Engagement for a Changing World Report US PDF

8/12/2019 Engagement for a Changing World Report US PDF

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ENGAGEMENT FOR ACHANGING WORLDA research study of how engagement isperceived and a proposed framework to

re-dene engagement in the age of digitaltransformationPublished February 2014

Co-authored with:


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Executive Summary 3Introduction 3

Engagement as a Corporate Objective 5

Dening Engagement 5

A New Model for Engagement 8

Trust and Engagement 8

Knowledge and Engagement 9

Measuring Engagement 10Engagement as a Value Chain 12

A New Framework for Engagement 13

End Notes 16

A Note about the Authors

CONTENTS


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The arrival of what is now being called

the age of the customer has causedbusinesses to focus on how to interactbetter with their customers, how tobuild stronger relationships, and how toensure that those relationships generatetrust and engagement over time.

Unfortunately, the way to do this hasbeen neither easy nor well documented.Each organization that has, in somemeasure of success, addressed theseissues has done it in a way that isdicult to repeat. Our goal was to builda conceptual model for customerengagement that would provide a

framework for repeatable success, andtest that model against the ideas andlessons learned by a group of seniorexecutives that have done so acrossindustries, through a series of in-depthinterviews with these exexutives.

The whole idea of a customerrelationship with a business isproblematic, as it tends to bemisinterpreted or distorted bycomparison to personal relationshipsand personal emotions (for example Idont want a relationship with myinsurance company or bank). From

the business side it is also problematic,with 75% of our interviewees saying thatthey dont know how to engage withcustomers.

And yet what we learn from manystudies is that engagement over thelong-run is the best way, if not the onlyway, to generate value for both thecustomer and the business at eachinteraction.

Relationships that do not build long-term trust and engagement havelimited, if any, value to both parties.

The core principles that guide

interactions between a business and itscustomers should be a combination oftrust and knowledge over time, and thiswill build to engagement. Of course,nding and using the right knowledge isnot an easy task, nor is it to build trust,but we have identied the key tenets:

1. There are four elements to buildingtrust: repeatability, longevity,unselshness, and equality (equalexchange of value over time).

2. Knowledge can only be used insituations where both parties

benet; the outcome of knowledgeis value for both parties.

Measuring value, while a very complexconcept that spans simple metrics tocomplex value networks, is whatdetermines the ability to transform asingle interaction into a chain of resultsthat will ultimately result in engagement or not. Without value generated ateach interaction to fulll the needs ofthe customer and the needs of thebusiness, there is neither trustgenerated, nor long-term engagementpossible and a loss of knowledge at

each interaction results as well.

Leading executives have told us thatwhile they are still working on reningtheir attempts to build engagement, theresults they are getting are sucient to

justify continued and extensiveinvestment.

The framework presented in this paperprovides a comprehensive and clearmodel for customer engagement,which can be used to drive engagementprograms and deliver measurablebusiness outcomes.

EXECUTIVE SUMMARY

ENGAGEMENT FOR A CHANGING WORLD


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Understanding the true nature of the

relationships between a business and itscustomers is a complex task.

Ever since the early 1980s we have beentoying with the concept of CRM(Customer Relationship Management)[1], but it has only been in the past 20years that we have had software to helpbusinesses in that task. Even with thisintroduction, the concept and thepractice have not improved much; inmost cases it became even morecomplicated since the software typicallyendorsed a set of practices that thebusiness organization was not using, or

not able to use. And the constantchange in the relationship dynamicswith customers placed businesses in theposition of forever catching-up.

The advent of the Inbound revolutionand the change in direction of thecommunication (where the customer isnow more in control than ever before)brought the concept back to theforefront [2]. The adoption of SocialMedia and Social CRM was an attemptto deal with that onslaught of changes,but it did not succeed. The issue is notmore software: It is about restoring the

customer to the center of the business.

This lack of success (it was not a failure,as many things were improved in theprocess) is the best indicator we have,as a society and a corporate world, ofthe limited progress we had made in ourunderstanding of how customers andbrands should interact, and howoutcomes for both could be improved.

Indeed, it is another evolution in thisuniverse and one that is led by theconcept of engagement. It is the lack ofa working denition of engagement forbusinesses, and a model for working

with engagement, that we will discuss in

this report.

We conducted extensive and fascinatinginterviews with 33 senior managers ofCustomer Strategies across dierentindustries. These interviews weredesigned to discover their currentperspectives and how they see theirworlds evolving. We discussedeverything from denitions to bestpractices in detailed conversations. Wealso collected some data points that weshare in this report.

What follows is a summary of the

ndings as well as the development of anew framework to dene and measureengagement in this new world.

SURVEY RESULTS

2/3of respondents have nocustomer relationshipstrategyin place.

1/3of our respondentsdontknow if their customersvalue their relationship

INTRODUCTION


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And it is also this new drive, pushed by

the shift to inbound communications,which has changed the common rulesfor the relationship. In the old model,these rules meant how to obtain theproduct, how to pay for it, and how touse it: now we have common rules onhow to collaborate better, includingco-creating value, products andservices, and better relationships.

There is almost unanimous agreementamong the people we talked to that thisis the biggest change aectingbusinesses in the last twenty years (evenmore than the internet, which changed

communications but not the objectiveof them). And this is what is driving ashift in how we look at relationshipsand, ultimately, engagement.

Indeed, there is now an emergingrecognition that long-term engagementis a far more strategic way to look atcustomer-business relationships [10],and the drive to create customer-centric, engagement-focusedbusinesses is on.

What we need is a model to focus on, adeconstruction of the stages of

long-term engagement betweencompanies and customers.

Thus, one of the conclusions from ourconversations is that the new denitionsfor the three elements of engagementare: common goals (collaboration),common rules (knowledge), andcurrency (trust) combined over timehelp dene the new engagement. If wewere to try and express thissymbolically, we would have:

Looking at it from the perspective of the business engaging with customers and

assuming the goals and rules of engagement are rooted in knowledge (knowledgebeing used at each interaction to ensure a satisfactory outcome for both businessand customer) we would get:

Engagement is a function of knowledge and trust over time

Based on these conversations and research, we came up with a simple model todene engagement, as depicted in the following schematic.

Fig 1

Goals

Knowledge

Rules

Foundation

Value

Trust

Expectations

Metric

Engagement

Relationships

Interactions

Time


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Our research ratied ndings from other

projects showing that customers preferchannels that generate trust andleverage knowledge over those that arefaster but not as accurate or trustworthy[11]. While customers want promptanswers, they rate accurate answersabove the speed at which they happen.

In evaluating why this is, customersunequivocally said that providing theright answer leads to trust, one of thecritical elements in buildingengagement. The secret for businessesthen is to focus on how to generatemore trust, and what fuels that trust [12].

Lets explore, as we did with ourrespondents, the elements of this newmodel for engagement in the next fewsections, concluding with a frameworkto bring all these pieces together.

TRUST AND ENGAGEMENTAmong the words and conceptsimproperly used to managerelationships by businesses trust is nearthe top. While it is true thatrelationships without trust dont ourish it is impossible to generate trust froman inanimate entity such as a business

and a person [13]; only people have thecapacity to trust whereas businessescannot trust a person. Businesses canbuild better relationships when trusted[14] but cannot generate trustthemselves; the brand promisebecomes their trust proxy and trust as acurrency for long-term engagement isparticularly useful.

There are four elements to buildingtrust between people: repeatability,unselshness, longevity, and accuracy[15].

In other words, delivering what is in the

best interest of the other person in therelationship, accurately and repeatedlyover time, generates trust. This trust iswhat engenders long-term relationshipsand engagement among humans [16] and is a lesson business could learn.

The trust customers place in a businesshas its genesis in the brand promise.This is what the business says it will doand, in interactions with customers, iswhat they should deliver on. The abilityto deliver on their promise is whatengenders trust.

When we asked respondents about thecore attributes for their brand promisewe found many dierent answers, butthey all centered about the sameprinciples: deliver what was promised(repeatability) and needed (accuracy);make sure there is value generated forthe customer (unselshness); andunderstand how to retain customersover the long run (longevity). The wordsused to describe these parallelstatements by our respondents mayhave been dierent, but the conceptswere the same.

Based on this correlation betweenpromises made by the business and thethree principles for trust, we reach theconclusion that the brand promise is thefoundation on which companiesleverage trust from customers and inreturn arm their role in therelationship [17].

As in human relationships, the trustgenerated is what (over time) engendersengagement. Just as a person wouldnot engage in a long-term relationshipwith another person after just onemeeting or interaction, a businesscannot expect their customers to be

A NEW MODEL FOR ENGAGEMENT



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fully engaged with them after one

interaction or product purchase.

Tracking the right metrics to ensurethat, over time, this trust grows is thekey to building engagement withcustomers.

This is why trust is the currency ofengagement [18]; it is the metric thatdenes the value of engagement.Without trust, there can be no engagedrelationship. The level of trust is anindicator of the level of engagement.

KNOWLEDGE AND ENGAGEMENT

At each interaction between thecustomer and the business there is anexchange of knowledge. Regardless ofthe specic business purpose (sales,marketing, customer service,administrative, shipping, etc.)knowledge is the basis for theinteraction. The customer must havespecic knowledge about themselves toprovide to the business, and thebusiness will have specic knowledge toprovide to the customer about theavailable products and services.

In most cases, it is a balanced exchange

of knowledge that determines theoutcome of the interaction: the morethe business knows about the customer,the better knowledge it can deliver fromits existing repositories of knowledge[19].

Knowledge is the result of combiningthe common goals and the commonrules of the interaction. This is one ofthe important conclusions that cameout of discussions with our respondentsabout knowledge. In setting commongoals for the interaction, the customer

and business agree on the expected

outcome.

As you can imagine, with many usecases and potential interactionsbetween a business and its customers,agreeing on a common goal for all ofthem is a monumental task butnding a common element to build onis not. This common element isknowledge, and the more knowledgeboth sides contribute, the more likely itis that there will be an outcome thatmeets the expectations of both sides.

The common rules reect the

understanding between parties that theinformation shared by both will berestricted in use for interactionsbetween the customer and thebusiness, and that over time this sharedknowledge will increase and yield abetter understanding by both sides.

The common rules may be as simple asa privacy policy, or as complicated asfollowing governmental restrictions onwhat to do but the bottom line is thatthey must exist.

Knowledge is the element that fullls

these denitions and ts within theproposed algorithm: if the businessknows the customer and combines thatknowledge with the trust it hasengendered in the customer over time,it leads to engagement.

On the other hand, if the business doesnot know the customer, or does nothave the right information to providewhen the customer interacts with it itis highly unlikely that it will eitherengender trust or create engagement.


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Similarly, customers that dont facilitatethe business learning and building theirknowledge about them, make it verydicult for businesss trust in thecustomer to grow, thereby detractingfrom engagement.

Knowledge between the parties is whatgenerates trust, and that trust is thecurrency for engagement makingknowledge an essential component ofthe engagement algorithm [20].Now that we have an agreement onwhat each of the elements ofengagement are we can start the mostcomplex task: how to measure it.

MEASURING ENGAGEMENTHow is this trust generated bybusinesses?If trust, as most of the respondents said,is about keeping a brand promise, andthis happens through accurateknowledge, then value is how it ismeasured.

When we started this project we wantedto nd out, amongst other things, theoutcomes of implementing anengagement strategy for a business. Westarted with the assumption, driven by

early research, that value is the outcomeof a well implemented strategy.

We discussed with respondents severalaspects of value, such as concepts,denitions and measurement, and whatthey were doing to dene and measureit. The most common assertion wasthat value is not a single metric in eachinteraction, but there are in fact twometrics:

Value delivered (to the client)

Value obtained (by the business)

Although there were many words usedto dene value delivered to thecustomer, the common elements usedto dene it were monetary at eachexchange and emotional over thelong-run.

For example, in the short termcustomers may perceive value bygetting discounts, promotions, lowprices, and coupons or special oers atthe moment of each interaction. Thisvalue perceived by the customer over

time becomes an emotional attachmentto the brand, resulting in a long-termperception of value that translates intoloyalty.

Value obtained by the business has noemotional or sentimental long-termvalue. Short term value received, ineach interaction, can be measured bymonetary elements like prot, revenues,and meeting specied KPIs or metricsrelated to revenue. When asked for thelong-term measurement of value forthe business, virtually all respondentstalked to Customer Lifetime Value (CLV)

as the driving force and metric [21].

These ndings are similar to otherresearch done in terms of value, butthey fall short of showing a sustainablelong-term model. A model that can beused again and again must result incomparable value to both customer andbusiness at each exchange, measurableand traceable regardless of theuniqueness of each interaction.



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As we discussed above, engagement

requires a common objective, notdierent ones.The key problem that all theseconversations uncovered was that therewas no long-term value exchange, butrather interaction by interaction with ahope and expectation that it wouldtranslate into long-term value to thecustomer (with long-term value for thebusiness assumed in the nancialbenets sought).

In other words, loyalty was not anassumed outcome but rather a hopethat customers will evolve into it as time

went by [22]. Unfortunately, hope is nota sustainable business model.

ENGAGEMENT AS A VALUE CHAINTime is the dening dimension ofengagement. Thus, a model forengagement must have a commonconcept of value over the long term forthe business and its customers tobecome engaged i.e. a model thatmeasures value for each interaction andcontact separately, but then builds anaccumulative value.

As Michael Porter has shown in his

research, this model is the value chain[23]: building long-term value bydissecting it to smaller portions of thebusiness chain. In a customer-centricbusiness most of those portions areexplicitly or implicitly related tointeractions with customers and, as ithas been shown many times in manyways, knowledge is the basic buildingblock of customer interactions [24].

Building on the model discussed so far,and adapting the concept of the valuechain to progressive building ofengagement, we are led to thefollowing:

Each interaction has a value for boththe business and the customer.

The data points for calculating thatvalue are (i) trust generated and (ii)knowledge used.

The calculation will yield two values:one for the customer and one forthe business.

Making those values sustainableover the long-term, and similar overthe short term, is what buildslong-term engagement

Discussing this with the respondents inour survey conrmed what wesuspected when we started: the vastmajority of them mentionedengagement as a goal, but werent sureof how to go about developing it orhow to measure it. When we explainedhow an engagement value chain can bebuilt and used to ensure the goal ofengagement is reached, virtually all ofthem (with one exception) agreed that itwas worth trying, while acknowledgingthat they didnt necessarily know how togo about implementing such a model.

There are 4 elements to building

trust between people: Repeatability Unselshness Longevity Accuracy

SURVEY RESULTS

3/4 only have operational dataon customers Halfhave survey data on theircustomers

1/8have sentimental data ontheir customers 4/5are deluged with data andknowledge of their customers;dont know how to organize orwhat to do with it


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A NEW FRAMEWORK FOR ENGAGEMENTThe goal for this study was not only to reach an understanding of what engagement meant and, how it could be measuredfrom the perspective of dierent stakeholders, but also to craft a synthesis of

(a) the insights from the myriad studies and reports on engagement and related topics,(b) the experiences of the people interviewed, and(c) and outcomes from our own research..

The framework consists of the components described above, and it is represented graphically in the following diagram.

Fig 2



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[14] Edelman Trust Barometer. (n.d.).

Retrieved 27 November 2013, fromhttp://trust.edelman.com/

[15] Interpersonal relationship. (2013,November 16). In Wikipedia, The FreeEncyclopedia. Retrieved 12:29,November 27, 2013, from http://en.wikipedia.org/w/index.php?title=Interpersonal_relationship&oldid=581937802

[16] McKnight, D. H., and Chervany, N. L.(1996). The Meanings of Trust. Scienticreport, University of Minnesota.

[17] Brand. (2013, November 21). InWikipedia, The Free Encyclopedia, http://en.wikipedia.org/w/index.php?title=Brand&oldid=582741892

[18] http://www.psychologytoday.com/blog/trust-the-new-workplace-currency/201307/employee-engagement-isnt-your-problem

[19] http://www.businessdictionary.com/denition/exchange-value.html

[20] http://www.stonecobra.com/evolving-from-knowledge-in-storage-

to-knowledge-in-use/

[21] Customer lifetime value. (2013,November 12). In Wikipedia, The FreeEncyclopedia, http://en.wikipedia.org/w/index.php?title=Customer_lifetime_value&oldid=581285035

[22] Esteban Kolsky, The Loyalty Open

Denition Experiment: Lessons Learned,thinkJar blog, http://estebankolsky.com/2009/09/the-loyalty-open-denition-experiment-lessons-learned/

[23] Value chain. (2013, November 16). InWikipedia, The Free Encyclopedia.Retrieved 12:25, November 27, 2013,from http://en.wikipedia.org/w/index.php?title=Value_chain&oldid=581904859

[24] Leveraging Knowledge forInnovation in Collaborative Networks:10th IFIP WG 5.5 Working Conference on

Virtual Enterprises, PRO-VE 2009,Thessaloniki, Greece, October 7-9, 2009,Proceedings (Google eBook) http://books.google.com/books?id=_OAT5jmWZ9oC


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A NOTE ABOUT THE AUTHORSEngagement for a changing world is areport that was co-authored by EstebanKolsky, Independent Analyst at ThinkJarand Thunderhead.com, a leader in CustomerExperience and Enterprise Engagementsolutions.

Esteban Kolsky, ThinkJarEsteban is a Customer Strategist with 25+years of technology, customer service,communities, social media, online and oinemarketing, CRM and enterprise strategyexperience. Esteban was an early pioneer incommunity-based customer service, feedbackmanagement, and using social channels forcustomer service.

As an industry analyst, formerly with Gartnerand now at ThinkJar, Esteban provides insighton Customer Strategies to help growing andchanging organizations adopt and succeedwith emerging technologies and topics and is

a thought leader in Customer Experience andCustomer Engagement.

Esteban personally conducted our extensiveinterviews with Senior Customer Strategists,summarized in this report.

ABOUT THUNDERHEAD.COMThunderhead.com provides a range ofpowerful SaaS solutions from its ONEEngagement Hub. The ONE EngagementHub ties together customer insight, contextand journey behavior and uses these toinform interactions with customers andpartners across all touchpoints.

We make it easy for customer-facing teamsto design and deploy great customer

journeys based on this rich insight andthrough value-driven interactions that leadto long-term engagement.

The result is that businesses have morepower to drive revenue, brand strength anddierentiation by delivering far beyondisolated interactions and experiences but bycreating the rich relationships that greatbusinesses are built on.

Thunderhead.comserves its global customer base from oces

located in North America, Europe and AsiaPacic.

Learn more at www.thunderhead.com

To learn more about Thunderhead.com visit:Thunderhead.com

[email protected]

@ThunderheadONE

linkedin.com/company/thunderhead-.-com

Copyright Thunderhead.com 2014 All rights reserved. Version 1.0 (UK). Thunderhead.com

endeavors to ensure that the information within this document is correct and fairly stated,but does not accept any liability for any errors or omissions.


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