4.3 Three Levels of Customer Engagement


4.3 Three Levels of Customer Engagement

The Internet has provided businesses with a new look at how consumers behave beyond a simple transaction of buying a product or service. What is most important to learn from the retail markets is that the behaviour of consumers within both domains is surprisingly analogous to how the transaction is executed, and unlike the way in which the interaction occurs. Customer behaviour and engagement can be broken down into three increasing levels of engagement with the selling and fulfilment process within a firm: it starts as simple interactions or interactivity, intensifying to a higher degree of customization or intimacy, and finally evolving to complex customer relationships or immersion. These three levels of behaviour (or customer engagement) represent a challenge for retail firms because they are in conflict with the objectives of standardization of services to a generic one size fits all strategy, which retailers have been using for decades. For example, anyone can see how hard it is to choose an item of clothing when sizes are small (S), medium (M) or large (L) with no variation in between. The fact that retailers have been using this sort of strategy for years will make it harder for them to adapt to the levels of customer engagement which is, after all, what they should be aiming to conquer.

The first level of customer engagement is interactivity, or the simple act of facilitating transactions such as buying stock, ordering a book, or paying your bills with home banking. This level of interaction between buyer and seller is simple and relatively straightforward, being designed merely to sell commoditized products. The second level is intimacy, whereby a seller uses accumulated knowledge of the customer coupled with purchases made by other customers to recommend additional products or services. The third level is immersion, the encapsulation of multiple products and services into a suite of offerings which fulfil customers’ immediate needs and anticipate future needs. In a click-and-mortar strategy, the more ‘immersed’ the customer becomes – as illustrated in Figure 4.2 – the more loyal the customer becomes.

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Figure 4.2: Click-and-mortar strategy

Customer Experience: Interactivity

The first level of engaging a customer is interactivity. Interactivity means the act of transacting with the firm, the customer wants to buy an item and their request is quickly fulfilled. This level is best represented as a dialogue or exchange between a community, customer or an employee that results in a transaction of value. For example, browsing online and purchasing a book or plane ticket is the simplest form of interactivity. This level often represents the highest volume of customer interactions, in which regular purchasers are very price sensitive. It can be said that competition between websites tends to drive down the price of goods because customers are not loyal to one particular vendor. Customers who engage in an interactive relationship are often disappointed with the quality of the experience when using a company’s website. Technologies such as Korean-based AvataSoft’s T3 Studio can increase the overall customer experience by taking two-dimensional photographs and transforming them into three-dimensional images to enhance a product’s presentation. This technology adds value to customers who are looking for additional information on the product. This type of software application strives to simulate the tactile experience of shopping which many people find missing from the cybershopping experience. It is naive to think that all shopping, even for mundane consumable items will be eventually replaced by Internet shopping. The physical act of shopping is a social phenomenon which people enjoy.

Customer Experience: Intimacy

The second level of engagement is intimacy, which places the customer at the heart of a total process of customized solutions or collection of products containing options and allowing the grouping together of components, to form a ‘customized solution set’. This level is often represented by a community or affinity group that functions as a consolidation body and associates transactions. For example, on the US Airways website, a frequent flyer can select a preferred travel destination; this location will be monitored and when the prices change to the customer’s advantage he or she will be informed via eMail on the reductions or special offers.[124]

Customer intimacy is not limited to big multinational corporations. From a micro-economic viewpoint, customer intimacy can be enhanced by simple delivery technologies which give the greatest flexibility in offering value propositions for small businesses. For example, PayCell is a wireless technology that allows a trader to be as mobile as a customer, disconnecting the sale of products from any physical infrastructure in order to conduct business remotely. The UK is known as a nation of shopkeepers and Keith Brasher of JusPerfick in Soham, Cambridgeshire, demonstrates how transaction-enabling technology greatly enhances the value proposition of a small to medium-sized enterprise (SME). Local outdoor markets offer local people and tourists the opportunity to make impulse purchases. Being able to facilitate credit card payments is vital in creating the perception of convenience which often closes the deal. However, a trader without a telephony-connected, card-processing device must use the traditional credit card process of making a manual impression of the card. The trader will not know if it is a fraudulent card user until late in the day when entering the credit card transactions into an attached reader. The value proposition of the PayCell to the trader is clear: a minimal risk of fraud and a reduced risk of robbery associated with carrying cash. These facts, coupled with the overall cost of a wireless device reaching parity with in-store technology, create a compelling reason for traders to migrate to this technology. For customers, the value proposition is equally compelling: it allows an individual to make a purchase with the same expressed trust as in a store connected with infrastructure, and the traders can create a more intimate experience by focusing time on the customer, while reducing the time spent facilitating the payment.

Customer Experience: Immersion

The third level, which is most difficult to achieve, is called immersion. In this level, the customer is the process and the firm provides a total environment to supplement a lifestyle with anticipatory services. Few retail firms have achieved this level of customer behaviour and many dot-com firms, such as Peapod.com and Streamline.com, who tried to apply this to the mass market, realized too late that most customers are not prepared to bear the expenses of this level of service. In fact, each market segment may indeed have a different idea of what is the immersion experience.

In all cases, the three types of interaction culminate in a complex set of relationships between the company and the customer. Technology can be used to discover the patterns of customer behaviour attributable to developing loyalty. Moreover, the behavioural patterns can be assessed to improve the customer relationship and linked directly back to profitability. This relationship analysis is instrumental in identifying customer attrition and improving customer retention.

One facet of the new customer experience will be the deployment of electronic ‘valagents’. Valagents – or ‘value exchange agents’ – are intelligent agent technologies that provide a bridge between advice and action in financial services. Value exchange agent technology can be applied to any or all of the aforementioned levels of a customer experience because they can add value not only in facilitating transactions and negotiating on the customer’s behalf based on predetermined rules, but they can also sense changes in market conditions and inform the owner of the new state of intended transactions, and wait for the owner’s confirmation to proceed. Preist of Hewlett-Packard noted that:

As the time and cost of making a contract drops rapidly, the nature of contracts will change. Contracts between businesses will no longer be things laboriously set up, lasting for months and years. Instead, they could last for as little as a single transaction. New electronic marketplaces, trading good such as bandwidth on transatlantic cable connections, will come into being. Agent technology will form a central pillar of this new world of business.[125]

At the present time, agent technology is focused on the individual acquiring the agent, providing it with instructions (rules) and sending it into cyberspace to execute on the individual’s behalf. The value proposition for companies providing customers with this type of technology is to enable a customer to perform basic functions and participate in predefined activities such as a news clipping service. A customer who uses a valagent issued by a firm providing intermediary services, such as America on Line (AOL) or Amazon.com, could be allowed to take part in product purchasing activities already in progress but with other agents, such as:

  • Standard agents: an individual defines the needed product, establishes the conditions or rules according to which the agent will act and determines the methods of payment and delivery.

  • Branded agents: allow the individual to define the needed product, provides predefined conditions or rules based on the customer who is looking for similar items, thus giving the individual options for the execution of the rules. This type of agent also provides aggregation services in which the agent collects information on the execution of this action and coordinates delivery with other agents which the individual has issued, or other agents that are part of the branded provider. For example, an intermediary service provider might allow users of a certain agent class to participate as a buying group and negotiate low price or combined delivery.

The second type of branded agent could be organized within an intermediary’s market space. For example, Amazon could permit an agent to execute within the domain of Amazon’s offering and with the product offerings plus its affiliates. This type of agent confined within the Amazon domain could have privileges such as special pricing and products not offered to free-roaming agents.

A third type of branded agent could be deployed externally or with an intermediary having a predetermined mission to seek information along a vertical industry. To illustrate: a customer wants to purchase a book, and the agent has to find the best price from booksellers and buying groups in that particular industry; this could occur horizontally across an industry in which a customer has a desire that is predefined by a brand definition. For example, I have 15,000 to spend on a car; I have two children and drive 20 miles to work every day. What is the best car for me? In this case, the valagent investigates the Internet or a collection of predetermined sites and negotiates, based on each criterion set by the individual, or else the valagent subscribes to criteria that others have developed for its use and executes only if the resulting agreement is within the original criteria. Methods of payment and logistical preferences could be selected at the time of execution by initiating confirmation transactions such as eMail. Preist also observes that:

Agents will not only negotiate. They will also play an active role in all aspects of electronic commerce between businesses, from the decision of what to purchase to after-sales support. They may determine when to initiate purchases, by automatically monitoring inventories and making predictions about future stock requirements. They may keep track of customer accounts, determining which new products customers are likely to be interested in. They may monitor a product after sale, and inform the supplier when it needs servicing.[126]

One way in which valagent technology could be applied to the firm’s value proposition to customers is by deploying agents that enable transactions at each level of the customer experience, as illustrated in Figure 4.3.

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Figure 4.3: Valagents and levels of customer engagement

Valagent technology presents an opportunity to personalize a customer’s experience to a high degree by fostering greater levels of interaction and, more importantly, trust (as the provider of the agent is inherently acting in the best interest of the customer).

Valagent technology is not confined to applications external to the firm; they could also be applied to support information consolidation and data exchange. Jim Eckenrode of TowerGroup Research and Advisory identifies a prime example of where an agent could be employed:

To date, the complexities inherent in exchanging data between systems of different types have limited an institution’s ability to understand the true nature of its relationships with its customers and to process transactions across systems as efficiently as possible.[127]

Internal valagents could be focused on complementing various activities within the organization and executing them in line with corporate goals and objectives. For example, within a large multinational firm which offers a wide variety of products globally, a new product launch could employ agents that combine the purchases of several types of products in order to develop a profile of what kind of individual is most likely to purchase the new product. The resulting information could be broadcast to agents already seeking alternative products and information exchanged on the new product. Theoretically this new product data could be created before the physical product is even in the production phase, and it may be used to assess market demand even before manufacture of the product. In theory, a firm could develop two classes of products: real and proposed, or ‘imagined’. Products could be defined and developed virtually, with pricing data transmitted to agents who negotiate on future deliveries.

More immediately, internal valagents could be used to supplement applications such as CRM systems by providing information linking customer activities to tangible behaviours and actions. The customer behaviour data obtained from agent technology could be synthesized into information to develop market and channel strategies. It is to these that we now turn.

[124]US Air Group. See www.usair.com.

[125]C. Preist, ‘Economic Agents for Automated Trading’, Hewlett-Packard Company, (1998) p. 1.

[126]Ibid., p. 6.

[127]J. Eckenrode, ‘Is Internet Technology the Path to Banking Efficiency?’ IBM’s Building an Edge, November 29 (2001) p. 3.




Thinking Beyond Technology. Creating New Value in Business
Thinking Beyond Technology: Creating New Value in Business
ISBN: 1403902550
EAN: 2147483647
Year: 2002
Pages: 77

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