THE ENGAGEMENT SCORE

Transcription

1 WHITE PAPER THE ENGAGEMENT SCORE MEASURING THE VALUE OF BRAND ENGAGEMENT April 2015 HelloWorld, Inc.

2 ABOUT THIS REPORT Brand engagement is a hot topic among marketers, and increasing consumer engagement is more important than ever to build brand relationships and nurture long-term loyalty. While brands continue to invest in strategies that engage their consumers beyond purchase, measuring the impact of engagement and quantifying the return on these strategies has presented challenges. HelloWorld conducted a study aimed to answer the following questions: 1. How can you objectively measure or quantify engagement? 2. What is the impact of engagement on purchase? 3. How does engagement impact loyalty? The insights from this two-phase study allowed us to objectively measure engagement, develop engagement benchmarks and uncover insights on how engagement impacts purchase behavior and loyalty. The study resulted in the development of a metric used to evaluate a consumer s level of engagement with a brand or program. METHODOLOGY Our two-phased scientific approach collected online survey responses from January to June We asked consumers to think of a brand to which they are loyal as they answered our series of questions.. We call this brand their favorite brand. We collected responses across six industries: Banking and Financial Services, Consumer Goods, Electronics, Restaurant, Retail, and Travel. We used statistical analysis to develop an algorithm that scores engagement, then applied that algorithm to the favorite brands of over 4,500 consumers across the six industries. Phase 1 Algorithm Development The first phase of the study was designed to identify factors that drive consumers engagement with a selfselected favorite brand. We surveyed 936 respondents with 50 questions on common ways consumers interact with their favorite brands. Through factor analysis we narrowed the questions down to five. These questions represent five latent factors of brand engagement that explain over 75% of consumer engagement with their favorite brand. We then created an algorithm and scaled scores in a range of Scores were normalized to allow for cross-industry comparisons. The average engagement score is 30. Phase 2 Engagement Study The outcome of phase one and additional purchase behavior questions were then fielded in a survey of 4,755 consumers across the six industries. We applied the algorithm from phase one to score engagement and identify its impact on purchase behavior and loyalty. In addition to basic quantitative analysis of respondents questions and answers comparing results across demographic groups and industries respondents were also scored and sorted into segments of low, middle, and high engagement based on their responses to specific questions that were determined in algorithm development. SCORE GROUP SCORE RANGE % OF CONSUMERS (combined all industries) HIGH % MIDDLE % LOW % HelloWorld, Inc. / Engagement Score 2

3 WHAT S THE ENGAGEMENT SCORE? > The Engagement Score is a brand health metric that can help marketers measure the value of their engagement efforts. KEY FINDINGS Engagement is an important factor in consumers relationships with brands, influencing how much and how often they buy. Higher engagement drives higher share of requirements. Even the most loyal consumers buy more from their favorite brands at higher levels of engagement. Engagement positively impacts loyalty program membership. As engagement increases, so does the percentage of consumers who are members of their favorite brand s loyalty program. Converting consumers to loyalty program members plays a key role in maximizing share of requirements. Use a combination of topic and tactic to engage loyal consumers. Focus communications on high value differentiators like quality and service. FIVE FACTORS OF ENGAGEMENT Of the 50 factors evaluated, our study identified the five most important factors of brand engagement. These five factors explain over 75% of consumer engagement with their favorite brand. 1 Advocacy: Rating a product or writing a review 2 Social media: Posting a positive experience on social media 3 Insights: Being a beta test participant 4 Communications: Opting-in to communications 5 Promotions: Registering for a sweepstakes or contest (not discounts or coupons) HOW THE ENGAGEMENT SCORE CAN BE USED The Engagement Score can help marketers measure the impact of engagement efforts and evaluate the engagement levels of audiences their programs attract. Marketers can use the score to evaluate overall engagement for their brand, individual loyalty program, or other promotional campaigns. It can also be used to assess the impact of marketing strategies and track consumer engagement with your brand over time. Additional analysis can be applied to engagement results to calculate sales impact and the return on engagement strategies. DEFINITION // Share of Requirements A key brand loyalty metric that represents the percent of consumers purchases within a category, accounted for by a specific brand. It is also referred to as share of wallet when looking at consumer spend within a category. Example: Joe buys 10 carbonated beverages per month. If seven of those purchases are Coke Zero, Coke Zero has 70% share of Joe s requirements. HelloWorld, Inc. / Engagement Score 3

4 WHAT IS THE IMPACT OF ENGAGEMENT ON PURCHASE? > Engagement is an important factor in consumers relationships with brands, influencing how much and how often they buy. INSIGHTS Most marketers have a sense that engagement has a positive impact on sales; however, measuring that impact has consistently been a challenge. Our study was able to quantify the link between engagement and sales and demonstrate just how valuable highly engaged consumers can be to increasing share and purchase frequency. ENGAGEMENT INCREASES SHARE OF REQUIREMENTS Even the most loyal consumers (those who purchase their favorite brand most or all of the time) buy more at higher levels of engagement. Overall, we saw a 14% increase in this group of consumers when they scored high on engagement compared to those who scored low. (See chart to the right.) This is even more pronounced in certain industries. Retail, travel and electronics that had 21-24% increases in consumers who scored in the high group of engagement purchase their favorite brand most or all of the time, compared to those who scored low. Marketers who apply their own household penetration, frequency, and margin rates to these increases in share of requirements can quickly see how improving their consumer s engagement will impact their bottom line. What percent of the time do you purchase your favorite brand? ENGAGEMENT SCORE GROUP Low 24% Middle High -13% 17% 11% 21% 22% 19% 56% +14% 62% 70% RETAIL SPOTLIGHT // When engagement scores improve from low to high ranges, 21% more consumers shop at their favorite retail store most or all of the time. The majority of that change comes from consumers who purchase at their favorite store about half of the time. With over 75% of favorite retail stores falling into grocery, drug, mass, and club brands that tend to have higher purchase visits, we re talking a significant impact on traffic as a result of higher engagement, even among your most loyal customers. 21% INCREASE IN CONSUMERS WHO SHOP THEIR FAVORITE STORES most or all of the time at higher levels of engagement HelloWorld, Inc. / Engagement Score 4

5 What percent of the time do you purchase your favorite brand? ENGAGEMENT SCORE GROUP Low Middle High BANKING 73% 79% CPG 83% 85% 91% 60% 20% 20% 19% 16% 8% 5% 7% 6% 2% 10% 10% 7% ELECTRONICS 83% RESTAURANT 72% 59% 62% 57% 39% 33% 38% 18% 13% 2% 23% 24% 15% 19% 9% 10% 23% RETAIL TRAVEL 72% 77% 68% 81% 56% 58% 33% 22% 18% 23% 19% 21% 14% 11% 6% 5% 11% 5% What is your favorite brand? (Top brand per category) LOCAL BANKING & FINANCIAL SERVICES CPG ELECTRONICS RESTAURANT RETAIL TRAVEL HelloWorld, Inc. / Engagement Score 5

6 MORE FREQUENT BUYERS Even for brands consumers love, they might not buy their favorite brand all of the time. There are many personal and industry specific factors that may influence those purchase decisions. What we see in our research is that increasing engagement among occasional buyers is important too. The study showed a movement of 13% of occasional buyers into more frequent buyers (who buy their favorite brands half of the time or more) as engagement increases. This change is even larger for travel brands and restaurants, which is great news for industries with heavy price competition and lots of choice. (See charts on page 4) While we can t determine exactly where these buyers land into the about half the time or most/all of the time categories what we can see is the overall shift toward increased share of purchase frequency as engagement levels improve. RESTAURANT SPOTLIGHT // In an industry where consumers want or seek variety, like restaurants, we weren t surprised to find that fewer consumers dine at their favorite restaurant most or all of the time. But restaurant brands can make a big impact on purchase behavior when their customers are more highly engaged, especially among customers who dine with their favorite brands occasionally. Restaurant brands take note, even small increases in engagement can impact purchase frequency across your entire customer base. 33% In consumers who dine at their favorite restaurant brand more frequently at higher levels of engagement Even small increases in engagement can impact purchase frequency. 19% 14% In consumers who dine at their favorite restaurant about half of the time as engagement scores improve from low to high ranges In consumers who dine at their favorite restaurant brand most or all of the time as engagement scores improve from low to high ranges HelloWorld, Inc. / Engagement Score 6

7 WHAT IS THE IMPACT OF ENGAGEMENT ON LOYALTY PROGRAM MEMBERSHIP? > Share of wallet increases with loyalty program membership and higher brand engagement, demonstrating the important role programs play in driving sales among loyal consumers. INSIGHTS It doesn t feel like a stretch to presume that consumers who are loyal to brands are more likely to be members of their favorite brand s loyalty program. But does the same hold true for engagement? To answer that question, we looked at the data to identify whether highly engaged consumers are more likely to be loyalty program members, and then whether membership has the positive impact on sales that the program is designed to drive. PROGRAM AWARENESS To be a member of a program you have to be aware of it, so we first looked at awareness levels among industries. On average, 56% of consumers are aware of a loyalty program for their favorite brand. While there are differences in awareness among industries, these differences tend to reflect the overall loyalty program makeup in the U.S. where retail and travel hold the majority of active programs. Rates of awareness remain relatively consistent among industries, regardless of level of engagement. Are you a member of your favorite brand s loyalty program? NOT AWARE 44% NOT A MEMBER 29% MEMBER 27% Converting loyalists to members is critical. Our data shows that 72% of loyalty program members purchase their favorite brand most or all of the time, compared to 55% of consumers who are aware of a loyalty program for their favorite brand but not a member. For brands that have a loyalty program, this 17% variance represents a significant impact to sales as a result of converting brand loyalists to program members. The variance ranges even higher from 20-30% for banking, electronics, retail and travel brands. Using the engagement score to segment your consumers can help identify engaged loyalists who are a receptive audience for loyalty initiatives. CONSUMERS WHO PURCHASE THEIR FAVORITE BRAND MOST OR ALL OF THE TIME 72% PROGRAM MEMBERS 55% NON- MEMBERS HelloWorld, Inc. / Engagement Score 7

8 ENGAGEMENT S IMPACT ON MEMBERSHIP Level of engagement does have an impact on program membership, even for consumers favorite brands. On average across all industries, about half of consumers are members of their favorite brand s loyalty program. This conversion rate skews higher in industries where loyalty programs are more common and integrated with purchase like travel, retail, and banking/financial services, and lower in industries like CPG and electronics. And when we factor in engagement, the increase in program conversion becomes even more significant. As engagement increases, so does the percentage of consumers who are members of their favorite brand s loyalty program. Overall, among those who scored high in engagement, 70% of loyal consumers are members. Loyalty program membership drops off to 49% for those who scored in the middle range of engagement and 29% for those who scored low. That 41% swing in membership rates can mean significant additions to your program s enrollment. The gap is wider for restaurant brands where close to 60% more consumers are members of their favorite brand s loyalty program at high levels of engagement compared to those who scored low. MEMBERSHIP S IMPACT ON PURCHASE Loyalty programs are designed to increase purchase behavior, but do they? The answer is yes. Loyalty program membership has a positive impact on purchase behavior, increasing share of requirements. We see that 17% more purchase their favorite brand most or all of the time compared to those who are not program members. This holds true across industries, except among CPG brands. ENGAGED MEMBERS AND PURCHASE When you layer on a member s level of engagement, we also see that higher levels of engagement drive higher share of requirements. The story is noteworthy for CPG brands where almost all program members who scored high in engagement purchase their favorite brand most or all of the time compared to 78% of members who scored in the middle range. The trend across almost all industries shows that highly engaged loyalty program members have the highest share of requirements among all consumers in this study. Brands that want to drive maximum bottom line results should employ strategies to nurture these highly valuable consumers to both improve engagement and convert brand loyalists to their loyalty programs. Are you a member of your favorite brand s loyalty program? Among those aware of a loyalty program for their favorite brand ENGAGEMENT LOW MEDIUM HIGH TOTAL Banking CPG Electronics Restaurant Retail Travel What percent of the time do you purchase your favorite brand? MEMBERSHIP YES 29% 49% 70% NO 71% 51% 30% YES 34% 67% 79% NO 66% 33% 21% YES 4% 19% 39% NO 96% 81% 61% YES 5% 9% 34% NO 95% 91% 66% YES 9% 43% 68% NO 91% 57% 32% YES 59% 72% 82% NO 41% 28% 18% YES 46% 61% 83% NO 54% 39% 17% Consumers who purchase their favorite brand most or all of the time LOYALTY PROGRAM MEMBER NOT A MEMBER NOT AWARE OF A LOYALTY PROGRAM TOTAL 72% 55% 60% Banking 78% 57% 71% CPG 82% 85% 86% Electronics 87% 57% 71% Restaurant 20% 12% 12% Retail 76% 61% 63% Travel 82% 54% 60% Program members who purchase their favorite brand most or all of the time by Engagement Score ENGAGEMENT LOW MEDIUM HIGH TOTAL 70% 71% 74% Banking 73% 78% 82% CPG N/A 78% 96% Electronics N/A 78% 92% Restaurant N/A 18% 19% Retail 66% 79% 79% Travel 76% 80% 87% N/A - Sample size too small HelloWorld, Inc. / Engagement Score 8

9 INVEST IN MEMBER ACQUISITION It s no surprise that highly engaged loyalty program members are the most valuable consumers. But converting frequent buyers at all levels of engagement is critical to increasing a brand s share of requirements. Our research shows increases in purchase behavior at all levels of engagement. But the biggest jump, at almost 20%, comes from enrolling consumers who aren t highly engaged. What percent of the time do you purchase your favorite brand? Engagement Score groups for consumers who purchase their favorite brand most or all of the time. LOYALTY MEMBERSHIP Non-Member Member +19% +16% +9% 70% 71% 68% 74% 51% 55% Low Middle High Enrolling frequent travelers in a brand s loyalty program can increase share of requirements by up to 32%. TRAVEL SPOTLIGHT // Focusing on loyalty program enrollment is especially important for travel brands. We found that enrolling frequent travelers in a brand s loyalty program can increase share of requirements by up to 32%. While driving higher member engagement reaps the biggest rewards, acquisition efforts targeting those who aren t as engaged with their favorite brand can add significant bookings for travel brands. 44% +32% Low 76% 68% +19% High 87% LOYALTY MEMBERSHIP Non-Member Member Engagement Score groups for consumers who purchase their favorite brand most or all of the time. HelloWorld, Inc. / Engagement Score 9

10 HOW CAN BRANDS ENGAGE LOYAL CONSUMERS? > When interacting with loyal consumers, use a combination of topic and tactic to engage them on the driver that is most important to why they are loyal. INSIGHTS If highly engaged consumers purchase more share from their favorite brands, it begs the question: How can I engage loyal consumers? Because the list of tactics brands can use to engage consumers is long, varied, and dependent upon on a variety of factors including brand strategy and technology capabilities, the first place to start might be with the message. UNDERSTAND THE WHY To increase engagement, brands should first understand why consumers are loyal, then determine the best tactic to engage them. Rooting communications in the why builds deeper brand connections and positively influences the dynamics among loyalty, engagement, program membership, and increased share. That s not to say the how isn t important. Engagement will pay off at its highest when a combination of how and why are employed. With more ways to connect with consumers than ever, brands who take a consumer-centric when they want, where they want, with the message they want approach will successfully engage their consumers. Why are you loyal to your favorite brand? INDUSTRY PRICE QUALITY CONVENIENCE CUSTOMER SERVICE TOTAL 17% 57% 15% 11% Banking 12% 24% 37% 27% CPG 7% 90% 2% N/A Electronics 12% 79% 5% 4% Restaurant 12% 67% 11% 10% Retail 29% 43% 22% 7% Travel 30% 39% 14% 17% N/A - Sample size too small HIGH VALUE DIFFERENTIATORS Our research shows that quality matters when it comes to brands consumers are loyal to, regardless of degree of engagement. While price is an important factor for some loyal consumers, it is not dominant. Even in retail and travel industries where more loyal consumers indicated that price is important to why they are loyal to their favorite brand, quality is still the most important factor. Regardless of industry, fostering a loyal consumer base by focusing on higher value differentiators like quality and customer service is important because it takes the pressure off of competing based on price. Understand your consumers reasons for choosing your brand over others and then engage them with that message. HelloWorld, Inc. / Engagement Score 10

11 WRAP UP Engagement and brand loyalty are not synonymous. We asked consumers to respond to our survey thinking about their favorite brand within the category, and what we found are varying levels of engagement, even among the most loyal consumers. Engagement matters and is an important factor in a consumer s relationship with brands influencing purchase behavior and loyalty program membership. Understanding consumers levels of engagement with your brand and the drivers behind their loyalty can provide rich information to target communications and move consumers up the engagement spectrum. Engaged consumers are incredibly valuable to brands on multiple levels driving increased share of requirements and providing a receptive audience for loyalty initiatives. Highly engaged loyalty program members are a brand s most valuable consumers. But converting loyal frequent buyers at all levels of engagement to program members can drive significant increases to a brand s bottom line. The Engagement Score is a brand health metric that can help marketers measure the value of their engagement efforts and evaluate the engagement makeup of audiences that their programs attract. HOW WE CAN HELP HelloWorld s experts are passionate about creating stories from data. Leverage our infrastructure and experience to dive deep into your analytics, starting with your consumers level of engagement. We ll measure the sales impact of your loyalty and marketing programs, and create targeted and relevant solutions. Contact HelloWorld to get started. Michela Baxter Sr. Director, Loyalty michela.baxter@helloworld.com ABOUT HELLOWORLD, INC. HelloWorld is a digital marketing solutions company working with the world s leading brands across all industry verticals. The company offers a powerful combination of native platform technology and marketing strategy to brands looking to accelerate growth and deepen customer impact. HelloWorld creates brand-consumer interactions through promotional campaigns to spark interest, loyalty programs to retain and reward, and mobile messaging to continue the conversation. Founded in 1999 as eprize, HelloWorld is one of the largest independent digital solution providers, with offices in Detroit, New York, Chicago, Los Angeles, Nashville, Phoenix and Seattle. HelloWorld s technology is behind local, national and global campaigns for clients such as Coca-Cola, Microsoft, the Gap and Procter & Gamble. For more information, please visit helloworld.com HelloWorld, Inc. / Engagement Score 11