G00253331

Ten New Realities of Customer Engagement to

Account for When Developing a Digital
Strategy
Published: 28 June 2013
Analyst(s): Hung LeHong, Gene Alvarez, Jenny Sussin
This research helps enterprises develop the customer section of their digital
strategy by detailing how technology will change customer engagement and
what enterprises should do about it.
Key Findings

You won't be able to automate a relationship, but you will need to automate responses.
Recognize that entire relationships cannot be automated, but the need to interact with
relevance and personalization and do this at scale will require automation.

Real-time service transparency will be a must-have. Customers will expect enterprises to make
all aspects of fulfillment and service visible to them as it is happening.

Payment will become its own experience and has the potential to be a negatively
complicated one at that.

Privacy can be bought, trust must be earned, and security will be expected at all times. As more
parts of consumers' and citizens' lives become digitally connected, the issues of privacy, trust
and security become amplified and must be managed.
Recommendations

Define a new or updated vision for customer engagement in your digital strategy.
Determine how customer expectations will change with new technologies, and then define how
you will improve customer engagement.

Do not force customer engagement to become a fully digital experience (unless

customers demand it). The purpose of the customer engagement portion of a digital strategy
is to improve the customer experience, not to transform it into digital interactions or maximize
self-serve automation. Instead, seek to leverage digital technologies to improve face-to-face, in
person, telephone and electronic interactions.
Table of Contents
Analysis.................................................................................................................................................. 2
Introduction...................................................................................................................................... 2
Service and Relationship Management............................................................................................. 3
No. 1 You Won't Be Able to Automate a Relationship, but You Will Need to Automate
Responses................................................................................................................................. 3
No. 2 Every Interaction With an Individual Will Also Be an Interaction With the Individual's
Social Graph...............................................................................................................................4
No. 3 Real-Time Service Transparency Will Be a Must-Have.................................................. 5
No. 4 Ongoing Customer Engagement Will Be Digitally Built Into Certain Products................ 5
Customer Insight.............................................................................................................................. 6
No. 5 Personalization Will Be Based on the Three-Way Intersection Between Customer
History, Context Awareness and Intent....................................................................................... 6
No. 6 The Voice of the Customer Will Not Always Be Equal................................................... 6
No. 7 Privacy Can Be Bought, Trust Must Be Earned, and Security Will Be Expected at All
Times......................................................................................................................................... 7
Transactional and Loyalty................................................................................................................. 8
No. 8 Payment Will Become Its Own Experience and Has the Potential to Be a Negatively
Complicated One at That............................................................................................................8
No. 9 Full Price Visibility Will Become the Norm......................................................................9
No. 10 Loyalty Recognition Will Move From a Post-Transaction Activity to One That Spans
the Entire Engagement............................................................................................................... 9
Recommended Reading.......................................................................................................................10
Analysis
Introduction
Defining how customers will be engaged is a critical element of a comprehensive digital strategy.
The Internet of Everything big data, mobile, social, and the trends and technologies that
accompany them will change customer expectations for engaging with businesses. A digital
strategy should take these changes into account to allow for new opportunities. For example, with
so much emerging technology focused on the payment experience (e.g., mobile payment, virtual
currencies and personalization), it is important that an enterprise define how it will leverage new
technologies to improve the payment experience.
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Technology will change many aspects of customer engagement. However, there are 10 new
realities that most enterprises (private and public sector) should account for when developing their
digital strategy. Even if these points do not apply to your enterprise, it is worth deliberately going
through the exercise of questioning each one, as the impact (both positive and negative) is far
reaching. Senior executives can use this research as a checklist to review the digital strategy being
created by their teams.
We've grouped the 10 new realities of customer engagement into three categories:
Service and relationship management
1. You won't be able to automate a relationship, but you will need to automate responses.
2. Every interaction with an individual will also be an interaction with the individual's social graph.
3. Real-time service transparency will be a must-have.
4. Ongoing customer engagement will be digitally built into certain products.
Customer insight
5. Personalization will be based on the three-way intersection between customer history, context
awareness and intent.
6. The voice of the customer will not always be equal.
7. Privacy can be bought, trust must be earned, and security will be expected at all times.
Transactional and loyalty
8. Payment will become its own experience and has the potential to be a negatively
complicated one at that.
9. Full price visibility will become the norm.
10. Loyalty recognition will move from a post-transaction activity to one that spans the entire
engagement.
Service and Relationship Management
No. 1 You Won't Be Able to Automate a Relationship, but You Will Need to Automate
Responses
As convenient as the digitization of the majority of customer conversation has become, it is
important to recognize that relationships cannot be automated. This will become a significant
challenge in the digital future. Enterprises will need to interact with their customers in a personalized
and relevant way on top of the fact that customers will reach out more excessively via multiple
touchpoints. The challenge to enterprises will be to not only meet these needs, but also do so in a
Gartner, Inc. | G00253331 Page 3 of 11
cost-effective manner that scales. One of the only ways to meet this balance is to employ humans
when it matters and human-like customer engagement technology when automation is required.

Templated responses should be used to scale, not as a crutch. Disney has more tweets
directed at its company each day than it could respond to if it could answer an inquiry a
second. If you're Disney, you can and should have response templates to stay engaged with the
over 100,000 tweets directed at you in one day, but you should empower employees engaged
in digital spaces, like social media, to augment the templated response by injecting some
personality into the posts to show there is a human behind them.

Employ virtual assistants. Technologies like IBM's Watson have become very human-like.
They can excel in areas such as answering a series of questions (that have not been predefined
nor prescripted) or gathering requested information. Enterprises should stay close to the
developments in the virtual assistant space. Although, these solutions have existed for a while,
a new generation has just begun, with significant improvements.

Know when human representatives are the best way to go. Enterprises must recognize that
the kind of genuine interaction that leads to customer loyalty and advocacy comes from human
empathy. Templates, or even the most human-like virtual assistants, will never provide the
emotional sensing and appropriate human response required when it really matters. Clearly
identify the engagement situations when human representatives are the only way to go. Give
these representatives more time and leeway in these situations and look to technology and self-
serve to deal with the rest.
No. 2 Every Interaction With an Individual Will Also Be an Interaction With the Individual's
Social Graph
Social technology will leave almost no consumers or citizens unconnected from their friends, peers
and family. Enterprises must assume that the individuals they interact with will at some point
communicate positive and negative experiences to their social graphs. If social propagation is the
norm in the digital future, the challenge will be for enterprises to cost-effectively determine when
they should or should not control or influence this propagation.
What to account for in your digital strategy:

Employ technologies that help you know when to assess social impact, how to track it
and how to influence it. Every critical/moment-of-truth interaction has a risk of being
propagated throughout an individual's social graph and beyond.

Deliberately build communication vehicles that are meant to be propagated throughout

the social graph or the reverse designed to not be shared beyond the individual.
Don't leave it up to chance.

Offer products/services that can be sold to an entire social graph. For example, offer a
wedding registry that can be easily deployed to a social network or the reverse that allows
a wedding registry to easily use an individual's social network of friends. Either way, the goal is
the same, friends can easily register and purchase gifts. Another example, give discounts with
each additional friend who purchases (like a mini Groupon).
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Plan on using the individual's social graph as input to personalization where it makes
sense. You are who your friends are. Personalization will need to include details from an
individual's social graph. For example, if an individual's social graph has a lot of interaction on
the topic of golf, then the personalization engines should account for this and tie it back to the
individual, even though it is a property of the group.
No. 3 Real-Time Service Transparency Will Be a Must-Have
How long will I be on hold? How many minutes until the next train? Is my pizza in the oven or being
driven to my house? How long is the wait time at the driver's license office? Technology will make
all aspects of service trackable and customers will expect it. Keeping customers in the dark will
be unacceptable. Consider the following points in the customer component of your digital strategy:

Use sensors and the Internet of Things. Invest in sensors in strategic parts of your customer
processes. Many types of sensors can provide visibility to wait times, queue lengths, location
and status of goods basically anything that a customer might care about. Look to logistics
companies like FedEx for best practices in communicating service statuses.

Employ technology that can determine or foresee service problems. If a pizza restaurant
displays the status of a customer's order and a customer notices that their pizza has been with
a driver for a long time, then it will be quite easy for the customer to get upset at the driver
when she/he arrives. Technology that monitors status and applies business rules to catch or
anticipate these problems should also be implemented. The more transparency you provide to
customers, the more investment you will need to make in avoiding or self-correcting service
issues. For example, drive-throughs often display the wait times of current customers in their
kitchens to make sure the whole staff can act to help fulfill the order.

Master distributed order management and service. As we move toward more digital
business models, it becomes more likely that service and order fulfillment will be sourced from a
network of partners, rather than a single enterprise. Having the transparency to see a
customer's order or service delivery as it gets "touched" by multiple delivery partners will
become critical. The key will be to make sure you and all your partners have the transparency to
see any other partner's actions during the joint delivery of an order or service. This means that
real-time transparency is required for more than just your customers. All of your vendor partners
and outsourcers will need the same level of transparency.
No. 4 Ongoing Customer Engagement Will Be Digitally Built Into Certain Products
The Internet of Things allows almost any physical product to be connected. This creates the
opportunity to extend digital services to the physical product. For example, a connected home
appliance can be digitally monitored for optimal use or maintenance, or upgraded with new
functionality (for example, a washing machine downloads a new wash cycle). This creates an almost
perpetual chance to engage the customer.

Assess if any of your major products can be extended with digital services. Take your top
products and consider the customers who are buying these products. Will they gain value by
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having digital services extended to these products? Would they pay extra for these digital
services? If not, should you still provide these services to gain engagement opportunities?

Augment your postpurchase engagement experience. When you know your products will be
connected, work out how customer engagement will be managed after the sale it should
form the basis of your postpurchase experience (which for most products today consists of the
filling out of a registration card). Consider the whole engagement from prepurchase through
to the extension of these digital services. In some cases, the postpurchase experience might be
the key differentiator for a product.
Customer Insight
No. 5 Personalization Will Be Based on the Three-Way Intersection Between Customer
History, Context Awareness and Intent
Big data and advanced analytics will have a significant impact on personalization and customer
analytics. Over the years, the industry has moved from household-level analysis, to individual-level
analysis. However, using an individual's history of engagement with an enterprise as the basis for
personalization and analysis will not be enough. An enterprise that relies heavily on personalization
and customer analysis will want to consider these points in their digital strategy:

Determine customers' recent and real-time context when engaging with them. Know their
location, the last website visited, the last interaction you had with them, the weather or any data
that would be significant. The type and amount of context data available in the future will
expand significantly. For example, Alibaba uses search, listing and transaction information as
context data to help it determine if it will extend financing to a customer. In the future, even a
connected home could contain context information about how often someone runs their
dishwasher. Plan on using this context data to personalize any interaction point do not limit it
to marketing offers.

Be able to interpret a customer's intent. Text analytics is used today to interpret customer
sentiment such as reactions to new brands. However, think about going beyond sentiment. Text
analytics could be used to estimate many kinds of intentions (e.g., intent to purchase, intent to
churn, intent to use a coupon, intent to call or visit). Use knowledge of these intentions when
personalizing an engagement. A customer that you think has intent to purchase may cause you
to send it an offer, while a customer who has the intention to churn may trigger a much more
aggressive offer.
No. 6 The Voice of the Customer Will Not Always Be Equal
Social networks, blogging, reviews and other sources have made the collective and individual voice
of the customer accessible by enterprises. The high level of activity in areas like sentiment analysis
shows that enterprises are hungry to leverage the newly available customer data that the digital
world has made available. However, in analyzing the voice of the customer, there appears to be
equal weighting put on customers' statements and sentiments and this may not be the right
approach. For example, when a person on Facebook with the maximum 5,000 friends puts down a
product and communicates it to their friends, the impact is much greater than a negative tweet from
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someone with 200 followers. Friends are also not equal, especially when consumers are just
accepting any friend invite to build up their circle. When an expert reviewer makes a negative
comment on CNET, the impact is even greater. The point is that individuals have a "social influence"
that needs to be factored in when analyzing the collective voice of the customer. Consider the
following:

Employ technology that assesses social influence, and know when to use it. Technology
can help you determine if an individual has a far-reaching social graph and how often they
communicate throughout their social graph. When assessing the voice of the customer (e.g.,
sentiment), factor in the individual's social influence. You will get a more accurate assessment
of customer sentiment. For example, anyone who has more than 500 friends and voices a
positive comment about your brands may receive a 100% of the weighting, versus someone
who has only 50 friends may only get a 50% weighting. Commercially-available assessments,
such as Klout scores, can be useful here.

Understand how social influence actually influences sales. Just because someone is
influential on social media, doesn't mean they'll affect your top or bottom line. When a
passenger's guitar was damaged by United Airlines, the video clip went viral. Sales on the other
hand, remained unaffected. Use correlation analysis to understand when social influence does
and does not affect sales.
No. 7 Privacy Can Be Bought, Trust Must Be Earned, and Security Will Be Expected at
All Times
As more parts of consumers' and citizens' lives become digitally connected, the issues of privacy,
trust and security become amplified. Enterprises should not assume that these three issues will be
showstoppers; however, they will need to be carefully managed. As you craft your digital strategy,
think about privacy, trust and security as part of your "brand" as a promise you are making to
your customers or citizens. These will become as important as your product/service or company
brand. Carefully review the major customer engagement points to ensure that you are using
technologies and policies that maintain that promise. The more digital customer engagement
becomes, the easier it is to compromise one more of these three areas. Consider the following
points:

Privacy can be bought. Customers have demonstrated that they are willing to give up a little
bit of privacy in order to get convenience, benefits and cost savings. Internet search, loyalty
programs, social networks and even credit scoring show that most individuals will give up some
privacy for a benefit. As you craft your customer engagement strategy, do not assume that
individuals will want to remain private. Instead, seek to give them a benefit that is
commensurate with the information you are trying to collect from them and communicate
clearly that this is the trade-off they are gaining from (don't hide it). Always factor in ethical,
regulatory, moral and personal considerations this balance will vary widely based on
demographics and region.

Trust must be earned. In a digital world, trust cannot be bought by savvy marketing or by
giving customers rewards and benefits. It is earned by providing transparency (see No. 3 and
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No. 9), by word of mouth (see No. 2) and by being responsive. Instead of using personalization
technologies only to provide offers, also use your detailed knowledge of the customer to be
responsive to their communication needs. For example, know when and when not to
communicate with the customer, and how to communicate (e.g., SMS vs. Twitter).

Security is expected at all times. As most parts of your customer engagement processes
become digital, the minimum requirement will be to ensure that customer details are protected.
However, enterprises will need to go further than that. They will also need to constantly
communicate the fact that their customers are protected. Customers not only need to
protected, they need to know they are being protected.
Transactional and Loyalty
No. 8 Payment Will Become Its Own Experience and Has the Potential to Be a
Negatively Complicated One at That
Gone will be the days of simply paying cash or swiping one of three payment cards. Payment will
graduate from being a simple transactional activity at the end of a set of customer events, to one
that is a longer experience. Although it would seem that the industry is attempting to simplify the
payment experience, if left unchecked, the amount of technology surrounding payment is on a
course to complicate things for both payer and payee. A payment transaction in the digital future
could include automatically applied coupons, loyalty points, context-aware discounts, alternative
payment methods, complicated logons, biometric, Near Field Communication (NFC), PIN
authorization, real-time fraud detection, stored value, and virtual, real or loyalty point currency etc.
Options to transform the payment experience abound. Digital strategies should be established that
simplify the transaction and make it part of an overall customer experience not to try to cram in
as much capability and personalization as possible. Enterprises still wanting to provide value-added
and personalized services should realize that in a fully connected world there will be many more
chances to interact with the customer than just at the payment step. For example, loyalty points
could be granted in-store, while the consumer is shopping (see No. 10 loyalty).
Consider the following points when developing your digital strategy:

Target a payment experience. The payment experience can range from invisible (e.g., having
payment automatically done based on an event, combined with preregistered payment
credentials) or fully featured (e.g., loyalty points, personalized coupons, biometric
authentication, multichannel, etc.). Plan a target payment experience that your customers will
value. Build in the flexibility to vary the experience, based on customer type, transaction type or
any other significant determinant.

Build transparency into the payment experience. The more the payment experience
becomes automated or complicated, the more important it will become to ensure that
customers can immediately know exactly what has happened in their transaction. A simple link
to the payment details sent in a message, email or social network post may be all that is
required. Provide reassurance.
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No. 9 Full Price Visibility Will Become the Norm
Build your digital strategy assuming that prices for all products and services in every channel will be
available to a consumer. As enterprises and industries become more digital, data on prices, mass
promotions, shipping costs and any other part of the sales offer will become visible by your
customers and competitors. This will reduce the ability to use regular price as a competitive lever.
Instead, enterprises will have to compete in other ways. Consider the following:

Use personalized offers to compete on price. Customers may have visibility to all prices from
all sellers in every channel, so the only way to give them a "true" deal is to offer them a
customer-specific promotion. An enterprise's cost-plus pricing, price optimization, price zoning
and any other pricing techniques will need to be complemented with the ability to produce
customer-specific promotions. Note that customer-specific pricing is illegal in many industries
and countries, so promotions (e.g., discounts) will often be the preferred approach.

It's OK to have higher prices. As customer engagement becomes more digital, the risk of
complicating and "messing up" an interaction becomes increased (see No. 3). As such,
delivering a great experience will become a stronger competitive lever. Immediate gratification,
excellent service, wider assortment and convenience become strong selling points. Look at
Square. Although merchants using Square to take payments know that the cost of running a
transaction is higher than the cheapest payment options in their area, the simplicity of the
merchant experience (and the customer) is outstanding. Use digital approaches to create a
great experience if not competing solely on price.
No. 10 Loyalty Recognition Will Move From a Post-Transaction Activity to One That
Spans the Entire Engagement
Customers are used to getting loyalty points after they've bought the groceries or taken the flight. In
other words, their loyalty is rewarded after the transaction has been completed. However, in a world
in which everything is connected, there is the opportunity to reward customers for any part of the
customer engagement process. Consider the following:

Any customer interaction can be a reason to grant loyalty points. In a connected world, an
enterprise has the potential to track location, tweets or, even perhaps, how often a consumer
uses their Internet-connected dishwasher. This turns any customer action into a potential
reason to reward them for their loyalty. Loyalty points can be granted if someone presses +1 or
Like in a social network, tweets, lingers in front of an end cap display, buys tickets on your
mobile app or achieves a certain exercise level on an Internet-connected fitness device. Look at
every customer action and decide if it is a potential moment that reinforces loyalty. Decide if
loyalty points are worth granting at these moments.

Plan out what percentage of loyalty points should be granted both pre- and post-
transaction. Conducting the transaction and paying for products or services will still remain the
strongest demonstration of loyalty. Perhaps 80% of your loyalty points can be granted post-
transaction, and 20% granted for actions that happen before the transaction. Think of the right
balance that you want to encourage customers to pursue. Loyalty can now be applied
throughout the whole continuum of the engagement.
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Recommended Reading
Some documents may not be available as part of your current Gartner subscription.
"CRM E-Commerce Strategies, Processes and Technologies Research Agenda, 2013-2014"
"Future E-Commerce Success With Customer Experience Depends on CRM: A Gartner Team
Perspective"
"The CRM Customer Engagement Hub Targets Social Customers"
"CRM Technologies for the Emerging Customer Engagement Hub"
Page 10 of 11 Gartner, Inc. | G00253331
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