Customer engagement offers an in-depth perspective on the impact of customers on the organisation’s growth and goals. Gallup has identified four measures of customer engagement:

Confidence: Belief the firm will always deliver on its promises
Integrity: Faith in the organisation’s commitment to quality, customers and ethics
Pride: Ownership of the brand, feeling of personal association
Passion: Intense attachment, belief that the product or service is the perfect solution to their requirements
Gallup’s research suggests customers who score high on all the four metrics contribute 23% more to profitability than the average customer.

Measuring customer-centric results 
Whether you look at it as customer satisfaction, loyalty or engagement, it is essential to translate your relationship with the customer into tangible results. This is especially true since any effort to appease the customer involves a cost — often huge — and customer-focused efforts are a cost centre in the short run.

Customer retention and engagement efforts cannot succeed without buy-in from the top management and other functions within the organisation. Outcome metrics should, hence, be quantifiable and linked to the mission and strategic focus of the organisation.

The Balanced Scorecard, for instance, effectively links outcomes to financial results and objectives and presents them in an integrated manner. In recent years, other measures have emerged, such as:
l Customer-perceived value (CPV): The perception of value lies at the core of customer loyalty, retention and repeat purchase. Customer-perceived value has been defined from various perspectives to suit diverse industries and contexts. Essentially, CPV is a cost-benefit analysis of a product or service — especially in comparison with alternatives. A fundamental characteristic of CPV is that it is usually implicit and abstract.
CPV is rarely put down with pen, paper and numbers — the customer more often than not evaluates the worth of a product or service at an intuitive level though it may be based on previous knowledge and experience. This highlights the need for a two-way process to identify CPV — the organisation needs to communicate relevant facts and data to the customer, and at the same time listen to the customer’s voice.

A big advantage of CPV is that it is relative and allows for benchmarking. Through CPV, you get to know not only where you stand in the eyes of the customer, but also how you measure up against the competition. Like any good metric or measurement tool, CPV is dynamic. Customers’ preferences change, competition changes; hence, it is essential to track CPV on a continuous basis and take proactive strategic action to maintain a consistently high value.
l Net promoter score (NPS): Can one simple question measure customer loyalty or engagement and also predict future performance? Yes, according to Frederick Reicheld of Bain & Company and Laura Brooks, who jointly developed NPS as a tool for measuring loyalty. NPS is based on just one question fielded to the customer — “How likely is it that you would recommend this product/service to a friend or colleague?”

Customer responses are solicited on a scale of 0 to 10, where 0 indicates no likelihood of referrals and 10 means that the customer will certainly make a positive recommendation. Based on the scores, customers are grouped into three categories: promoters (those who marked 9-10), neutral (7-8) and detractors (0-6). The difference between the percentage of promoters and that of detractors makes up the net promoter score.

NPS is ideally tracked on a monthly basis to ensure that the organisation has more promoters than detractors at any given point. Survey results show that when applied across an entire customer set, NPS can accurately predict a company’s growth potential. While the average company has an NPS of only 5% to 10%, the leaders in customer loyalty like Southwest Airlines and American Express cross the 50% mark.

l Share of wallet (SOW): McDonald’s calls it “share of the stomach”, while at General Motors, it is share of the garage. The concept, which forms the basis for penetration marketing, measures the percentage of the customer’s purchase or use of a particular brand against their total product usage. Share of wallet is being increasingly recognised as a more effective predictor of long-term performance than of market share.

Increasing the share of wallet also generates more return on investment than do efforts to increase the market share. The measurement of share of wallet is accompanied by various strategies to “dig deeper” into the customer’s wallet. A popular strategy used by many firms is upselling — persuading the customer to buy larger volumes or advanced versions of a product. Another SOW strategy is cross-selling, where the firm offers additional products or services to go with a particular product.

Suresh Lulla is the managing director of Qimpro Consultants, founder of the BestPrax Club, and chairman of the IMC Quality Awards Committee.