Customer engagement is a crucial part of establishing a loyal client base, maintaining market share and setting the groundwork for greater profitability. To retain a competitive advantage, businesses need to engage with their customers at several levels.

The success of a business hinges on its ability to satisfy customers and obtain new ones. Customer engagement, which entails building a positive relationship with consumers, is a key method for generating return business, increasing the number of products and services customers purchase from a company and having customers recommend a company to others within their field.

According to a 2009 Gallup report, organizations that focus on optimizing their customer engagement outperform their competitors by 26 percent in gross margin and by 85 percent in sales growth. On average, a fully engaged customer represents a 23 percent increase in profitability and revenue over the same criteria in a standard customer.

The advantages of engaged customers can vary between companies. An Economist Intelligence Unit (EIU) survey of executives across industries found that 80 percent of respondents agree that improved customer loyalty is a major benefit of engagement, 76 percent consider increased revenue another advantage, 75 percent cite increased profits and 56 percent assert greater market share as one of the key benefits.

According to the EIU survey, businesses characterize an engaged customer as one who: recommends products and services to others (79 percent); frequently purchases products and services (64 percent); often provides feedback on product or service issues (61 percent); is less concerned with obtaining the lowest prices (55 percent); is more understanding if a company commits a mistake (39 percent); and is likelier to participate in product or service design (38 percent).

“Our survey indicates that executives in a variety of industries believe customer engagement moves beyond customer loyalty and satisfaction to provide a crucial competitive advantage,” the report explains. “Yet, despite their general optimism about the value of customer engagement initiatives, many respondents find them difficult to implement in their own companies.”

Building stronger bonds with customers can be challenging because it not only involves tangible inducements, such as an attractive pricing structure or the availability of a given product, but also more abstract concepts, such as trust, loyalty and communication. These concepts are especially important for small businesses that are “looking for ways to build better, stronger relationships with customers” because those customers are often seeking “much more than a transaction from vendors today,” IncTechnology.com explains.

Although customer engagement can be a complex process, AllBusiness.com cites the following ingredients for a positive business-client relationship:

• Communication — Whether through e-mail, phone calls or in-person talks, interacting with your customers is a strong way to establish rapport.
• Customer Service — Meeting customer needs and responding to any problems or complaints are the best ways to keep clients satisfied. The value of customer service cannot be overestimated.
• Employee Loyalty — Employees who are loyal to the business will perform positively in their work and transmit some of that loyalty to customers.
• Employee Training — Workers who are trained to interact with customers and make decisions that will benefit clients can build better engagement with the customer base.
• Customer Incentives — Providing bulk-order discounts or savings due to repeat business can give customers an added reason to return to your company.
• Product Awareness — Tracking what your long-term customers purchase and keeping these products in stock is a basic component of any successful business, but it is also important to ensure that customers know about new products or services being offered and that employees are knowledgeable about what they’re selling to clients.
• Reliability — Making sure the quality of service remains consistent can build a reputation for reliability, and if mistakes occur, letting customers know or compensating them appropriately can preserve confidence in your work.
• Flexibility — Adjusting to clients’ needs and avoiding excuses for failures shows your company is flexible enough to address most concerns.
• People Above Technology — Many customers prefer speaking to a company representative rather than an automated message, so personal communication can be an important element.
• Knowing the Customer — Build a better sense of familiarity by getting to know customers’ names or some details about their lives.

Efforts to improve a company’s relationship with its clients are likely to yield some competitive advantage, but how can a company gauge whether its customers are already engaged or measure the effectiveness of its engagement methods?

“You should periodically ask yourself why customers choose your business, and take a look at your segmentation schemes. Are you still bucketing customers into ‘newly acquired,’ ‘repeat’ and ‘lapsed’? Those categories won’t cut it in this ultra-segmented world,” Forbes.com explains. “Look at how you are tracking customer behavior and check market share, customer retention, selling price, market basket and something like Net Promoter Score, which measures ‘promoters’ and ‘detractors’ and shows trends via key competition.”

According to a study from business research firm Forrester, the key metrics for measuring customer engagement levels are involvement (how often a client visits a store or Web site), interaction (how much a customer provides feedback, requests information on a product or service or makes a purchase), intimacy (the opinion or perspective a customer has on a brand) and influence (the likelihood of a customer to recommend a company to others).

“Your brand is only as good as your last touch with the customer. While small businesses don’t have the marketing dollars to create major brand awareness, they do have the ability to craft a brand in their target market by providing service excellence,” Entrepreneur.com notes. “That’s how you achieve top of mind. That’s how you earn last look on proposals.”

Earlier

How to Give (and Know You’re Giving) Good Customer Service

Cashing in on Customer Complaints

Resources

Customer Engagement
Gallup, 2009

Beyond loyalty: Meeting the Challenge of Customer Engagement
Economist Intelligence Unit, March 2007

It Takes a Community to Raise a Customer
by Brent Leary
IncTechnology.com, November 2009

Ten Tips to Build Customer Loyalty
AllBusiness.com

Is Customer Loyalty Dead?
by Mike Linton
Forbes.com, Aug. 28, 2009

Marketing’s New Key Metric: Engagement
by Brian Haven
Forrester, Aug. 8 2007

4 Ways to Gain Customer Loyalty
by Ray Silverstein
Entrepreneur.com, Aug. 10, 2009