Measuring the Value Of Internet Customer Engagement

A while ago I applied for a PhD position that I got interviewed for but sadly I didn't get the position. Figured, I'd post my research material online so someone would find it useful! The topic was directed towards enabling SMEs within the Tourism Industry to measure the value of internet customer engagement.

RESEARCH PROPOSAL

Online travel markets are booming the world over with European travel industry seeing the fastest regional growth. The total number of online bookings has risen by 20% from 2010 to 2011, with UK consistently showing up on top every year. At 47% online penetration, UK overtook Scandinavia by a very small margin in 2010, but made up for a giant 28% of the total European online travel share. As larger markets mature, this number is expected to drop to 26% in 2013 but Great Britain will still continue to account for the largest market share in Europe (eHotelier, 2009; European Travel Commission, 2012; PhoCusWright, 2012; yStats, 2012).

The European online travel market is predicted to be worth €91bn in 2012 with focus shifting from mass tourism to customised travel for the individual (eDigitalResearch, 2010). According to the European Travel Report 2012 by yStats, more than half of all consumers within Great Britain book their holidays online. Travel related properties (online travel agents, destination information portals, transport and accommodation sites) now attract about 44% of digital audience in Europe as UK leads with 66.5% penetration, an 8% point rise from 2010. In April 2011, travel giant Expedia, Inc. recorded 21.7m unique visitors to their websites (TripAdvisor, Expedia and Hotels.com), making them the most popular travel property in Europe (European Travel Commission, 2012).

Another survey carried out by the European Travel Commission (2012) shows that 78% of travel professionals are increasing their digital budgets (social media, SEO, content, video, mobile apps etc) in 2012. With the advent of ubiquitous technology, larger companies have been investing in experience enhancing models built around augmented reality and gamification.

Integration of innovative marketing solutions along with advanced technical tools to measure their impact creates a significant gap between large enterprises and SMEs or micro enterprises. Financial constraints, lack of skills or misalignment of priorities leaves UK SMEs at the losing end despite a large number of internet users in Britain booking travel and accommodation via the web (Buhalis & Main, 1998). Travel bookings rank among top 5 e-commerce activities done online (ACMA, 2010) yet a large number of SMEs can be seen focusing their efforts on promotion than engagement (Braun, 2006; yStats, 2012)

Such contradictory statistics highlight the need to focus on internet customer engagement. The European Commission has begun a demonstration project to create an ICT and Tourism Initiative for SME’s, given the lack of digital progress (European Commission, 2012; Amadeus, 2012). Engagement is critical but formulation of goals and metrics is a task requiring local-level transactions and enterprise-wide transformations (O’Toole et al, 2007; Gallup, 2009). Recent Epson Business Council research shows only 29% UK SMEs acknowledging the value of customer engagement (Lawrence, 2012). A survey of tourism SMEs in the European hospitality sector shows that tourism SMEs are still reluctant to apply e-commerce strategies regardless of the fact that the fast growing tourism industry is one of the few to withstand in the current economy and has been predicted to create more jobs in the future (Braun, 2006; European Commission, 2011).

The greatest advantage of adopting Web 2.0 has been its ability to provide firms with personally owned media that allows them to engage customers and influence them at desirable points within the transaction cycle (Wanderlust, 2010).

Gallup’s research explains that fully engaged customers are more profitable than average customers, while companies that have an optimized engagement plan in action have a customer engagement ratio of 8:1 as opposed 0.8:1 for their counterparts without a plan. Furthermore, enterprises with optimized engagement outperform their competitors by 26% in gross margin and 85% in sales growth. Engaged customers spend more, return often and stay on the website for an extensive period. In the long run, engagement is the key to sustainable growth (Gallup, 2009).

Strategies to create engagement are endless, with businesses going on to explore different platforms. But as with any investment, one cannot gauge the true reach of these strategies unless a concrete output is provided. Google Analytics, Facebook’s Open Graph APIs, Omniture and other popular packages that provide insight into customer behavior can assist in tracking engagement but collecting information without any prior goals can cause an overload of data. To reduce and consolidate data into what actually matters, it is important to develop engagement metrics based on business objectives.

Literature explains that Customer Engagement is a step forward from Customer Relationship Management. Along with the two core CRM concepts- Involvement and Interaction, Customer Engagement also addresses Intimacy and Influence. Metrics are then developed based on Engagement’s four I’s (Hunt, 2011; Myles, 2011).

Customer engagement has changed the world of internet and experiments are being carried out to develop tools that will help businesses to focus on metrics to measure engagement. Totango, a tool that allows integration with SalesForce and Apptegic assist in measuring engagement but so far their application is limited to the SaaS companies. Companies with technical knowledge tend to develop their own engagement metrics, such as HubSpot’s famous CHI (Customer Happiness Index) Score, that helps them identify customers that are at a risk of churning (Skok, 2011).

Investing in developing engagement metrics is an easier task for larger enterprises, for tourism SMEs running on low financial and human resources, such a task can be mistakenly viewed as high cost. The real issue is lack of knowledge or training. Developing customer engagement metrics can be a simplified process if one begins by addressing business outcomes (Haven & Vittal, 2008; Skok, 2011)

An engagement measurement plan initiates with,

Consolidation of data

Using a data-intensive approach, SMEs can create a centralized system that records cross channel data (Haven & Vittal, 2008). At this stage, it is important to opt for a system that supports correlation of engagement’s qualitative value along with rigid big data (Jutras, 2011). 

Social listening is a growing trend that helps in recording interactions between customers on forums, blogs, social networks (Vargas, 2010; Band, 2012). Consolidation of the social data will enable SMEs to address engagement issues that may usually be overseen. This data can assist in further market research, sentiment analysis, sorting service issues and customer retention (Band, 2012).

Measurement Analytics

Emotional connection delivers, making consideration of psychological theories (motivation, search pattern, cognitive dissonance) an imperative (Haven & Vittal, 2008; Vargas, 2010).  Engagement is the qualitative ‘heart’ metric in between back and front-end operations (Kaushik, 2007).

Similar approach is suggested by Peoplemetrics (2012) where both emotional and behavioral outcomes are married to build engagement metrics. Fully Engaged, Engaged, On The Fence and Actively Disengaged are engagement segments that help in sorting customer responses. Further focus on these responses helps in providing an insight into REAP- Retention, Effort, Advocacy and Passion of a customer.

Peder (2009) for Unilytics suggests an engagement model based on Act-React-Interact with the point being that every activity has its own value that affects the company’s marketing success differently. No single activity or event is the ultimate metric.

Consumers are passively and actively interacting with the brand at all times. Setting metrics that record ‘visit to an array of behavior ratios’ can provide a brilliant insight into Awareness-Interest-Conversion-Advocacy cycle. Acquisition of such analytics can assist in development of tools like ‘Activity driven search’ or ‘Budget driven search’ to enhance usability on the travel website (Gallup, 2009; Amadeus, 2012).

Websites are considered successful when they are designed to provide utility and at the same time are able to entice users into investing their time, emotions and attention by providing engaging experiences. Lehmann et al (2012) provide a different view by explaining that so-called engagement metrics used to measure web usage, are used as proxy for online customer engagement. An in-depth approach based on self-reported engagement, cognitive engagement and online behavior metrics is suggested. To explicitly understand the value of engagement, metrics should be developed around Popularity, Activity and Loyalty. 

But popularity doesn’t always mean engagement. A Page Lever report from 2011 explains that a rise in number of Facebook likes results in decreased engagement on the page (Constine, 2011).

Lake (2009) for Econsultancy.com suggests 35 social media engagement metrics, some or all of which can be used by tourism SMEs. These KPI’s can be measured with the help of Google Analytics or with the application of bespoke technology. Econsultancy provides a great example in context to specific metrics such as user generated content. Specific functionality can be built into the web platform to generate trend reports for ‘comments’ or ‘forum posts’.

Literature review displays a variety of different opinions on which factors induce engagement. Developing metrics specific to tourism SMEs essentially requires addressing and identifying business elements that are unique to the industry.

Aim and Objectives

Peter Drucker explained ‘The purpose of a business is to create a customer’, but ‘creating’ a customer costs 5 times more than retaining and sustaining the growth of an existing one, making the role of engagement very significant (PeopleMetrics, 2010).

As service providers, tourism SMEs have always focused on the customer but this practice requires further evolution into the digital. Taking business online has some advantages despite the fact that one loses personal face-to-face time with customers. The digital reach is wider, 24/7 shopping service is convenient for the customer and the prospects of integrating new engagement tools that generate more business are limitless. In addition to an improved service experience, digital enables tourism SMEs to track, analyse and review customer behaviour long before the actual shopping takes place. This information can provide an insight into the demographics, search keywords, backlinks, landing pages, popular platforms, operating systems, bounce rate and even complex information based on individual goals set by the business. Detailed information collected from different analytics packages will enable businesses to enhance engagement through better web usability and improve user experience.

Blog posts and white papers addressing the concept of measuring customer engagement have been on the rise roughly since late 2009. Until then, marketing professionals struggled with developing metrics and eventually some refused to acknowledge the unique existence of engagement as a separate entity (Mason, 2007; Shevlin, 2007). This has changed with the explosion and adaptation of intelligent technology that facilitates creation of new interactive experiences. HeBs Digital has predicted 2012 to be the year of SoLoMo (Social, Local and Mobile). Convergence of channels and integration of SoLoMo is the new trend in travel that is built on the concept of creating engagement (European Travel Commission, 2012).

Engagement is a metric dependent on psychological and emotional factors, therefore the correlation of performance requires an integration of quantitative and qualitative. Large-scale tourism businesses have already lifted up the ante by developing models that track online customer engagement.

For tourism SMEs to move along the same path, the biggest hurdle is the lack of tourism specific knowledge. Most literature provides information targeted towards larger enterprises or SMEs that sell tangible products. The unique feature of tourism industry is that the product itself is an intangible experience, there by making it in an imperative to track and measure the value of customer experience and engagement throughout the Awareness-Interest-Conversion-Advocacy cycle. This data will not only give an insight into the buying behaviour but also help tourism SMEs in assessing the effectiveness of the actual tourist experience when post-experience the customer goes on to refer others or buys again from the same website. 

The research aim is to develop a model that will enable tourism SMEs to Measure The Value Of Internet Customer Engagement.

SMEs tend to establish online presence without advance planning or prioritisation and selection of channels that suit individual needs. At times digital marketing services are outsourced, large number of clients on the agency side results in online marketing that lacks industry specific customisation. There is a need to raise awareness by adding to the body of knowledge that constitutes application of digital marketing within the tourism industry. Simply developing a digital marketing campaign is not enough, tourism SMEs must learn to measure the impact and most importantly analyse whether their actions are viable in sustaining customer development. Tourism SME’s need guidance through a model based on metrics that can be applied to their industry.

Four objectives of the study that will enable in achieving this aim,

Objective 1:  Best practice for developing effective engagement metrics

Epistemology, current trends, existing models, advantages of applying engagement metrics, comparison of metrics used across large and small enterprises and scope for improvement will assist in developing an understanding of the best practice. Further analysis will be carried out to address the feasibility and practicality of crossing the metrics over from general SMEs to tourism specific SMEs.

Objective 2: Current practice for measuring online engagement in tourism SMEs and scope for improvement

Travel market trends, internet marketing strategies, and popularity of channels will help in reviewing current engagement practice, metrics and their effectiveness throughout the cycle. Scope for improvement will be displayed through the analysis of business goals and their alignment with current engagement metrics.

Objective 3:  Development of an engagement measurement paradigm specific to tourism SMEs

Along with the conclusions from Objectives 1 and 2, limitations, feasibility and usability issues will be addressed. Based on these, an engagement measurement model will be developed with the aim to assist tourism SMEs to value the impact of internet customer engagement and use this data to develop customised digital marketing campaigns.

Objective 4: Conclusion and Recommendations (if any)

Methodology

This research will involve the application of multi-methodology, incorporating the best of qualitative and quantitative.

i.               Ethnography is a well-suited theory for qualitative research as it provides the researcher a detailed look inside the issue being studied. Implementation of purposeful sampling procedures will assist in addressing the key issues head on. Case studies and one-on-one interviews with travel professionals and digital agencies will help in collecting relevant data. Data will collated and analysed using Computer Assisted Qualitative Data Analysis software like NVivo.

ii.              Quantitative data will provide this research with a statistical insight. Data will be collected through online surveys, interviews and analysed with SPSS. A further insight into the Google Analytics, Facebook/Twitter insights, Omniture or any other analytics packages of a few selected SME’s is crucial for this research. 

References

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