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Published: 13 June 2024
Contributor: Keith O'Brien, Amanda Downie

What is customer engagement?

Customer engagement is the act of providing positive experiences to customers across the entire customer journey. Customer engagement strategy is a hallmark of the overall customer experience.

Customer expectations have increased in recent years, leading customers to more quickly change brand loyalty. A 2024 IBM retail study found 77% of consumers across all income groups say they make tradeoffs when prices are too high. As such, organizations often need to prioritize their customer engagement efforts across the customer lifecycle to keep customers happy.

According to Salesforce(link resides outside ibm.com), 80% of customers value the experience an organization provides as much as the products and services they sell. Organizations need to connect with customers throughout their omnichannel customer journeys, from in-store interactions to social media, email, forums and contact centers. Providing omnichannel customer service is the best way to provide successful customer engagement throughout the customer journey.

Some customers increasingly want a deeper emotional connection with the companies from which they buy products and services. Other customers just want the items that they purchase to work without any issues.

Effective customer engagement helps organizations recruit new customers and retain their existing customers. 

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Why customer engagement matters

Optimizing customer interactions is likely to produce several important benefits.

Reduce churn rates: Engaged customers are less likely to leave the company they prefer. By focusing on communicating with customers and understanding their needs, they can correct any issues before they turn a customer away.

Increase customer satisfaction: Engaged customers are likely to be happier and more likely to recommend a company to their friends.

Drive an organization’s bottom line: Improving customer engagement helps organizations spend less money on finding new customers, which can cost four to five times as much as keeping their existing customers (link resides outside ibm.com).

Better understanding of core strengths and weaknesses: Organizations that prioritize engagement with customers are more likely to receive feedback about what is good and bad about their existing offerings. Advanced organizations can use this information to improve their products to drive even higher customer satisfaction.

Customer engagement trends

There are several key customer engagement trends for organizations to ensure they optimize the customer experience to their target audiences.

 

Engaging in proactive customer support

Smart organizations do not wait until a customer reached out with an issue or a question to keep in contact with them. They reach out in key moments during the customer journey, especially after purchase, to provide feedback and advice on how to use the solutions.

Sharing the company mission and values

Many customers, especially those from younger generations, expect the companies they purchase goods from to share in their worldview and perspectives. Some organizations embrace advocacy for important social causes, while others are minimalist in what they support.

Providing an exemplary brand experience

Individual consumers like brands for different reasons. They might want something that feels luxurious, fashionable or sustainable. Smart organizations understand what motivates their current and potential customers and gears the brand experience toward provoking those feelings.

Customer engagement tactics

Organizations have several ways to improve customer engagement.

  • Robust marketing campaigns: Customer engagement and marketing strategy are often intertwined. Marketing campaigns can help recruit new customers while also strengthening relationships with existing ones. Showing customers relevant content is a great way to keep them engaged and improves an organization’s brand awareness.
  • Enhanced loyalty programs: Organizations that prioritize engagement are likely to increase customer loyalty. Brand loyalty is a huge opportunity for organizations to offer incentives that encourage repeat purchases. Offering customers benefits to stay with an organization is a great way to keep loyal customers. Examples of loyalty programs include free gifts on birthdays and other special occasions, benefits.
  • Personalized experiences: From marketing to product offers, organizations can offer different ways to meet customer needs and enhance the customer experience. Organizations can offer these experiences by using customer relationship management (CRM) tools track consumers they reach through sales or communications channels. Organizations can use them as an engagement platform to track high-profile customers’ interests, so they can provide exemplary, personalized service.
  • Heightened customer service: Ideally, customers rarely need to interact with customer service professionals because the products work as expected. But how an organization responds to customer issues might be the difference between a loyal customer and one who decides to buy from a competitor in the future.
  • Customer success teams: Organizations that sell high-ticket products and services often employ customer success professionals who work directly with customers to ensure they know how to use the products.
  • Educational materials: Companies, especially business-to-business (B2B) providers, can offer customers webinars or video tutorials to help customers maximize the utility of the products and services they bought.
Customer engagement metrics

There are several different KPIs an organization can track to measure customer engagement. Tapping into real-time customer data is a great way to stay ahead of any customer issues.

  • Customer retention rates: Organizations that produce engaged customers are less likely to lose them to competitors. Tracking how many customers they keep purchasing goods from them demonstrates the health of their customer experience.
  • Click-through rates (CTR): Customers that are engaged with an organization’s products and services are more likely to click offers provided via email, SMS, social media platforms or websites. That’s why organizations work hard to get social media follows and email subscribers and use automation and personalization to offer unique communications to different segments of customers and prospects.
  • Customer satisfaction score (CSAT): CSAT is the percentage of respondents who claim to be satisfied (4) or very satisfied (5) in surveys that are offered after a touchpoint experience. Producing satisfied customers is an excellent way to retain the existing customer base while other marketing efforts go toward recruiting new customers.
  • Net promoter score (NPS): This metric identifies where customers are likely to promote a company’s product or service to people they know. It asks people whether they are 'highly likely' to recommend a product versus those who are 'unlikely' to recommend it. There is a strong correlation between word of mouth and high NPS.
  • Referral rates: Organizations that provide good customer service are likely to encourage customers to become brand advocates and share their experiences with other potential customers.
  • Customer lifetime value (CLV): Keeping customers engaged leads to longer relationships, which increase the long-term value of a customer. If an organization’s CLV decreases over time, it a sign that the customer experience is faltering.
Advanced technology changing customer engagement

A 2024 IBM consumer study found that over half of respondents expressed interest in using bots or virtual assistants (55%), augmented or virtual reality (55%), and AI applications (59%) as they shop retail.

Generative AI: There are several key use cases for generative AI to enhance customer engagement, including:

  • Conversational AI: Every customer is different. Some customers will always prefer to talk to a customer care representative. While others will prefer to engage with intelligent chatbots to get answers to their questions. Conversational marketing uses generative AI to communicate with customers and prospects through personalized, real-time interactions on various marketing channels. It powers chatbots and other tools that can remove the need for an employee to provide information.

  • AI-assisted customer service: An Institute for Business Value study found that 63% of executives planned to use generative AI to help customer service agents by the end of 2023. Generative AI can help agents find answers to customer issues quicker by searching through previous call transcripts or other customer data.

  • Predictive customer service: Organizations can use information from customer interactions to create dynamic FAQs of the most frequent questions and answers or preemptively create resolutions to future issues.

  • Sentiment analysis: Generative AI can analyze vast amounts of customer data to extract trends, behaviors, preferences and feelings. Curating and using this information empowers businesses to understand, connect with and serve their customers. For instance, the data can help improve targeted marketing campaigns or product and service offerings.

Machine learning (ML): Organizations that collect a lot of customer feedback can use ML to parse that information and generate actionable insights. ML can use data and algorithms to enable AI to imitate the way that humans learn.

Automation: Automation helps organizations streamline workflows and customize experiences. An organization that has embrace automation can provide an excellent customer experience from awareness through to purchase.

For example, a prospect that comes to a website can engage with an AI chatbot that can provide more information. Those customers can request more information by supplying their email address. Organizations can set up email workflows to supply more information, exclusive offers and request feedback.

Augmented reality (AR): AR involves real-time integration of digital information into a user’s environment. Organizations can improve customer engagement by using AR to show customers how personal care products look on them or household goods look in their homes.

Virtual reality (VR): Organizations can use virtual reality to create even more immersive experiences for their customers. They can create marketing materials, product visualizations and other experiences to help customers make important purchasing decisions.

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Footnotes

What Is Customer Engagement?, Salesforce