Why Does Customer Engagement Matter for Banks in Digital World?
Digital customer engagement can be regarded as combination and excellence of many marketing strategy areas such as CRM, Service Quality, Customer Experience and Customer Engagement. The historical approach for this improvement was suggested by Leemon and Verhoef (2016) as shown in diagram below.
In contrast to phases before the engagement, non-financial or non-transactional experience also gained importance beside the sales and customer value dimension. Kumar et al. (2010), defined customer engagement value by mapping behavioral, attitudional and network dimensions with power of referral, customer lifetime value, customer influencing power and customers product or service knowledge base. Edelman and Singer (2015) suggests that customer journey management needs to be regarded like product management as a separate key performance indicator such as sales increase or cost saving to reinforce the engagement. In this case, fully engaged customers can be regarded as key success indicator of the approach. It was also stated by Leemon and Verhoef (2016), there is not still a well-established scale to measure multichannel touchpoint-based customer journey. Although, there are scales such as service quality (SERVQUAL) and market orientation (MARKOR), there is a need to measure the customer experience across all channels in different stages of the journey.
As digital platforms in financial services evolve to serve customer needs without needing to visit a physical service point such as branches in banking sector, the way of measuring and tracking of customer engagement requires to be changed to include non-transactional customer activities as well. Eiegenraam et al. (2018) defines digital customer engagement as customers digital behavioral indication of brand engagement that go beyond purchase. They have categorized those customers into 5 different segments which are; having fun, learning, providing customer feedback, working for a brand, talking about a brand.
Kumar et al (2010) introduced this new approach called customer engagement value (CEV) that is consolidation of customer lifetime value (CLV), customer referral value (CRV), customer influencer value (CIV) and customer knowledge value (CKV). CLV is usually calculated based on customer transactional interactions with the company such as profit, retention rate, complaints etc. However, other three dimensions are mainly concerned with customers non transactional activities such as referral, influencing community, number of connections with other customers, product or service knowledge etc. Main reason of this conceptual change is to cover non-purchase related customer behaviors that generate value for the firm in engagement measurement beside purchase related activities via digital platforms. Digital customer engagement can be assumed as part of the customer experience approach which aims to strengthen touchpoints with customer in terms of satisfaction level. It is assumed that various levels in customer engagement cycle will end with different levels of advocacy scores and customer engagement matrix scores. The Marketing Science Institute states that customer experience is the one of the most important study areas in the future for them due to several complicated interaction channels with customers and the idea that improving customer experience will lead to customer loyalty and advocacy. Loyalty and advocacy or word of mouth are the key pillars in digital customer engagement cycle as well. Brodie et al (2011), defines customer engagement (CE) as; “the types of connections consumers make with other consumers, companies, and specific brands: CE is viewed as being conducive to enhancement of brand loyalty’’.
Conceptualization of customer engagement gained more attention by researchers in last decade with help of fast development in social media and digital platforms capabilities. Many contributions were gained in the area of developing theoretical customer engagement conceptualizations (Merlo et al., 2014; Hollebek, 2014; Brodie et al. 2011; Kumar ,2010; Van Doorn et al., 2010). Practices and measurement of the customer engagement model is one of the key areas regarding researches. Van Doorn et al. (2010) states that consequences of customer engagement behavior regarding focal customer can be categorized into three perspectives; behavioral, attitudional and emotional perspectives. It is emphasized by Leemon and Verhoef that there is big difference between customer engagement and attitudes such as trust, satisfaction and commitment. Customer engagement initially refers to a strong two-way connection behavior between customer and company’s brand which leads to a sustainable consumer interaction, sales, market share etc. Customer engagement final output can be regarded as developed participant consumer groups for bank’s service deliverables and sales. This interpretation also aligns with marketing 3.0 approach which mentioned by Kotler (2010). For example, it was mentioned by Merlo et al. (2014) that Apple which is famous with its fully engaged customer profile invests especially on encouraging their customer for participation in their online platforms instead of investing on traditional market research and product testing activities. Moreover, they don’t try to avoid negative feedback participation as well. According to a research conducted by Merlo et al. (2014), customers whose participation level and word of mouth level is significantly high has tendency to increase their cross-buy portfolio six times more than lower ones.
Brodie et al. suggested to measure customer engagement via five key pillars regarding its conceptual aspect (2011, p.159). The conceptual aspects of customer engagement that are suggested are listed below:
- A1: Customers psychological aspect during the first interaction
- A2: Continuous and repetitive value creating business flow between customer and the agent.
- A3: Nomological structure of interaction map between service provider and customer.
- A4: Cognitive, emotional and behavioral interactions within different set of complexities.
- A5: Various customer engagement scores based on different situational outcomes.
Conceptional aspects that are listed above are depicted in a structured flow in figure below. Outcomes of customer engagement is grouped into 4 key indicators as; fully engaged, engaged, disengaged, and actively disengaged.
As an example, the digital engagement results of a bank will look like in the graph below which depicts the need for better non-financial or non-transactional experience.
According to Edelman and Singer (2015), there are four key pillars to implement the customer journeys and improve the engagement. Those pillars are:
- Automation; the digitization and streamlining the manual steps formerly done.
- Proactive Personalization; customize the experience based on customers past interactions.
- Contextual Interaction; draw customer attention into physical or virtual interaction.
- Journey Innovation; ongoing analysis and experimentation for customer needs and services.
Digital customer engagement is a long journey that consists of many different aspects. Emotional and cognitive needs of the customer should be taken into consideration besides focusing on having more available services while working on the four pillars above.
In conclusion, as much as we start to deep dive in digital platforms, the marketing analytics model need increases regarding measurement of customer engagement with different dimensions.
