Can customer engagement beat the recession?

In our latest podcast, Paul interviews Richard Sedley, who is Director of the customer engagement unit at digital agency cScape. He is also the author of the book “Winners and Losers in a Troubled Economy“, which explores how to use online customer engagement to create competitive advantage.

Is customer engagement the same as customer experience?

They’re fairly fluid terms and if you’re successful in one, you’re likely to be successful in the other. But there is a difference. We would define customer engagement as repeated interactions that strengthen the emotional, psychological and physical investment that a customer has in a brand, product or company. The key words are ‘repeated’ and ‘investment’. Too much marketing is focused on making a single conversion.

You can have positive customer experiences that don’t necessarily lead to engagement. For example, in the US car industry surveys show that 85-93% of people are satisfied or very satisfied with US cars. But they only have a repurchase rate of 40-50%. Satisfaction – and sometimes this applies to customer experience – is more an indication of past performance than future performance. Engagement is probably the best predictor of future business performance that you’re likely to get.

What impact is the recession having?

The big problem is that we don’t know where the bottom is, so we’re seeing companies cutting funding of marketing and other activities in preparation for a race to the bottom.

But there are companies doing reasonably well and a lot of that comes down to an understanding of customer psychology. Cadburys posted a 30% rise in annual profits, up to almost £600 million. You could say it’s all down to drumming gorillas and slightly psychotic children with wobbly eyebrows but I wouldn’t say that. It’s more to do with an understanding that while customers are feeling the doom and gloom, they still have a sense of escapism and playfulness and want to treat themselves. I talk about people trading up and trading down at the same time. People will carry on buying things that are important to them, and even trade up in brand, while they are cutting back on other things.

There’s a company in the US called Heritage, the world’s largest specialist collectables auctioneers. They auction collectables like film posters, comic books, and coins. They’ve seen a 40% rise in profits in the last quarter of last year, and average lot value has gone up by over 8%. The reason is that because of the recession, customers feel a lack of control. They retreat into domains where they do have control, and collecting is one of those.

Customers are not not spending. They are just spending with a more heightened focus on what they consider to be valuable to them.

How can other businesses perform better in the recession?

It’s about recognising what’s important to customers, what they value, and the prism through which they see that value. One example would be widescreen televisions. They were marketed as the ultimate boys’ toys for a number of years, but we’re already seeing that the marketing has changed to be more about family values. Family is a prism through which people understand recessions. They circle the wagons, bring things together more. It’s important to be able to emphasise the idea of domestic bliss (save money by not going out) over the boy toy aspect.

Competitor analysis will be increasingly important. There will be a greater emphasis on innovation, which means you need to monitor the marketplace so you can learn quickly from your competitors if they steal a march on you.