"We can't afford to engage our customers"

Let's tackle the top objection to investing in customer engagement

If you say that out loud, it sounds ridiculous, doesn’t it?

Yet ‘cost’ is often the excuse used by companies to avoid investing in customer engagement initiatives. Let’s debunk the myth of ‘we can’t afford it’ when it comes to investing in customer engagement, and prove that customer engagement is one of the best drivers of real business growth.

In today’s issue of Backstage Pass, we’ll cover three main areas where customer engagement impacts every business; Customer acquisition costs, lifetime value of the customer, and overall profits and revenue.

Customer engagement leads to lower acquisition costs. When is the last time you saw a commercial from your favorite rock star? Take a second and think about that. You never have, right? Why don’t rock stars advertise for customers the same way brands do?

Because rock stars engage directly with their fans, and empower them to acquire new customers for them. When customers refer new customers for you, it dramatically slashes your cost to acquire that new customer. Your only real cost is the expense you have from engaging with the customer who referred the additional customer.

A research study conducted by the Wharton School of Business found that referred customers have a 16% higher lifetime value. This is because the acquisition point is via a customer rather than brand marketing. As I said in the previous issue of Backstage Pass, your passionate customers are your best salespeople. Passionate customers can sell your brand to other customers because they understand other customers. Customers sell to their friends and family, and they know their friends and family better than you do. So why wouldn’t you want to engage directly with your customers so they can sell your brand to their friends and family?

Engaged customers have a higher lifetime value. Remember in the last issue I talked about how interacting with your customers leads to understanding them, which leads to trusting them and advocating on their behalf? It all starts with interacting and engaging with your customers. Once you begin to engage with your customers, you better understand them, and they better understand you. You can communicate wth them more effectively and efficiently. Which also lowers your marketing costs.

And this impacts all areas of your business. Years ago, Patagonia started getting complaints about its packaging. Patagonia’s customer base is highly sensitive to environmental and sustainability causes. As such, customers started complaining about the boxes being used to ship clothing. The customers wanted Patagonia to start shipping in a simple bag that in their mind would reduce waste.

So Patagonia listened to its customers, and took its complaints to heart. To test their suggestion, Patagonia started packaging orders in simple bags rather than boxes. What Patagonia found is that during the packaging process in its warehouses, the bags would often rip, and the clothing would be damaged. So Patagonia reverted back to the boxes in order to provide adequate protection for customer orders. But since Patagonia listened to its customers, they were able to test their suggestion and engage with them on results. This leads to the customers feeling appreciated and they now have a better understanding for why Patagonia uses boxes during packaging.

Tying into the value of engaging customers and making them feel appreciated, Salesforce found that engaged customers buy 90% more frequently than non-engaged customers, and they spend 60% more when they do. We want to support brands that we feel appreciate our business.

Customer engagement leads to higher profits. So let’s build on what we’ve learned so far: Engaged customers will refer new customers for you, lowering your customer acquisition costs. Referred customers also have a 16% higher LCV. Additionally, engaged customers buy more frequently, and spend more when they do.

So all of that has to add up to increased profits, right? Right. Companies that focus on engaging their customers are 60% more profitable than ones that don’t.

So the next time you are in a sales or marketing meeting and someone wants to shoot down an investment in customer engagement, you can counter with “Have we considered the positive impact that customer engagement has on acquisition costs, lifetime customer value, and overall profits?”

After that, the floor will be yours.

As I leave you, I wanted to share one of my favorite Bible verses, Proverbs 25:2: “It is the glory of God to conceal a matter, and the glory of kings to seek it out.” In every area of our lives, so much is hidden from our direct view. But if we humble ourselves and put in the work to seek out wisdom, we shall discover it.

I hope you have a wonderfully productive weekend, and that you find the wisdom you are seeking.

Mack

PS: Alexandra, Paul and Neela, thanks for the support of the previous issue. I see you!