Customer Engagement vs Customer Loyalty

Summary: A simple explanation of the difference between Customer Engagement and Customer Loyalty software

What's in a name?

Many applications claim to engage the customer or focus on the customer experience. The words customer engagement are so overused that quality is likely the only thing claimed more often.

Equally confusing, Customer Engagement software is new. How new? The entire class of software is so new that many people don't even know it is a separate category.

It's helpful to look at how market leaders think about the separation between Customer Engagement and Customer Loyalty. Let's look to Starbucks who is a leader in both categories. Starbucks has a Customer Loyalty program called Starbucks Rewards. Starbucks has a new Customer Engagement program called Starbucks Odyssey.

Two different programs. Two different mobile applications. Two different purposes.

• Starbucks Rewards = Customer Loyalty
• Starbucks Odyssey = Customer Engagement

But why does Starbucks have two separate applications: one for Customer Loyalty and one for Customer Engagement? Why not combine them into one application?

Different customer experiences

How does the customer experience differ between Customer Engagement and Customer Loyalty? Let's look at a step-by-step comparison (over simplified for clarity).

Customer Loyalty

Customer Loyalty in practice is focused on providing a reward for purchase. The general steps are:

1. Customer makes a purchase
2. Customer earns points
3. Customer redeems points for a reward or discount

Customer Engagement

Customer Engagement is a new practive that is focused on providing a reward for participation in the brand experience. The general steps are:

1. Customer makes a purchase
2. Customer participates in an Adventure that involves product usage along with sharing on social media
3. Customer earns rewards for participation
4. Customer redeems rewards for a discount or other offer

A real life example will help

Let's look at running shoes as an example.

A Customer Loyalty program for running shoes might look like this:

1. Customer buys a pair of running shoes
2. Customer earns points
3. Customer redeems points for a discount on a future purchase

What's missing? The points, rewards and discounts having nothing to do with actually using the product, nor does it help the customer achieve the outcome they want from the product. The customer is rewarded for buying the product, but not for using the product.

A Customer Engagement program for running shoes might look like this:

1. Customer buys a pair of running shoes
2. Customer participates in an Adventure that involves running and sharing her health journey on social media
3. Customer joins a community of other beginner runners as part of the Engagement program
4. Customer earn rewards for participation
5. Customer redeems rewards for a discount on future purchases, which now happen more frequently because the customer is actually using the product and is more engaged with the brand

What's different? The Customer Engagement program rewards the customer for using the product and for participating in the brand experience. The customer is rewarded for buying the product, using the product and sharing the product experience with others.

Conclusion

Customer Loyalty programs have been around for a while and are a valuable tool. Customer Engagement programs, while new, add an extremely valuable new tool to improve customer and brand loyalty.

Hopefully this brief introduction to the differences between Customer Engagement and Customer Loyalty has been helpful. If you have any questions, please reach out to us at hello@sentrixlabs.com.