October 10, 2018
The State (and Future) of Digital Marketplaces
Engagement is frequently bandied about in marketing circles. It’s a hot (if poorly understood) term.
Further proof of this trend comes this week from Forrester Research in the form of the Q1 TechRadar: Mobile Marketing Report. Forrester declared the Mobile Engagement Automation industry as the fastest growing mobile marketing and commerce technology poised for significant success 2016. (You can get a free copy of the report here.)
You might say there’s little surprise here. Mobile is the new competitive battleground for companies. Gartner reported that worldwide smartphone shipments topped 1.9 billion in 2015 outpacing desktop and tablet sales combined by a margin of 1.4 billion. And, it’s not slowing down. The number of connected devices owned by consumers is expected to grow by 15 – 20% per year according to McKinsey, with smartphones far and away leading the charge.
But this trend isn’t just about mobile, it’s a change in what will be prioritized in the marketer’s job description. And that change will spread well beyond the mobile marketing landscape to touch every aspect of marketing to consumers.
Put succinctly, engagement is quickly becoming the new acquisition. This is borne out at the highest levels of the organization. A study released by McKinsey found that the top priority for digital investments by C-level executives is engagement of customers. As this directive filters down from the corner office, it’s little wonder that marketers across channels and touchpoints are prioritizing and seeking out partners to create a better engagement strategy. Mobile, where $0.37 of every marketing dollar is spent and 51% of digital media is consumed, is a natural leading indicator of this shift.
But this isn’t a simple shift. It requires changing the way we think about the customer funnel and how we align budgets (read: priorities) to it. Today, many marketers work directly from an acquisition budget: Money, programs and people are given the role of deploying campaigns across channels to find persuasive, and preferably cost-effective, means for bringing customers in.
This paradigm puts the emphasis on the front end of the customer relationship. Marketers are equipped and empowered to pull people in. Engaging these customers, and enticing them to take the repeated actions that drive lifetime customer value, is given short shrift. Until it’s too late.
That’s why simply raising the profile of engagement is not enough. It requires a remodeling of our customer funnel. And a rethinking of what we mean by engagement.
Today many think of the customer funnel relatively simply. You generate awareness, you acquire the customer, then you activate the customer. Rinse and repeat.
The problem with this model is that the pace of disruptive technologies and business models means that businesses need to drive greater continual value from their customer base, and employ that customer base as advocates in order to keep future acquisition profitable. This is challenging in any environment, but when “engagement” is left out of the strategic plan and budgets, it becomes near impossible to do effectively.
Let’s take an example from eCommerce (though this costs across industries). Imagine I’m running marketing at a publicly-traded eCommerce brand. Within our public filings we always include these four metrics:
Meeting each of these numbers is difficult because continued growth in my customer base is a priority, but I’m also charged with improving the value within the margins. If my budget is currently allocated to acquisition, I’m going to spend a lot of time and energy on increasing that topline number to the point that my margins within my funnel suffer. For instance, if the number of active customers slip, and I lack the ability to target customers based on their specific needs, wants or preferences, I default to discounts, which may increase my active customer base but hurt the amount of value I am able to draw from those customers.
This is just one example in one industry, but indicative of the larger need to reimagine the funnel from awareness to acquisition to activation, and realign investment to deeper stages of engagement that result in greater customer relationships and continued value. That funnel would look more like this:
In this model, activation and engagement are not assumed. They are critical steps that require more scrutiny, application of resources, and lead to stronger outcomes. Advocacy, then, is not only a hoped-for by-product of marketing’s messaging, but a planned outcome that leads to greater referrals, recommendations and reviews that drive greater, less costly customer acquisition. As such, the marketing budget for acquisition is more finely sliced to be applied to these stages of the funnel, and those programs are measured against the desired outcomes of these stages.
But this also requires a more detailed explanation of what “engagement” means.
One of the key issues with allocating resources to engagement is the definition is so broad as to be fairly criticized as “squishy.” Engagement can mean an email open, an app visit, or even a purchase. The term can be so vague that applying value is difficult if not impossible. Compare that to acquisition where the definition are more strictly defined: you have acquired an app download, registered user, email contact, etc.
This lack of refinement holds back marketers from making a deeper investment in engagement, and, as a result, limits how well resources are aligned to those programs or actions that will deepen the brand’s relationship with the customer and lead to a continued value exchange between both parties.
In our funnel, we define engagement as repeated value for the brand versus a single instance of consumption or purchase behavior. Instead, we align those single instances with the activation phase.
This model provides greater clarity around the actual outcomes that lead not only to a growth in customer base, but the continued value that is provided in each stage. And that allows the marketing organization to concentrate on a bigger picture of capturing greater value among active customers and users, aligning their resources and efforts to those actions, and meeting the executive-level charge to increase consumption, revenue and advocacy from each customer.
There is no on/off switch here. The change required is not just one of time, budgets and frameworks. Engagement requires grasping and responding each customer’s behaviors individually, learning more about what truly motivates them to act, and providing ongoing, personalized value to them. We are talking about a conversational marketing approach, rather than a transactional one.
But this shift is also not a nice to have. It’s a requirement for remaining competitive in markets that are facing regular disruption. Forrester, and other marketing leaders, are seeing the need play out. We’re thrilled they called Kahuna best-in-class in this category. Clearly, it’s a category whose time has come.