As a business variable, customer engagement is messy. It’s hard to quantify, and therefore hard to measure. It doesn’t fit particularly nicely into a chart or graph. Customer engagement is all about human behavior, and human behavior is always complex rather than mathematically convenient.
That being said, businesses still need to be run and budgets still need to be set. In order to know whether or not your customer engagement strategies are financially beneficial, there needs to be some way of comparing the money put into customer engagement with the value that comes out—preferably without bringing quantum mathematics into the mix.
The bad news is that there’s no one objective way to measure the ROI of customer engagement. However, that emphatically does not mean that quality customer engagement doesn’t provide concrete, monetary value. Here are some ways in which a fully engaged customer base can plump up the bottom line:
1. Increased share of wallet
Customers that are engaged by a business will spend a greater proportion of their available funds on that business than they would otherwise. All in all, a company with an engaged customer base can expect to see an average increase in share of wallet of 55%.
2. Customers are less price-sensitive
Fully engaged customers are more willing to pay a premium on goods and services, because they feel the brand is worth the extra cost.
3. Lower customer attrition
Engaged customers are loyal over long periods of time. Organizations that successfully engage their consumer base see 63% fewer customers cancel or leave for competitors as compared to their less-successful counterparts.
An engaged customer is not just a satisfied customer, but an enthusiastic one. These are the customers who tend to become promoters, bringing in new business opportunities and potentially saving your organization a great deal on sales and advertising costs as well.
5. Questions being answered in community forums
Here’s one most people don’t think about: an engaged customer base means an active community. Not only does that reinforce loyalty, it also provides informal channels where customers can ask questions and get answers. This means the company itself needs to spend less time and resources troubleshooting and answering questions for their customer base—especially since these answers are then available to the community for as long as the forum stands.
All of these factors are just pieces of the puzzle, but together they can start to give a clearer sense of the overall ROI of customer engagement. Certainly, taken together they have a substantial impact on actual revenue. According to research by Gallup, a fully engaged customer base brings in 37% more annual revenue for retail banks, 29% more revenue for online retailers, and 46% more revenue for hotels.
Small wonder, then, that Gallup goes on to declare customer engagement the definitive predictor of business growth. Quality customer engagement means a prosperous business that will be able to reap the benefits of their close relationship with their customers for years to come.