Customer engagement is a hot topic for both practitioners and researchers alike. In an increasing digitally connected world, there is a rising number of touchpoints between consumers and companies as well among consumers. These new touchpoints can be of tremendous benefit for both sides.
One example is that companies like Starbucks and LEGO deploy online open innovation platforms to leverage consumers’ knowledge in their new product development processes. Another observation is that 92% of consumers consult online reviews of other consumers before they make a purchase (eMarketer 2013).
Both examples show that consumer behavior aspects that go beyond mere transaction and consumption are becoming increasingly important. Yet, customer engagement can take many forms and there is an ongoing debate among researchers and practitioners with regard to what actually constitutes customer engagement. Not surprisingly, recent academic research has investigated different facets of the phenomenon. This article summarizes key findings from recent articles from the Journal of Marketing, each offering valuable insights into customer engagement.
A classical way of customer engagement is involving them in innovation processes. Previous research shows that consumers can play an important role in the development of new products - in particular during the ideation and launch stage. Yet, many managers may be interested in more fine-grained insights into practices how to get the most out of the collaboration, e.g. what can a firm exactly do to optimize online crowdsourcing results? In a recent study, Luo and Toubia (2015) investigate how firms can enhance consumer performance in online idea generation platforms by conducting two experiments involving more than 6.000 participants from Amazon.com’s Mechanical Turk panel. The results show that online idea generation platforms should be customized in terms of their task structure on the basis of each participant’s domain-specific knowledge. This means that low-knowledge consumers should be presented a pre-structured idea generation problem in which specific stimulus ideas are offered for each sub-problem, whereas high-knowledge consumers should be assigned to pre-structured idea generation tasks without stimuli as this leaves more room for their creativity. A system customized in this way has the potential to considerably enhance the value firms can derive from involving consumers in idea generation.
Another classical aspect of customer engagement activities are referrals. Referral systems are actively managed instruments that aim to “use” existing customers for the acquisition of new customers. Beyond the direct benefit of acquiring new customers, Garnefeld et al. (2013) show that the referral also has a positive effect on the recommender’s behavior. In their field study based on a large-scale customer data set from a global cellular telecommunication provider, Garnefeld and colleagues find that participation in a referral program increases both loyalty and revenues of the respective customers. More precisely, the recommenders’ defection rates fell from 19% to 7% within the observation period while their average monthly revenue grew by 11.4% compared to statistical twins that did not participate in the referral program. Furthermore, the authors suggest that the positive effect on the recommender’s own behavior is particularly strong for those who are relatively new customers themselves.
Customer engagement in form of online customer reviews is generally perceived to be highly credible and influential, because these product evaluations are generated by other consumers as opposed to marketer influenced messages (e.g. advertising). Ho-Dac, Carson, and Moore (2013) investigate the impact of customer reviews in an online retail context using Amazon.com data with star ratings and sales ranks for Blue-ray and DVD-players. The results show that customer reviews actually matter less in the presence of strong brands, but in contrast they increase sales of models of weak brands. Furthermore, more sales lead to larger number of positive (but not negative) reviews. This creates a positive feedback loop between sales and positive reviews for models of weak brands. Hence, customer reviews seem to work different vis-a-vis traditional marketing communication.
WOM / User-generated content
Tang, Fang, and Wang (2014) take a different approach to a similar topic. They examine the impact of neutral user-generated-content on product sales. The authors distinguish between mixed-neutral (i.e. comments containing a balance of both positive and negative claims) and indifferent neutral (i.e. comments that lack any dominant attitude) user-generated content by analyzing comments related to the U.S. automobile industry on Facebook and YouTube and numerical movie ratings from Yahoo movies. The results indicate that the effect of neutral user-generated content on product sales is not neutral. In fact, ignoring the “middle” can lead managers to under- or overestimate the true impact of positive or negative user-generated content: Mixed-neutral user-generated content provides a premium effect, which amplifies the effects of positive and negative user-generated content, whereas indifferent-neutral user-generated content leads to a discount effect, which attenuates the effects of both, positive and negative user-generated content. Thus, managers are well advised to differentiate mixed from indifferent neutrality and design online review systems which facilitate mixed-neutral and suppress indifferent-neutral user-generated content.
Thompson and Malaviya (2013) examine another particular type of customer engagement, namely consumer-generated ads. Conventional wisdom would suggest that consumer-generated ads build a sense of collaboration and engagement with consumers and thus may be more persuasive for other consumers. Yet, the paper of Thompson and Malaviya illustrates that consumer-generated ads are not necessarily perceived as more trustworthy. In fact, in a series of laboratory experiments the authors show that consumer-generated ads can backfire if they are not specifically tailored towards the target group. This is driven by two opposing effects – skepticism about the competence of the ad creator and identification with the ad creator. Disclosing co-creation of ads is only beneficial if the ad provides credible background about the ad creator that triggers similarity perceptions among the audience or if the audience already has a high loyalty towards the brand. Overall, the findings challenge the view that consumer-generated ads are processed just like word-of-mouth communication.
Collectively, the previous examples show that customer engagement can take many different forms. Moreover, the phenomenon of customer engagement is relevant for all aspects of marketing – from product development to advertising and customer relationship management.
Thus, it is essential that managers are aware of the impact of the different respective types of customer engagement for their business. In order to make customer engagement “actionable” for their firms, managers need to get a comprehensive understanding of what is going on in social networks (study 3 and 4) and offer well-designed “platforms” for customers to get engaged (study 1, 2, 5). Overall, understanding and managing customer engagement is likely to be crucial for successful marketing in the future.
Questions for the Classroom
- Based on the articles discussed here, what is the essence of customer engagement and what are common characteristics of the different types of customer engagement?
- What can companies do to manage customer engagement? Which strategies work best for each type of customer engagement?
- How does customer engagement provide value to companies?
Lan Luo and Olivier Toubia. (2015), Improving Online Idea Generation Platforms and Customizing the Task Structure on the Basis of Consumers' Domain-Specific Knowledge. Journal of Marketing, 79(5) 100-114.
Ina Garnefeld, Andreas Eggert, Sabrina V. Helm and Stephen S. Tax (2013), Growing Existing Customers' Revenue Streams Through Customer Referral Programs. Journal of Marketing, 77(4) 17-32.
Nga N. Ho-Dac, Stephen J. Carson, and William L. Moore (2013), The Effects of Positive and Negative Online Customer Reviews: Do Brand Strength and Category Maturity Matter?. Journal of Marketing, 77(6) 37-53
Tanya (Ya) Tang, Eric (Er) Fang, and Feng Wang (2014), Is Neutral Really Neutral? The Effects of Neutral User-Generated Content on Product Sales. Journal of Marketing, 78(4) 41-58.
Debora V. Thompson and Prashant Malaviya (2013), Consumer-Generated Ads: Does Awareness of Advertising Co-Creation Help or Hurt Persuasion?. Journal of Marketing, 77(3) 33-47.