How customer engagement can predict profits

Loved John Dillon’s (CEO of our partner Engine Yard) blog on customer engagement in Forbes!

He says (amongst many other things):

Why is doing a better job of customer engagement so crucial? Because it impacts customer loyalty, which directly impacts the bottom line. A landmark study published in Harvard Business Review asserted that a 5% increase in customer loyalty can increase profits from 25% to 85%.

More proof points:

  • In a study by the Business Marketing Association (BMA) and SPSS, 72% of B2B marketers rated customer engagement as a high priority…but 55% gave their organizations a grade of C or lower in customer engagement practices.
  • In the Forrester Research 2010 Customer Experience Index, only 13 of the 133 firms studied earned excellent ratings, while 45 firms received “poor” or “very poor” ratings.

And we would add the recent Aberdeen study which says:

  • Those who have a centralized customer analytics database and operationalize customer insights to improve customer engagement across all customer facing functions will experience 3x greater retention and 20x greater year over year per customer revenue growth as compared to companies that don’t.

Not surprisingly for the CEO of a cloud app development environment, John spends a lot of time up front talking about the advantages of rapid, iterative development using the cloud to improve customer engagement. However, his most profound statement is in the last paragraph. I would have started the article with this:

Engagement. Satisfaction. Loyalty. Profits. All Connected.

If you take nothing else away from his blog then remember this:

Engagement = Profits

Too few companies understand and appreciate the connection between Customer Engagement and Profits. When customers are actively using your service (not just your corporate website!) and engaged, this is the best leading indicator you can get that the customer is satisfied and likely to buy more from you. If their usage and activity is declining, they might leave you and defect to a competitor.  Actions speak much louder than words. So when measuring customer engagement, don’t limit yourself to the corporate website (which is really “prospect engagement” not “customer engagement”) but also and first and foremost analyze the usage of your online service itself.  Other metrics like Net Promoter Score are good too but these are all lagging indicators and you cannot act on them in realtime to influence and improve the business result. With customer engagement monitoring you can!

Use what you know about customer engagement to drive realtime decisions in your organization, not just about product improvements (John’s area of focus) but also about what type of offer to send which customer, which customer to call or visit, what tutorials to present, etc.

An example out of Totango’s customer base that aligns very well with John’s story is nCircle:

They measured customer engagement of new users in real-time and were able to make rapid product improvements to their cloud service that led to tripling the completion of successful trials in a matter of weeks!

So yes, use John’s service Engine Yard to build better products faster. Use Totango to manage your online users, maximize user engagement and thereby maximize customer satisfaction, lifetime value and ultimately profits!

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