4 Metrics I Use To Help Retailers Measure And Boost Customer Engagement

In today’s hypercompetitive environment, it is imperative for businesses of all shapes and sizes to continuously engage and retain their existing customers . The cost of new customer acquisition is steadily increasing, and therefore it becomes even more critical for companies to focus on robust customer engagement strategies.

Successful customer engagement at a high level would simply mean understanding your existing users and continuously giving them a user experience that is the best of the breed. It should compel them to remain associated with you over long periods.?

While engaging and retaining your existing users are vital marketing strategies across any industry segment, it becomes even more significant for retail as an industry segment given the intense competition amongst brands and the sheer plethora of choices available to consumers today.?

Retail as an industry is anyway prone to generating a lot of data. So, customer engagement as a discipline has picked up a lot of importance and focus in the last few years, particularly in retail.?

In this blog, we will aim to understand the chief drivers of successful customer engagement and how we as retailers can play around with these levers to improve our business’s overall customer engagement metrics.

With my 15 years of experience in retail and associated industries, I have realized that customer engagement is a multi-faceted phenomenon, with various behind-the-screen forces driving it.?

However, to make this more practical and implementable, we will try and zero in on a few key drivers of customer engagement, that if worked upon, can definitely lead to an increase in overall customer engagement for your retail business. I will define some of the crucial drivers of customer engagement and share some practical ways to improve the same.?

1. Customer Repeat Rate

This would be by far the cornerstone metric in the overall customer engagement analytics. Simply put, it can be defined as the ratio of the number of customers who have made more than one transaction with us to the total number of customers.?

Customer repeat rate = Customers who have purchased more than once/Total number of customers

Naturally, the higher the repeat rate, the better it is for the business. Now there are multiple ways to improve the repeat rate for your customer base. But the most prominent amongst them would be to define and execute customer journey or lifecycle campaigns.?

Understanding the inter-purchase time of your customers and curating trigger-based campaigns across different time points to motivate them to make a repeat purchase is a common technique.?

There are many marketing automation tools available today that can help you do that. AI-based CRMs such as Ingage also have a very comprehensive marketing automation platform . Using them, you can define and execute highly personalized trigger campaigns across different channels like WhatsApp, SMS, email, push notification, etc.?

Based on my experience, a well-thought-through customer lifecycle campaign can provide an uptick to repeat rate as high as almost 20%. The magnitude of the impact, of course, would depend upon the type of retail segment (Grocery, Fashion, Electronics, etc) with frequency retail showing the maximum impact (between 20-30%) and high-value discretionary retail showing the least (up to 10%).

2. Recency Index

This is simply a measure of how active your customer base is. An easy way to define this would be the ratio of the number of customers who made their last purchase in the last 3 months to the total number of customers.?

Recency Index = Number of customers who purchased in the last 3 months/Total number of customers

The idea behind this metric is to understand how fresh or stale the overall customer base is. Any healthy business has to have a customer base that is pretty active and interacting with it more frequently. A lower recency index would indicate more inactive customers, which definitely needs to be addressed.?

A higher recency index, on the contrary, could mean either of the two things. Maybe there’s a high proportion of new customer acquisition happening in business over time, or there is a decent repeat rate in the business.?

Again, as with all other drivers, this metric would vary from one retail format to another. For instance, a recency index of anything less than 30% would be considered bad in grocery retail whereas the same number for fashion retail would be considered very good.?

Depending upon the type of retail, businesses should ensure that they are tracking this metric and trying to be above average for their particular segment. One simple way to improve the recency index for your business would be to continuously run a reactivation campaign and try and reactivate an inactive customer community. Trigger campaigns can also be set to do the same.?

So, whenever a customer goes without shopping for more than a year, an automated trigger communication (email/SMS/WhatsApp/push notification) can go out to them, incentivizing them to make a second purchase. The inactivity triggers can be configured at an overall level or can also be configured at a specific product category level depending upon the inter-purchase time for the particular product category.?

For instance, we know that the typical inter purchase time for a 2L ketchup packet is 2 months, and average customers usually refill within 2 months. A specific trigger can be set up for all “ketchup buyers” after crossing 55 days from the last ketchup purchase.?

AI-driven customer engagement platforms like Ingage can send out such personalized trigger communications to customers and then also help understand the effectiveness of these campaigns on a real-time basis.

3. NPS?

There's no better measure of customer satisfaction scores and hence engagement, than Net Promoter Score (NPS). This metric has been around for a while and has been used quite actively across industries, especially retail.?

According to Wikipedia , the net promoter score is a widely used market research metric that is measured by the responses collected in a survey that typically raises queries like:?

Would you recommend our product/service/company to a friend or colleague??

Mathematically, you can measure NPS by deducting the percentage of detractors from the percentage of promoters.?

NPS = % Promoters - % Detractors?

Note that the customers are clustered into promoters, passives, and detractors depending on their response to the single survey question.?

In simple terms, the higher the NPS value, the more likely is it that your customers would recommend your products or services to others, and vice versa.?

The beauty of NPS lies in its simplicity and ease of execution. Again, as is the case with all other key metrics, the baseline of good/bad/average NPS score would significantly vary as we move from one retail segment to another.?

For example, an NPS score of 30-40% would be considered a good score for Supermarket/Grocery retail, but the same would be considered low for pure-play eCommerce retailers.?

As a retailer, it is crucial to measure NPS consistently. Then you should try and benchmark yourself against your industry peers. One significant step to improve NPS would be to slice and dice the survey responses and figure out deeper insights from this data.?

That insight would then need to be executed to lead to tangible improvement on the ground for the NPS to improve over some time.?

A lot of retailers just have an NPS survey with a lack of real-time analysis. This is something that should be avoided, and the NPS response data should be thoroughly analyzed to unearth nuggets of insights to improve the overall customer experience and exceed customer expectations.?

Extensive studies have been done linking NPS scores to overall sales growth. In one such study, the London School of Economics found that an average NPS increase by 7 points correlates with a 1% growth in revenue. So NPS is an important metric for customer engagement analytics and needs to be tracked and acted upon.?

4. Loyalty Transaction Percentage

A loyalty program is a powerful lever in the hands of a retailer. This helps them increase customer retention and customer loyalty . There are different loyalty programs —from simple vanilla points-based programs to slightly more complicated tiered programs with unique earn and burn rules.?

Whatever it is, there's no denying the fact that a lot of retailers leverage some sort of a rewards/loyalty program to establish an emotional connection with their users and reward them for their continuous purchase.?

For those retailers who have a loyalty program, one important metric to understand the effectiveness of the loyalty program is the “percentage of loyalty transactions”.?

Simply put, it's the ratio of the number of loyalty transactions (where a loyalty card was used) to the total number of transactions.?

Loyalty transaction percentage = [Number of loyalty transactions/Number of transactions] x 100

The higher this number, the better is the loyalty program performing. A higher loyalty transaction percentage would indicate a greatly engaged customer base. They are using the card to earn points and then subsequently redeem them, hence increasing repeat purchases.?

In my experience, incentive schemes at the cashier level play an important role in improving the loyalty transaction percentage. Of course, the overall dynamics of the loyalty program itself will go long-term in determining whether users display regular interactions or not.

With one of our fashion retail clients in UAE, we started a cashier-level incentive program.? Every cashier/store staff had a loyalty transaction percentage target to achieve and were also rewarded for meeting the same.

And honestly, a small reminder by the cashier at the till about the benefits of the program went a long way in improving the overall program engagement.

Successful customer engagement matters. It is a composite metric, and as such multiple independent metrics would impact the same. The interplay of these individual factors usually ultimately determines how engaged our users are with us.

The above-mentioned four metrics are good indicators of the health of our overall customer engagement strategy and should be used in a deterministic way to take relevant actions.

Calculate And Boost Your Customer Engagement Score For Free

In an endeavor to simplify the complexity of customer engagement metrics and help retailers benchmark themselves, my team and I have come up with a customer engagement calculator .?

It gives an overall customer engagement score based on the user input values for the four key drivers, with tips to improve the same. The back-end cutoffs for each of these drivers are pre-fed in the system. They vary as we move from one retail vertical to another.?

The best part is, it is free to use.?Yeah, you read that right!?

I'm just sharing some industry knowledge with hopes that you could have a reference point to benchmark and improve over a period of time. After all, that’s the reason I left Target and started my own company — to help mid-sized retailers get data-driven solutions without breaking the bank :)?