Executing on a customer engagement strategy

Abstract

The relationships between a firm and its customers are ever evolving, with growing opportunities to connect to other customers and firms through social media and mobile devices. Increased competition and advances in technology that are reducing barriers to entry have motivated firms to adopt several strategies to build a deeper level of attachment with their customers. Such a strategy is now termed as “customer engagement.” Reflective of the trend toward customer engagement, this special issue on “Understanding and Managing Customer Engagement through Customer Relationship Management” presents a set of studies that lay the foundations of a new literature that I believe is poised to grow in importance and impact. These papers provide definitions of customer engagement and develop theoretical frameworks that identify the drivers and consequences of customer engagement (Pansari and Kumar2017; Harmeling et al.2017; Homburg et al.2017).As the academic field is developing the concept of customer engagement and its nomological distinction from other concepts such as loyalty and service dominant logic (Hollebeek et al.2017), firms are experimenting with strategies that could develop relationships with their customers beyond just monetary transactions. Consider the company Amazon.com and its attempts to develop customer engagement, for instance by developing Amazon Dash, a device that can be paired with a product of a consumer’s choice and allows the consumer to reorder these products at the push of a single button. The objective here is to introduce a device that embeds with consumers’ everyday routines and improves customer retention rate, share of wallet, purchase frequency, and ultimately customer lifetime value (CLV). To improve referrals, Amazon allows consumers to “get $5 when your friends join Prime,”Footnote1and the Amazon associatesFootnote2program allows participants to advertise products and earn up to 10% in referral fees. In 2005, Amazon launched a crowdsourcing marketplace called Amazon Mechanical Turk (mTurk) to improve improve feedback from customers and also learn from customers’ knowledge about products. The marketplace allows employers to post jobs and workers to select jobs and complete them in exchange for payment.Footnote3Open to any company, the service can ultimately help Amazon and its customers to gain knowledge from the jobs that are offered. Customers’ reviews, an integral part of the Amazon post-purchase experience, significantly improve the influence its customers can have on each other. Amazon provides opportunities for its customers to interact with Amazon directly and with other current and potential Amazon customers.The above example shows how customers are now continually connected to other customers and firms, through the internet, mobile applications, e-commerce platforms, and social networks. As firms adopt strategies to enable interactions among the triad of the customer, firm, and other customers, measuring and managing the value of customer engagement (CEV) becomes a strategic imperative. A recent Gallup research study shows that engaged customers offer a 23% premium in terms of share of wallet, profitability, revenue, and relationship growth over the average customer across retail, consumer electronics, and hospitality industries (Pansari and Kumar2017).Footnote4And while only 58% of executives in a 2016 Convero survey claimed to have a formal customer engagement program in place, 74% of the executives said they would increase spending on customer engagement over the next year.Footnote5Over the last decade several academic articles have defined customer engagement from different perspectives. A common thread in these definitions is the fundamental assumption that customers are valuable to a firm in many ways in addition to his or her transactions. This is an evolution of the relationship marketing perspective wherein a customer’s transactions with a firm is the base for a broader mutually beneficial relationship spanning word of mouth, and co-creation of new products.Several studies in this issue, namely, Pansari and Kumar (2017), Harmeling et al. (2017), Homburg et al. (2017), and Menguc et al. (2017) focus on how firms can develop customer engagement through marketing and employee engagement. This is a first step in a critical direction toward value creation for different customer types. In this editorial I propose that academics and practitioners can benefit from combining the perspectives of customer experience (Lemon and Verhoef2016) and engagement literatures. I base this on the following process-based premise: Customer relationships evolve through different states that can be broadly categorized as acquisition, growth, retention, and win-back. Customers engage in repeated journeys with the firm and their social networks in each state. This synergy between short-term experiences and the accumulation of such experiences that lead to progression in relationship states lead to different levels of customer engagement. My perspective is also reflective of the emphasis of Homberg et al. (2017) on touch point journeys across firms’ mindsets, strategy, and capabilities.Current research has a good understanding of experiences from pre-purchase to post-purchase that can lead to repeated transactions and can maximize customer lifetime value (CLV). But the role of experiences in creating value for customers to advocate for a brand or provide information that can allow brands to develop better and newer products is unknown. Managing this multidimensional perspective on the customer experience and journey maps is exactly what is needed to develop customer engagement-based business models and processes.I next propose a framework for developing a journey map–based view of customer engagement. Another aim of the framework is to be enable managers to build an engagement-oriented firm. I highlight some of the managerial implementation issues in theconclusionsection.Footnote6