The New Rules of Engagement CMOs Rethink Their Marketing Mix IN ASSociAtioN WitH: © Copyright Forbes 2010 1 KEY FINDINGS To gain a deeper understanding of how marketers are defining and acting on customer engagement, Forbes Insights, in association with experience marketing agency George P. Johnson, surveyed more than 300 marketing leaders of large companies. Key findings of the study include: • As traditional “interrupt and repeat” advertising models are fading as brand-defining tools in favor of customer “conversations” and advocacy, engagement is becoming the way marketers are creating brand experiences worth discussing. • CMOs are building their customer-facing programs with engagement in mind, and making it a KPI in their dialog with top corporate management. • Coming up with a definition of customer engagement appropriate to their organization and brand—and the accompanying metrics to measure it—is a core responsibility of the CMO. • In assessing engagement, experiential and digital opt-in methods are frequently rated as the methods that engage with customers most deeply. Yet CMOs aren’t necessarily aligning their marketing budgets to these priorities. • Companies may be getting in their own way when it comes to drafting their engagement strategies. Among the top inhibitors: lack of a well defined approach to engagement, and poorly articulated benefits for loyal customers. • Despite an understanding of the importance of engagement, more than a quarter of companies don’t have a specific engagement strategy in place. More than a third believe their companies are doing only a fair or poor job engaging their audiences. • For most marketing executives, effective engagement translates into greater sales, higher margins, and repeat purchase behavior. Still, given the value they place on engagement, a high number are not measuring its impact. • Employees are an important element of the engagement formula; inspiring employees and equipping them to over-deliver to customers is crucial to success. • Marketing channels that emphasize engagement are increasingly favored by executive marketing decision makers. © Copyright Forbes 2010 2 As customers’ attitudes and expectations change ads—continue to fade as brand-defining tools. Instead, con- towards the companies they do business with, sumers, empowered by the Internet and social media, are speaking their minds more freely about what they buy and the concept of engagement is becoming more use. They are driving the brand conversation and marketers crucial to marketing success. At the same time, need to understand they must “join” the conversation instead marketers are trying to justify their efforts of shouting over it. To gain a deeper understanding of how marketers are across an ever-broadening spectrum of media defining and acting on customer engagement, Forbes and increasing number of customer touchpoints, Insights, in association with experience marketing agency while customers are raising their expectations George P. Johnson, surveyed more than 300 marketing leaders at companies with annual revenues of more than of what they want. $500 million. The respondents clearly have been putting a Even so, “engagement” remains an amorphous concept laser-like focus on engagement—not just of their custom- for many marketers. While academics continue to dis- ers, but also within their own organizations. But they are cuss the topic and debates rage over a proper definition, at often at odds over how to do it correctly and how to mea- its essence, engagement is a way to get customers to con- sure its impact. nect more deeply with a brand. For this study, engagement is defined as the interactions, experiences, and context that create and MANY PROPOSALS FOR geTTING ENGAgeD nurture enduring, profitable customer relationships. There’s little doubt that marketing executives are now Why is this important? Customers are gaining greater building their customer-facing programs with engagement control over how brand values are communicated. Traditional in mind. In fact, nearly all survey respondents (97%) said “interrupt and repeat” advertising models—such as broadcast their companies viewed the issue of engagement as very FIGURE 1: The role of engagement At your company, how important is the issue of engagement? Is engagement part of your ongoing conversation with the CEO, board of directors and other corporate leadership? 3% 14% 30% • Very important • Yes • Somewhat important • No • Not important 67% 86% © Copyright Forbes 2010 3 FIGURE 2: Which of the following results are integral to your definition of (67%) or somewhat (30%) important. In addition, 86% said successful customer engagement? engagement is part of the ongoing conversation between marketing and top corporate leadership. (Fig. 1) Repeat purchase behavior Still, marketers don’t have a consistent approach to what 72% they expect from engagement. They know that engagement Customers become brand advocates who market on your behalf is intrinsically linked to customer loyalty and retention. 69% They want repeat sales. They want stronger word of mouth. Customer willingness to pay a premium And they want customers who are less price-sensitive. 48% When asked what results they thought were integral to Customer resistance to competitive products and services their definitions of engagement, more than seven out of ten 38% marketers (72%) chose repeat purchase behavior. (Fig. 2) That was followed closely by customers becoming brand Customer support for the brand reduces marketing and sales costs advocates (69%). In addition, nearly half of the respondents 28% (48%) cited a customer’s willingness to pay a premium as sign Customers volunteer time and talent to improve brand’s products and services of successful engagement. Fewer saw the economic implica- 14% tions of engagement, with 38% noting customer resistance to 0% 50% 100% competitive products and services, and 28% indicating that engagement could reduce marketing and sales costs. With no industry-wide definition of engagement in place, FIGURE 3: How can the CMO/marketing function best encourage customer it’s little surprise that marketing executives are approach- engagement? ing the issue from different angles. For more than one-third By taking a leadership role to ensure authentic, consistent brand experiences (35%), engagement is primarily about creating authen- 35% tic brand experiences, while a quarter (24%) have given up observation in favor of interaction. (Fig. 3) Another quarter By creating campaigns based on customer interaction, not observation (23%) are involving customers in the product development 24% cycle or designing tools to empower brand advocates. By creating systems that involve customers in the product development cycle No matter the approach, it’s clear that engagement isn’t 12% just an outward-facing challenge. For 61% of marketing By designing tools and assets that brand advocates can use to evangelize executives, employee engagement is also a priority. (Fig. 11% 4) And that’s just the beginning. Like many of the execu- By increasing employee education and training to create rich brand experiences tives surveyed, Joanne Smith, director of customer loyalty 10% for DuPont, sees many important targets. “Engagement across a host of audience groups is critical to success,” she By designing “big idea” marketing campaigns to express brand values said. “We engage customers and employees, but also policy 9% makers, NGOs, community members, the scientific com- 0% 50% 100% munity, to name a few.” GETTING IN THeir OWN WAY While the need to engage customers is a given, market- ers remain unclear about how to accomplish this. They want to add value to their brands, deepen their customer relationships, and protect their profit margins. But they are running into roadblocks—some of which they may be erecting themselves—that keep them from reaching these objectives. © Copyright Forbes 2010 4 FIGURE 4: Among which audiences do you hope to optimize engagement? FIGURE 5: Does your company have a specific strategy toward customer engagement? Customers 95% 4% Employees 61% 27% Partners • Yes • No 39% • Don’t know Distribution/retail network 35% 69% Media 22% Shareholders 19% Analysts FIGURE 6: Overall, how successful is your brand organization at engaging your audiences? 18% 0% 50% 100% 4% 10% For example, more than a quarter of the companies surveyed indicated they have no specific strategy related to customer engagement. (Fig. 5) Without a plan in place, • Excellent 30% these marketers will be challenged to understand their • Good objectives and gauge their results. Perhaps that’s why more • Fair • Poor than a third of marketers rated their companies’ current engagement efforts as just fair or poor. (Fig. 6) 56% What do marketers expect from engagement? It ulti- mately depends on who the company’s primary customer is. MTV: HOLISTIC ENGAgemeNT TO A REAL WORLD AuDieNCE Though best known for its namesake cable channel, MTV Networks—a any and everything in the digital space, as it relates to customer engagement.” division of Viacom, Inc.—is comprised of several dozen cable networks world- But blogs, fan pages and iPhone apps are not enough. “We want to be wide, including MTV, VH1, Spike, Comedy Central, Logo and Country Music in the spaces and places where our viewers hang out—whether that’s on Television. The audiences for these channels are diverse and subject to turnover Facebook, or at summer festivals,” noted Exarhos. “While it might not be a as they outgrow individual properties. direct pathway to ratings, we believe that staying top-of-mind with consum- How do MTV’s marketing executives engage such moving-target consumers? ers is critical.” For Tina Exarhos, executive vice president of marketing and multiplat- Real-world engagement is also crucial for Niels Schuurmans, executive form creative for MTV, the challenge is “to constantly reinvent ourselves for the vice president of brand marketing and creative at Spike TV, the network’s current MTV generation.” Right now, that happens to be millennials, broadly male-oriented channel, even when the returns can’t be measured. In 2009, defined as viewers born between 1982 and 1995.