Customer engagement: Definition, benefits, and strategies to improve your retention

What is customer engagement?

Customer engagement is the process by which a company builds a relationship with customers that results in brand awareness, product adoption, and overall loyalty. Customer engagement is done across channels and through methods like campaigns, events, content, email, loyalty programs, and in-person.

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

Engaging customers throughout all touchpoints can build and enhance the "human-to-human" connection, thus working beyond transactional relationships, and the traditional CRM approach.

Every interaction your company has with a client offers the potential to build trust and improve customer satisfaction. Each time you interact, you can strengthen the emotional connection and tie the customer closer to your brand, building better customer loyalty. These principles can be applied to any company, no matter how small or large it is.

Why and how does customer engagement drive retention?

Customer engagement and retention go hand in hand. The more valuable customers feel your offering is, the longer their lifecycle is and the better customer success rates are. Without a proper approach to engagement, retention is virtually impossible to achieve.

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.

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 their friends, family, on public forums, and other word-of-mouth channels. This helps you reach more potential customers and build your business.

What are the top customer metrics to measure?

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 and spending patterns throughout the entire customer journey.

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

High product/service usage

The more often your customer base uses your services, the happier they are with what you're offering. Accordingly, you must be doing something right with your engagement efforts. The usage metrics to pay attention to are frequency and average time.

Frequency

It 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

It is useful to 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 real-time 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 brand loyalty, 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.   

Customers who aren't approaching the maximum license allocation 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 employ 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 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 optimize and improve.

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 customers for 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, step-by-step articles, and webinars to help your target audience and customers 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 to inspire you

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

1. Omnichannel customer support

Asics creates an omnichannel 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. Customer community

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

3. Content marketing

Sprout Social invest in creating resources and tools to help their customers excel at all things social media. They provide resources specifically for different target personas, designed to help their customers make more of an impact in their roles.

4. Gamification

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. User group programs

Hubspot has successfully used user groups (the HUG program) to engage customers with their brand and connect them to other Hubspot users, to share experiences, expertise, and challenges.

"Being part of the HubSpot community has helped me grow not only as a marketer, but as a business professional." – Erin Borgerson, Chicago HUG

6. Personalization

Netflix uses customer interactions with the platform to learn individual preferences and tailor their recommendations. By surfacing the content that users appreciate the most, the company keeps them renewing their subscription.

Customer engagement FAQs

How to measure customer engagement?

There are a few ways to measure customer engagement. Focus on product/service usage, the number of daily active users, churn rate, referral rate, license utilization, and social media activity.

Why is customer engagement important?

Customer engagement is important because it can help grow your company, improve customer retention, and boost your revenue. The return on investment for retaining an engaged customer is much bigger than acquiring and onboarding new customers.

How to increase customer engagement?

There are a lot of different ways to increase customer engagement. In this post, we covered offering incentives, launching a VIP program, organizing customer surveys, providing excellent customer service, and educating customers.

How does customer engagement differ from customer satisfaction?

Customer engagement is a process that happens throughout the lifecycle of the customer, while customer satisfaction is the result of customer engagement.