Online Consumer Engagement - Literature review Example

Online Consumer Engagement In today's red ocean markets, satisfaction is no longer an added advantage it's just a bare necessity. Originally, customers were not the focus of company strategy as they are today. If you look back at the last 20 years, you will see that the way in which companies view their customers has changed dramatically. In the past companies believed that the most important strategy is to win market share through product oriented mass-marketing; profitability and revenue would be generated; one hopes; by themselves through economies of scale. However in the 80's the increased competition in global markets and the declining turnovers of companies that relied solely on product oriented mass marketing prompted companies to consider how they could ensure business success in the long term by improving customer relationships and increase their orientation towards customer's needs. Customer engagement is one such strategy that can significantly improve customer satisfaction. As the name suggests customer engagement is the commitment of the customer with the company or the product. As Mc Ewen suggests, "if you don't make a connection with your customers then satisfaction is worthless" (Mc Ewen, Fleming, 2003). Regardless of how high a company's customer satisfaction level may be, if their customers are not able emotionally connect with the company or their products to high levels of customer satisfaction of no use. Internet today is playing a very crucial role in affecting consumer behavior. Most companies have identified that starting B2B and B2C. channels over the Internet not only reduces costs in terms of paperwork, front desk time, personnel time etc., it also gives the customers the freedom to view previous products at the comfort of their homes get reviews about the products talk about it online to other customers and then make a well-informed decision. Online Publishers Association presented their finding that the Internet is the most dominant source for initial awareness, further learning, deciding where to buy and purchases when compared to any other media (Online Publishers Association, 2007). Thus, today customer engagement is essential not only in the physical store but also over the Internet. This is referred to as online customer engagement. The following sections aim at identifying the various nuances associated with online customer engagement. Online Consumer Behavior What drives customers from one website to another What makes the customers stay longer on a particular website when compared to others What influences the customers to buy the same product on one website when compared to another Please, and many other such relevant questions can be answered by understanding consumer behavior on the Internet. Brynjolfsson and Smith called Internet as "the great equalizer" because the technology capabilities of the Internet medium reduce buyer search and switching costs and eliminate spacial competitive advantages that retailers would enjoy the physical marketplace (Brynjolfsson and Smith, 2000). In 1999, a research carried out by International Data Corporation and RelevantKnowledge showed that users are not loyal to one web portal. At that time, it did show that Yahoo had a higher loyalty rate than others; however, no other portal had a substantial loyalty rate (Spring, 1999). Spring analyzed that the reason for this lack of loyalty at that time was due to the fact that not every portal realized the importance of building "closer and tighter relationships with consumers". Several researchers over time have analyzed the various factors that affect Online Consumer Behavior. An inclusive, but by no means exhaustive list is presented below. Usability: The definition of usability as stated by ISO is "a set of attributes of software which bear on the effort needed for use and on the individual assessment of such use ..." (ISO, 1991b). With respect to e commerce, it is the set of characteristics of the website that make online engagement of the consumer a good experience. The various factors that make online activity a pleasure are: Convenience: It is the degree to which accessing and using an interface is comfortable, and possible without excessive effort, mental or physical (usabilityfirst.com, 2005). Navigation: Website navigation needs to provide adequate navigational choices so that users can find what they want, while at the same time not presenting the user with so many options that they become overloaded (Hudson, 2004). Information Architecture: The content and information on the website must be presented in a clear manner segregated into logical chunks of relevant information. A consumer should not spend a lot of time trying to understand where to look for the right information. Functionality: This is of critical relevance to an ecommerce website. The ordering process must be simple, easy to understand with visual aids that help the customer at each step. The important activities such as order creation, management, shipping, payments etc. must be hassle-free. Speed: Customers are generally willing to wait up to 7 seconds for the page/functionality/information to load up (Sharp, Rogers & Preece, 2007). E Commerce websites must load pages fast and also processing time for feature and functionality must be within acceptable time ranges. Interactivity: Practitioners should learn and understand the parameters affecting the customer experience before they design and built their online venture. Interactivity refers optimizing the customers' web experience; creating a successful online presence means developing a comprehensive and customer-oriented virtual proposition addressing a wide variety of issues and delivering the maximum possible effect, the utmost web experience (Constantinides, 2004). This includes effective customer service, freedom for the customer to customize the website the way he prefers and ability for the customers to interact with the company personnel. Trust: Trust is a psychological factor that to a large extend determines the success or failure of an online venture. According to Harris Interactive (2001) around 70 per cent of the US Web users are seriously concerned about the safety of their personal information, transaction security and misuse of private consumer data. With the growth of cyber crimes such as hacking, spoofing, phishing, fraud and spam, customers are getting more and more concerned about the security of their sensitive information online. String security measures are necessary to build a long lasting customer engagement with the company. This includes transaction security, security from customer's personal data misuse, reducing elements of uncertainty and guarantees on products and shipping. Aesthetics: Aesthetics form important indicators of online vendor quality (Vrechopoulos et al., 2000). Majority of the web users also look at the aesthetics of the website to make their first impression son the credibility of the company (Fogg et al., 2002). Design, presentation quality, design elements and style/atmosphere all go into making a website aesthetic. Marketing Mix: The 4 Ps of traditional marketing also play a prominent role in enhancing online customer engagement. Consumers often call the marketing mix "the offering." The offer is controlled by 4 variables often referred to as the four Ps in marketing namely Product, Price, Place (Distribution) and Promotion (Coyle & Bardi, 1977). On the Internet it becomes even more essential to leverage these 4 Ps accurately for the consumer to make a better informed purchasing decision. Factors that Affect Customer Engagement Several market watchers and researchers over the last few years have stated that, in today's level field business, customer engagement is much more superior that customer satisfaction. Thus it is important for a company to have a proper framework with which it can most accurately measure its online customer engagement. The great and perhaps the bane thing about customer engagement is the wealth of ways in which it can take shape. Although, the various ways can be leveraged by a company to open channels through which a company can increase customer engagement. However, unfortunately, this fact is also what makes engagement so difficult to define and measure. Ron Shevlin (2008), a marketing Guru, refers to the following measures that affect customer engagement: Product Involvement: "A customer, who doesn't care about the product, is likely to be less committed or emotionally attached to the firm providing the product". Therefore, it is imperative to measure product involvement as the first step in measuring customer engagement. The consumer will become involved when the object of interest is perceived as being important in meeting one's needs, goals and values (Engel, Blackwell & Miniard, 1993; Rothschild, 1979). According to Taylor (1981), product-involvement reflects recognition that a particular product category may be more or less central to people's life, their sense of identity, and their relationship with the rest of the world. Studies also demonstrate a linkage between the product-involvement variable and brand loyalty. According to research, a consumer with greater product-involvement will be more loyal to a particular brand within the same product category (Iwasaki & Havitz, 1998; Park, 1996; Taylor, 1981). Frequency of Purchase: "A customer who purchases more frequently may be more engaged than other customers". Database technologies such as RFM (Recency-Frequency-Monetary) analysis can be applied to identify frequency of purchase and the value of purchases for individual customers. Frequency of Service Interactions: "Branding experts like to say that repeated, positive interactions lead to brand affinity". Customers with a history of positive interactions are more likely to consider new products and services from their favorite online products and/or services providers. Knowing a customer's transaction and service history, marketing professionals can better tailor product and service offers to their customers' needs. Types of Interactions: "not all types of interactions are created equally. Checking account balances is a very different type of interaction than a request to help choose between product or service options". Customers tend to develop favorites and first sources after multiple visits to a website. To a large extent, to determine customer engagement, it is necessary to learn what type of interactions the customer performs on a regular basis on the website. Sometimes data may show that a customer repeatedly visits an e commerce website. However, if all those visits were only to gain information on a product, such engagement may not be very profitable for the company. Online Behavior: "Time spent on a site might be very important. But, like types of interactions, not all web pages are created equally". Consumer behavior plays a very important role in determining level of customer engagement. Come factors influence the customer to stay online for a longer period of time, whereas some factors make the customer return to the same website to make a buying decision. Referral Behavior/Intention: "Customers who are likely to refer a firm to friends/family might be more engaged". According to Customer Engagement Strategies Inc. (2006), "The true test of loyalty is whether or not customers are willing to refer a vendor to peers, colleagues, and friends". Velocity: "The rate of change in the indicators listed above may be a signal of engagement". Today, because of the Internet, Internet is a buyer's marketplace. It does not take much time for a customer to make opinions, judgments and change loyalty. The rate at which the above factors change for a company's customers also goes into measuring customer engagement level. Any sort of online customer engagement measurement framework must take into account the above factors that influence it. Technological advancements and strategies can now be developed using which a company can come very close in measuring its customer engagement level accurately, taking the above factors into consideration. Measuring Customer Engagement With Social Media and Online Networking becoming prominent and the digitization of mass media, customer's attention is fragmented. This is what makes it very difficult to measure any marketing metric. Furthermore, engagement is a very relative action. Marketers need an intuitive framework that allows them to move away from treating customers as generic segments to focusing on an individual's buying process (Forrester Research, 2008). Measurement of online engagement encompasses the quantitative and qualitative metrics such as concrete individual metrics from store visits and online purchases, to the softer, aggregated insights from brand awareness studies, sentiment, loyalty, and advocacy. Forrester Research (2008) has developed a widely accepted 4 point engagement framework. There are 4 components according to Forrester Research that make up the engagement framework (also known as The 4Is). Measurement of each of the following components can aggregate the overall engagement level for a company. The following section discusses each of the components and how each one can be measured. Involvement: This denotes the presence of a person (the customer) at various brand touch points. Involvement must be measured right from acquiring a new customer. This includes measuring the success rate of advertizing campaigns, promotions new features and functionality. Some of the metrics that help determine level of involvement are number of web page hits, number of visits per customer, time spent per page etc. Web Analytics can help uncover some of this data. According to a research carried out by cScape, anoverwhelming 91% of marketers believe that web analytics are either 'essential' or 'important' for measuring customer involvement, a higher percentage than for usability testing, customer feedbackand insights from customer-facing staff (Gregoriadis, 2007). Interaction: This denotes the actions people take when present at those touch points. Having a customer visit a web shop is one thing, having them buy a product from the web shop is a totally different thing. Some metrics that help determine interactions are number of transactions, uploaded photos, click-throughs etc. Social Media platforms can be used to analyze the type of interactions users are performing in a web shop. Point of Sales (POS) systems can also be used to identify important information such as the number of clicks it takes for a customer to buy a product. Intimacy: The affection or aversion a person holds for the brand. Customers today vent their feelings towards a product or a company on the Internet. Social media such as Facebook, Digg and Orkut play a very important role as a repository of customer intimacy. Some metrics that help in measuring Customer Intimacy are Blog Comments, Blog Posts, Discussion Forums, and Call Center Calls. Influence: This denotes the likelihood a person is to advocate on behalf of the brand. The real test of customer loyalty is to measure if the customer is willing to be an advocate for the brand in terms of referring it to another person. Today, people prefer to hear from other people about a product instead of direct marketing. Therefore, if a customer is willing to speak good about a company, it is sure increase profits. Metrics to measure this include Brand Awareness, Number of referrals sent out, number of referrals accepted, satisfaction ratings and call center surveys. Marketing Strategy to Increase Online Customer Engagement It is not just sufficient to have the necessary technology in place to gather data and measure the level of online customer engagement. This data and records must be further used to align the company's marketing strategy to leverage upon their findings. Business models, product or service types, stage in the buying process, and even the emotions a brand evokes often dictate a customer's goals. Customer Engagement Strategies (2006) defines engagement marketing strategy as a lifecycle of 4 phases. The 4 phases are: Initiation: These are the advertizing and marketing activities triggered by the company to attract prospects. This includes all the activities a company performs in on boarding a prospect and establishing a relationship. In this phase the customers must be segmented to align their needs with capabilities. This form of customer segmentation is very essential to identify the target audience, their likes so that each segment may be promoted uniquely. Integration: This involves the active management and integration of services or products once the initiation has begun. Understanding the motivations of customers improves marketers' ability to deliver relevant messages and experiences. Marketers should foster customer engagement and expose opportunities to create new products and services that meet the needs of existing and prospective customers. Intelligence: Previous learning and historic facts and data must be turned into knowledge. Intelligence here refers to the ability of the firm to make decision about the customer. A firm must be able to analyze the priority of a customer, chances of responding to a promotion, credit risks, assessing performance etc. Value Creation: Finally, the customer must be the most important business partner is a company's value chain. The firm must constantly find opportunities to create new value for the customer. The customer must always feel like he is cared for and his requirements are met. References Mc Ewen & Fleming (2003), "Customer Satisfaction Does Not Count", The Gallup Organization, Found at: http://www.adobe.com/engagement/pdfs/gmj_customer_satisfaction.pdf Erik Brynjolfsson and Michael D. Smith (2000). 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Park, S. (1996), "Relationships between Involvement and Attitudinal Loyalty Constructs in Adult Fitness Programs", Journal of Leisure Research, 28, 233 - 250. Customer Engagement Strategies Inc. (2006), "The Four Stages of Customer Interaction", found at: http://www.customerengagement.com/Four%20Stages%20of%20Customer%20Interaction%20Apr%2007.pdf Forrester Research (2008), "Measuring Engagement", Adobe Global Market Research, Found at: http://store1.adobe.com/engagement/pdfs/measuring_engagement.pdf Gregoriadis. Linus (2007), "Web Analytics Play a Central Role in Customer Engagement", e-consultancy.com Article, Found at: http://www.e-consultancy.com/news-blog/364676/web-analytics-play-central-role-in-customer-engagement.html Read More