Marketing managers have long recognized customer engagement as an important driver of a firm's financial success. By creating a highly engaged customer base, firms can increase their market power through enhanced loyalty of their customers, and get access to market insights based on customer behaviors, which is critical for any company looking to sustain value creation over time.

In parallel, major improvements in communication and information technologies have provided firms with new data-driven capabilities to capture, analyze, and exchange customer intelligence data at increasingly high volumes, varieties, and speeds. Traditionally, companies could gather such data only from observed transactions and market research surveys. Now, however, customers are constantly sharing information through social media platforms, by interacting with smart products, and by letting firms obtain other information about their locations and usage of online and mobile media through digital intermediaries. Advanced analytic capabilities also allow firms to apply obtained insights instantaneously to decisions on product design and communication strategies.

Nevertheless, despite both the recognized importance of and enhanced access to opportunities related to customer engagement data, firms often find it challenging to leverage these opportunities in a sustainable and long-lasting fashion.

In a recently published article, my co-authors and I suggest that most research in both academic and industry settings is too focused on how digital transformation helps firms to reap benefits of enhanced customer engagement, while mostly ignoring the customers' perspective. To alleviate this gap, we outline a dynamic strategic value-creation framework that comprehensively captures both customer and firm perspectives for data-driven customer engagement. Our framework identifies the necessary firm resources, data, processes, timelines, and goals for engagement, and captures customers' motives, situational factors, and preferred engagement styles. We argue that Big Data opportunities can translate into long-term sustainable competitive advantages only for companies that successfully manage the balance between a firm's execution of engagement efforts and the customers' experiences, motivations, and preferences.

Specifically, our model calls for establishing an iterative, dynamic value improvement process for both the customer and the firm. We believe this process should take into account both customer motivation to engage in firm-related activities (for customer value) and firm motivation to derive actionable insights from customer engagement behaviors (for firm value). Practically, we offer several recommendations on how individual customer data can be programmatically used to increase customer engagement by communicating enhanced customer value. For example, companies making wearable devices can enhance customer value by offering daily physical performance summaries based on each customer's own data, as well as providing comparisons with their neighbors and friends. If this company-generated analysis keeps customers engaged by reinforcing positive, customer-desired behaviors associated with physical activity, customers will be incentivized to give the company even more data, which could then be used for generating more customer value, etc. Maintaining such virtuous feedback loops over time is the key to reinforcing positive value creation for both customer and firm over time.

Hear more from Professor Bart in the video below that further examines the findings of his research.

Professor Yakov Bart explores investing in customer engagement

Professor Yakov Bart explores investing in customer engagement Opens in Modal

Yakov Bart

Associate Professor, Marketing; Joseph G. Riesman Research Professor