Customer retention > Customer engagement

What is customer engagement? How engagement leads to retention

Danette Acosta

No matter how intangible and unmeasurable feelings may seem, marketing experts managed to wrap them in a highly valuable strategy—customer engagement.

Customer engagement drives sales, promotes branding, strengthens loyalty, and powers retention. Without a constructive professional approach to this factor, it's nearly impossible to stay ahead of the competition.

In this article, you'll learn about customer engagement, its utter importance to your success, and ways it fuels retention.


What is customer engagement?

In short, customer engagement is the depth of the relationship a customer has with a brand. The majority of customer engagement is built on emotions. Here are some examples of customer engagement:


  • When customers like your brand, they are likely to buy or sign up.
  • When customers love your brand, they are likely to continue buying or renewing subscriptions.
  • When customers enjoy your brand, they are likely to recommend it to others.
  • When customers relate to your brand, they are likely to give valuable feedback.

According to Gallup, fully engaged customers represent a 23% premium in terms of wallet share, profitability, and revenue as well as relationship growth over average customers.

While the relationship is emotional, it's possible to measure and improve it to retain clients and their loyalty. By engaging customers consistently, you can build and enhance the "human-to-human" connection, thus working beyond transactional relationships.

Every interaction your company has with a client offers the potential to improve customer engagement, be it signing up, participating in a loyalty program, filling out a survey, receiving an email, writing reviews, etc.

Each time you interact, you can strengthen the emotional connection and tie the customer closer to your brand.


Why engagement builds businesses faster

Customer engagement can become the key to building your company faster and boosting revenue substantially.

When it comes to building your business, customer quality wins over quantity. Connection and loyalty are integral to the success of your company. Customer engagement encompasses interest, loyalty, and commitment. All these factors are paramount to business growth.

In short, an engaged customer is a happy and loyal customer, who is likely to stay on board and recommend your services to others, thus helping you build your business.


What does customer engagement look like in metrics?

To figure out what brings customers to the company and keeps them coming back, you need to understand the customer's emotional and rational attachment, as well as spending patterns.

While customer engagement is mostly an emotional factor, you can measure it. By focusing on the right metrics, it's possible to adjust your engagement and retention strategy to drive the company forward.


High product/service usage

The more often customers use your services, the happier they are with them. Accordingly, you must be doing something right with your engagement efforts. The usage metrics to pay attention to are:


  • Frequency — gives you an idea of how often a customer uses your product over a certain period. Is the customer incorporating the product into their routine?
  • Average time — helps you see how much time the customer spends using your product on average. By filtering this information through your company's KPIs and customer history, you can get valuable context for customer engagement.

High frequency and high average time spent using the service or product are indications of satisfactory customer engagement.


High DAU (daily active users)

When a company sees a high number of daily active users, it's likely to enjoy better customer engagement benefits.

You can count the number of active users to establish a pattern. When you filter this parameter by active daily or monthly users, you are getting an indication of customer engagement.

To get a deeper understanding of this metric, you can review DAU across customer segments. This can help you find trends to drive your engagement and retention campaigns.

For example, you can find out that your users stop being active three months after customer onboarding completion and channel your resources toward a re-engagement campaign during that period.


Low churn rate

Customer engagement is directly tied to your retention effort. The lower the churn rate is, the higher the retention rate is, which indicates satisfactory customer engagement.

A high churn rate is an indication of many problems, including poor customer engagement efforts. By analyzing churn patterns, you can identify periods when customers are likely to leave and boost your engagement efforts accordingly.


High referral rates

Referrals are among the most important benefits of your customer engagement efforts. If you see customers referring your services to others, the engagement levels are high.

While low referral levels don't necessarily indicate poor engagement efforts, you can always increase them by tweaking the engagement strategy.


License utilization

By measuring the number of active users in an account against the purchased number of licenses, you can gain insight into upselling opportunities and measure customer engagement against the capacity.   

If customers aren't approaching the maximum license allocation, they may require a new offering.

These metrics allow you to see how satisfied customers are over the long run, thus helping you understand their engagement levels and retention potential.  


Social media activity

If you are employing social media channels for marketing and engagement purposes, you can measure customer engagement by monitoring their activities. Shares, comments, and mentions can show how well your clients relate to your brand and how likely they are to recommend it.


How engagement fuels retention

A well-engaged customer is likely to stay with your product or service for a long time, thus improving your retention rate. The reasons for their staying are:


  • Understanding that your product/service carries great value.
  • Feeling that the company cares about their interests and success.
  • Feeling that the product is the top option on the market for them.

Customer engagement and retention go hand in hand. The more valuable customers feel your offering is, the longer they are going to stick around. Without a proper approach to engagement, retention is virtually impossible to achieve.


How to increase your customer engagement

Digging deeper into your engagement strategy is the key to reaping the benefits. Since customer preferences change continuously, you need to keep your tactics up to speed and constantly look for improvement opportunities.


Offer incentives

While you are tracking your customer engagement metrics, you could identify drops in activity.  It could be the right time to offer incentives, such as "You've renewed your contract 12 times, get one month free!"

You can encourage them to participate in a rewards program to get discounts on future services.


Launch a VIP program

Consider launching a VIP program to reward your most loyal customers. Being part of such a program is often a big enough incentive to continue using products and recommending them to others.


Have great customer support

To succeed while using your product, customers need high-quality customer support. It should be readily available whenever they have questions.

The support must be ongoing and highly proactive. By analyzing your customers' behavior, you can gain insights into areas they need help with. By offering it at the right time, you are strengthening the emotional connection.

Consider employing in-app chats to provide one-on-one easily accessible help to your customers. As a bonus, you can use the chat to ask specific questions about their engagement.


Ask opinions

One of the best and simplest ways to improve engagement is to ask customers what they think about your product directly. Launch a short NPS survey to learn your customers' opinions to gain valuable insight.

When customers see that they help your company grow, they become more attached to it and often turn into brand ambassadors.


Educate customers about your services

If you notice that a customer is regularly engaging with only a certain number of features, communicate the benefits of other services. Let them know about vast opportunities of options they aren't utilizing.

Make engaging instructional videos and step-by-step articles to help them visualize how they can maximize your services.

Offer insight into how your product/service can be relevant to their company as it grows and changes.


6 examples of stellar customer engagement

Let's take a look at what other companies have done to improve their customer engagement efforts and drive retention. 


1. Asics

Asics creates an omni-channel customer support strategy, moving from being product-centric to focusing on being customer-centric. Director of global omnichannel at Asics, Alice Mitchell, says: 

"Our omnichannel vision is centered on a single view of the customer, and from there a unified customer experience of Asics. It's not only about having one view of a customer, but going further to say you can experience Asics, anywhere."

2. Autodesk

Autodesk focuses on cultivating customer community and making customers feel as if they are a part of the brand. Thus, customers easily become brand ambassadors while helping others with the onboarding process.


3. Sprout Social

Sprout Social offers users a great incentive by inviting them to an elite community. It brings many users to their doorstep to reap the benefit of the elite offers.


4. Quuu Promote

Quuu Promote created a loyalty badge system to encourage users to promote more content. When a user's piece of content attracts a certain number of clicks, they get a badge and free credits toward the next purchase.


5. Duolingo

Duolingo learns customer preferences to tailor the language learning programs to their goals. For example, if your language-learning goal is culture, the program focuses on teaching you related words and phrases first.


6. Netflix

Netflix encourages customer interaction with the platform to learn their preferences and tailor the offering to their needs. By providing users content they appreciate the most, the company keeps them renewing the subscription.


Powering your retention tactics with customer engagement

Customer engagement is one of the driving forces behind retention. By keeping your customers happy and involved with your product, you can boost their loyalty, increase the time they spend with your company, and turn them into brand ambassadors.

If you focus on improving your customer engagement strategy, you can reap the financial, emotional, and promotional benefits of high retention rates.


By Danette Acosta

Editorial Lead at ProfitWell, helping ProfitWell take its content to the next level. When she's not busy creating dope content, you can listen to her on the radio.

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