A recent Harvard Business Review article (Customer Loyalty is Overrated, by A.G. Lafley and Roger L. Martin, Jan-Feb 2017) makes the point that loyalty is driven primarily by habit, or “cumulative advantage” vs. “competitive advantage”. The authors make the point that the brain is wired to take the easy route and repetitive buying of a familiar brand is much easier than consciously making a new decision with every purchase. And “as long, of course, as the chosen product consistently fulfills expectations”, the customer is most likely to continue to purchase the tried and true.
The thesis makes sense. It is the reason that it is so hard to introduce a new product in the marketplace and why companies go to such length to protect the brand image. Keep customers happy and there is no reason for them to switch. It is the logic behind much of the work we do on the economic impact of customer experience leading to higher customer retention and bottom-line benefit.
But our research (2016 Customer Engagement Study, conducted by CX Solutions and Voice Crafter) shows that “Customer Engagement” is a level beyond loyalty or habitual purchasing. Customer Engagement includes both customer “affinity”, i.e., feelings of liking or attraction to a brand, and “activation”, i.e., engaging behavior towards a brand. We measured levels of customer engagement through feelings of emotional attachment (e.g., feelings of pride in the brand and willingness to go out of their way to purchase or continue to purchase even if not the lowest price) and examined associated customer behavior of brand engagement.
So why do we say that Customer Engagement goes beyond Loyalty or Willingness to Recommend? As a starting point, customers who are highly engaged with a brand continue to do business with a brand and they recommend the brand to others. However, highly engaged customers also exhibit a variety of other behaviors that go beyond the traditional measures of loyalty. For example, highly engaged customers are more likely to:
Therefore, Customer Engagement is good for a brand not only because highly engaged customers keep doing business and promote the brand, but because Customer Engagement increases and sustains a customer’s physical and psychological “presence” in his/her relationship with a brand, which has a number of benefits that go beyond repeat purchases, including a defense against potential issues or price increases.
Our research found that companies that have a high level of Customer Engagement (e.g., Chick-fil-A, Southwest Airlines and USAA) have achieved that through emphasis on (1) highly engaging employees, (2) customer-friendly technology, and (3) superior response to critical incidents (e.g., complaint and claims handling).
Simply put, companies with high levels of Customer Engagement make it easy for customers to both continue to purchase (don’t stop the habit) AND to amplify the brand through their actions. We find that measuring and driving “Customer Engagement” is a next level measure beyond loyalty or NPS that impacts the bottom line and increases customer stickiness for long term success.
Qualtrics XM Summit
March 6-9, 2018
Salt Lake City, Utah