Proposed: One (very simplified) short-hand equation for articulating the elements of Customer Engagement:
- Engagement = Need/Desire + Good Experience + Habit
Engagement is a necessary but not sufficient element of a successful business. A strong business model that generates cash and profit margin from the engaging activities is also required.
Engagement is a key factor in Loyalty and is measured in a variety of ways such as frequency of visit or purchase, length of customer lifetime, size of purchase, depth or length of visit, and evangelizing bahavior (recommending to friends and family).
Engagement is a major component in the Lifetime Customer Value Equation (LTV). For a deeper dive on LTV read “The Business of Social Media”, Lloyd Melnick’s excellent blog where you can find this post on calculating LTV.
LTV can be calculated in a number of custom and interesting ways to fit the product/business at hand. Looking at LTV by customer segment is also critical. However, no matter how LTV is calculated, engagement is crucial – without engagement, medium and long term monetization are impossible.
So: Engagement = Need/Desire + Good Experience + Habit
- Need and Desire are determined by whether a product serves the needs and wants of the consumer. The product may fix or solve a problem, or serve the user psychologically (or both).
- Experience is determined by the level of satisfaction through the use of the product and the way the customer perceives their treatment by the company and its employees. Ideally, that experience generates a strong positive feeling about the brand and product.
- Habit is succeeding in becoming a regular part of the consumers behavioral pattern over time. Habit can be an element of ongoing need and desire fulfilled in a pleasurable way which stimulates an automatic behavior measured as “loyalty”. Value judgements aside, habit can also result from mental or physical addiction or compulsive behavior.