Since 2008 and the Great Recession there has been major, yet slow growth in the US economy. Modern day consumers have high levels of confidence in the changing economy, then in the previous six years and they have become relaxed, with their spending habits getting closer to pre-recession spending trends, but they have also become overly cautious due to previous dealings with the recession.
It has been shown that when US consumers spend, they are attentive to the most important factor in choosing a company; getting good value for money. They are more likely to now explore, compare, review, question and ultimately be mindful before considering an option. They now expect that a company will work to earn their money, consumers will not just “hand it right over”.
The good news, is that customers are still spending their money, but they are more likely to lean towards spending it with a business they feel confident with. This view is less likely to disappear if spending increases, even if spending levels go back to previous to the 2008 recession. To summarize, consumers are more likely to spend money with businesses they have an emotional connection with and they will bar those that provide no overall value.
With this radical change in consumer values, businesses must work even more to create, develop and keep a more profitable consumer base. Some businesses often complain of a struggling bottom line due to lack of customer spending. These businesses try to vie back customers through over the top and aggressive advertising campaigns, mega sales and the latest technology. These tactics may work, albeit in the short term, to attract customers but they do not provide the level of connection that will ultimately engage these consumers.
Tracking Emotional Connection
According to the Gallup Business Journal, “customer engagement can be tracked through the emerging science of behavioural economics.” This idea holds that the vast majority of customer loyalty and buying decisions are influenced by emotional as well as rational factors.
Translation: Customers are choosing to invest using their heart rather than just from their head.
Gallup Business Journal Categorizes customers into the following:
The Three Types of Customers
• FULLY ENGAGED: these customers are your true brand ambassadors. They trust and respect your products and will always be the first to spread the word to others about your company. This the most profitable kind of consumer for your business.
• INDIFFERENT: Have a neutral approach to your company and what you provide. They essentially are not bothered as long as they receive what they pay for.
• ACTIVELY DISENGAGED: These customers think on an analytical level, weighing up factors such as price and level of service. They will change between companies and products easily with no brand loyalty.
Gallup’s analysis has found that fully engaged customers are more loyal and profitable than average customers in good economic times and in bad. Across a variety of industries and target audiences, including business-to-consumer and business-to-business, Gallup’s research has consistently shown a powerful link between customer engagement and key business outcomes.
Through Gallup’s data it has been revealed that a customer who is engaged represents an average 23% premium in terms, profitability, revenue, and relationship growth compared with the average customer. In stark contrast, an actively disengaged customer represents a 13% discount in those same measures. For example, Gallup research has found that:
• In the retail banking industry, customers who are fully engaged bring 37% more annual revenue to their primary bank than do customers who are actively disengaged. Fully engaged banking customers also have more products with their bank, from checking and savings accounts to mortgages and auto loans. Plus, they have higher deposit balances in their accounts than less engaged customers with the same products do.
• In the consumer electronics industry, fully engaged shoppers make 44% more visits per year to their preferred retailer than do actively disengaged shoppers. And when they do visit their preferred electronics retailer, these fully engaged shoppers purchase more items than they originally intended to. On average, they spend $373 per shopping trip, while actively disengaged customers spend $289 per trip.
This shows that when a business provides a significant customer experience to a consumer, they can capitalize on the rewards of loyalty and continuous profits.
How to raise the bar for Consumer Engagement
If a small business wants to take charge and seriously engage and retain consumers, gauging customer engagement is not enough. To effectively gain the most amount of success, companies should aim to make customer engagement a major part of the business growth strategy through acknowledging rational and emotional aspects of customer relationships with an emphasis on sustainable change management strategies and incorporating customer and employee goals for optimal performance. Overall, by tracking consumer engagement and developing the business based on this data, a small company can maximize their customer relationships and reap the benefits of larger profits and more business growth.