of how factors such as age, gender and geography impact on how engaged a customer is.
What it reveals about demographics
Unsurprisingly perhaps, given its competitive and fast-paced landscape, the research revealed that the retail industry had the highest overall ‘Customer Engagement Score’ (68) compared with banks which came second with 67 and mobile phone providers ranked third with a score of 64. This also reflects that shopping is generally a more pleasurable experience, compared to setting up a new bank account or comparing mobile tariffs.
The level of engagement across age groups was relatively high, with 25 – 34 year olds found to have the most attachment with an overall score of 71. The lowest level of engagement was identified in the 65+ age range, with an overall score of 64. This makes sense when considering younger age groups are often the target audience for retailers when it comes to their marketing strategies.
When it comes to gender, female respondents showed the highest level of attachment to their favourite retailers (69) compared with their bank (66) or mobile phone provider (63). In contrast, male respondents had the same level of engagement with their favourite retailer and bank, with both industries scoring 68.
Clearly, retailers understand that to generate loyalty they need to look carefully at how they are engaging with their customers. For retail, that means making sure the entire shopping experience is seamless across all channels – from mobile to in-store to delivery. Consumers expect flexibility and flawless service, and to deliver this through just one channel is no longer good enough. Taking the time to understand consumer behaviour is key – better analysis of the plethora of available data leads to better insight, a more personalised omnichannel shopping journey and finally a more engaged consumer.
What influences customers to buy?
The customer engagement model developed by Oxford Brookes is the first of its kind to map the customer journey from initial awareness of a brand or business, through to first becoming a customer, to building a relationship, increasing that engagement, and finally to the ultimate goal: becoming a loyal customer.
What the model reveals is that the initial interactions that take place between a customer and business – such as a retailer – takes place on a rational level. Who is offering the best-priced jeans? Can I get this pair of shoes online or will I need to go in-store? When moving along the journey towards repeat transactions, the decisions become much more emotional. Who has given me the best service? Who do I feel represents me best? Where do I want my hard-earned money to be spent?
A customer’s path to making a purchasing decision is complex, and it is clear from our research that companies that understand the role customer emotion plays in the engagement journey can build deeper relationships which are more likely to develop into feelings of loyalty and advocacy.
Our research also indicates that the more products and services a company has with its customers, the more engaged they are likely to be. With businesses now able to interact with their customers across an unprecedented number of channels, the potential to increase engagement is high.
However, what is also clear is that it isn’t just the number of products that build engagement, but the value the products can bring to customers’ lives – in the case of retailers, hyper-personalisation for example is key. Retailers are already taking steps into AI and the IoT to deliver this. The North Face has been experimenting with a tool called Fluid Expert Personal Shopper, powered by IBM’s cognitive technology Watson, which asks the consumer a series of questions during the online shopping process, evaluates the answers and accurately delivers tailored product recommendations. working with IBM.
Customers are more likely to be engaged with services that make things easier, quicker or offer reassurance in important areas of their lives. It seems when it comes to customer engagement, more really is more.
What it means for marketers
We will be using this research to continue helping businesses move customers from brand ignorance to brand advocacy. This is especially important as the research also showed that customers with the highestlevels of engagement said that they would always recommend a company to their friends and family.
This has even greater importance when you consider that half of the respondents in our research who came out as advocates had originally chosen to do business with a company because their family or friends used it. Advocacy breeds advocacy. And, with that in mind, marketers should be working with existing customers to ensure that they become advocates for a business. It is an invaluable acquisition tool, and one that will boost a business’ bottom line.
As for marketing teams more widely, what this ground-breaking study provides is a blueprint to achieving the holy grail: a loyal customer. Customer engagement has long been an area where practitioners have had to act on gut and intuition, but now the science and psychology behind inspiring loyalty can be better understood, and need no longer be ignored.
Why does this matter? Because ultimately engaged customers interact more with the brands they have a connection with. They follow them on Facebook, recommend them to friends and return time and time again to buy products and services. Whether it’s a new pair of trainers or a new mobile phone, the same principal applies, and it is one that makes good business sense to foster.
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