Top 10 Customer Engagement Trends of 2015—#6: Interactions and Transactions

Check out how the Top 10 customer engagement trends for 2015 are shaping up in this new series. If you missed #5 last week, you can read it here!

Today, brands are increasingly thinking of their customer relationships both in terms of what they buy (transactions) and how they engage (interactions), requiring a balancing act on the part of the marketer.

This deeply connected transaction-interaction customer-brand relationship increases the overall customer experience and determines the expectations and realities of future lifetime value—or customers’ propensity to buy in the future.

Historically, loyalty was hyper-focused on measuring lifetime value by transaction metrics around purchase frequency, recency, amount, cost to serve, etc. RFM served as the most effective predictor of future value. Tied with the traditional “right offer, right person, right time” this became the foundation of great CRM.

However, when we begin to think about nudge marketing—where smaller, more discrete, but still highly relevant interactions are able to shape purchase propensity in a more innate way—the balance of interactions and purchases comes into focus.

There is a powerful psychology to interaction marketing. Simply put, our data analysis of customer lifetime value points undeniably to future value aligned to greater brand interaction over and above spending more recently or frequently. This alignment certainly is correlated and we continue to test the causality of introducing more means of engagement to discrete segments of consumers.

Not surprisingly, Forrester’s “The Business Impact Of Customer Experience” report found that customer experience has a moderate inverse correlation to customer defection.

Here are four things to think about when introducing interaction capture and recognition to your engagement or loyalty program:

• Adding interactions (e.g. attending events, rating products, liking/sharing on Facebook) provides a really nice addition to core point accrual without overly complicating the published scheme or rules. Consumers in focus groups repeatedly testify to the fact that this layer adds to their satisfaction.
• Managing the cost of the additional points is not overly expensive. The key is to provide the impression (and legitimate opportunity) to earn more by “doing not buying,” but recognize that the overall point mix will still remain heavily weighted on points accrued through actual purchases.
• Do not introduce two point ledgers. Some brands have been tempted to segregate interactions as purely an aspect of gamification or with digital “non-cost” rewards. It’s overly complex and really does not work all that well.
• Interactions that focus explicitly on referrals or social engagement tied to acquisition or spend are incredibly powerful, as marketers assess how much value you are creating both from deeper engagement by the referrer and the value you create by engaging the new referee. Both are likely to be top decile customers and these groups of customers need to be nurtured and rewarded. (Oh, be careful with fraud, but that’s another blog post.)

Bottom lines: be creative, keep it simple, and don’t stress over the cost. There is a huge ROI potential in getting this right and a great opportunity to create meaningful differentiation of program experience.