How to Measure Customer Engagement Value & ROI

It’s Autumn (or Fall if you’re over The Pond), the most colourful time of year. It’s time to rake, pile and reap the rewards for your efforts in the previous year and gather your harvest. You could call it the Return On Investment (ROI) season. This is a blog about measuring the value of customer engagement, of how you calculate customer engagement ROI. We warn you, some of this is going to get theoretical so you’ll need to get your thinking caps on.

One pumpkin doesn’t make autumn great. Or a single joyful kick at a pile of leaves. Or the changing of the colours alone. What makes it great is the result of all these experiences combined over time. We perceive value when the whole becomes greater than the sum of its parts. How we perceive and measure value, over time, is ultimately what makes us feel good, or negatively, about anyone or anything.

Measuring value is what determines the ability to change a single event into a series that will ultimately result in engagement – or not. Without value being created at each and every point there is no engagement. The value must be reciprocal, enjoyed by both the customer and the brand. When this happens, over time, you see the evolution of trust. And where there’s trust, there’s a relationship. And where there’s a relationship, there’s growth…starting to get the idea?

Now for the science bit…

We’ll give you a second to read that again.

Customer engagement is a function of knowledge and trust coming together over time.

Got it? Good…

Each and every time a brand and a customer come into contact with each other that event must create a value for both the business and the customer. Every healthy relationship is mutual; it can’t be one-sided or it becomes parasitical. No one likes a leech.

To calculate the value of customer engagement you need to look at the trust generated and knowledge used, over time. The calculation will yield two values: one for the customer and one for the business. Making those values sustainable over the long-term, and similar over the short term, is what builds long-term engagement.

So, now we’ve established what the value of customer engagement is, how do you go about measuring it?

How do you measure a Customer Engagement Score?

It’s overly simplistic to say that Autumn leaves are just brown. Autumn leaves are many colours: russet, scarlet, yellow and rust, orange, amber, and so on. Similarly, what constitutes the value of customer engagement is made up of many elements. It might be customer satisfaction scores, review ratings, customer retention, customer value over time. It’s not any one single thing.

Research from Gallup revealed that brands who successfully engage their customers go on to see 63% lower customer attrition, 55% higher share of wallet, and 50% higher productivity. Gallup also found that actively disengaged customers present a 13% discount in those same measures. In other words, there’s no single measure of customer engagement, but instead contributing indicators which all need to be considered, which all add up to either a healthy, or unhealthy description of your brand’s customer engagement.

The elements which add up to calculating the value of, or return on investment from, customer engagement is about trying to measure relationships. If you were to score any relationship in your life you will use the metrics which are most relevant to you personally. You might measure them differently from your own best mate, or value different measures to a lesser or greater extent. Customers, and brands, will do the same, driven by their motivations and values.

Because this is quite complex, at Thunderhead we’ve tried to make it easier for you by creating a model for customer engagement which gives you some of the elements you need to invest in and values you need to measure.

Here’s a picture of Thunderhead’s Customer Engagement Model:

It describes the two key  forces that come together in the middle to drive forward velocity for both the business and the customer.

The growing value from increased advocacy, loyalty, satisfaction, revenue lifetime value, referrals, reduced attrition, reduced costs of service, product and service enhancements, productivity and share of wallet all need to translate into value for the business.

As customer engagement is not based on individual interactions, but instead is a growing, evolving virtuous cycle, the measurement of ROI can be seen as a function of cost and value drivers turning a profit over time.

It’s time to harvest the value from customer engagement for your brand.

Get your rakes out.