Rethinking Customer Value Creation in the Digital Business Environment

Online, customers create value not only during a purchase, but before and after it as well, says Elina Kukkonen.

Joanna Sinclair, 12.06.2016

“Far too many companies still think that people become their customers only when they purchase something from the company,” says Doctor of Business Administration Elina Kukkonen.

She affirms that in the digital business environment, a customer relationship starts a long time before any transaction takes place and continues long after it is done. Individuals may also create a great deal of value for a company without ever purchasing anything from it. 

“The present understanding is that companies can gain three types of value from their customer relationships in the digital business environment: monetary, social and visitor value. Together these three form engagement value,” Kukkonen says.

Kukkonen is an experienced professional in digital marketing. Marketing Director at Alma Media, Kukkonen was the first person to defend a dissertation completed under the Aalto Executive DBA program, which was launched in 2013. She defended her DBA dissertation in April 2016.

Monetary, Social and Visitor Value

There are two key facts that companies should keep in mind about online customer engagement. First, it creates significant value to companies – and second, it can be measured. A framework for managing and measuring customer value online is depicted in Figure 1.

“In the digital business environment, customer value enhancement must be planned, monitored and above all managed. Data is readily available to support decision making,” Kukkonen states.

For instance, customer recommendations in social networks are an important source of social value for companies. Many online service providers also gain great social value from content co-creation with their customers.

“Travel websites are an obvious example: users co-create content with the service provider and help each other by providing tips and reviews,” she describes.

Methods for measuring different aspects of social value are varied. A good yardstick for influencer value is the size and nature of a customer’s network. Customer’s co-creation value can be measured by looking at the number of comments the customer makes, or for example the social media reach of their blogging.

“Customers also create value simply by visiting advertisement-funded websites,” Kukkonen adds. Visitor value can be measured e.g. by assessing visit frequency, and the number of page views generated during the visit by browsing the content of the site.

Online, CVM surpasses CRM

Kukkonen asserts that online, traditional customer relationship management offers a too narrow perspective to help top management drive growth. A one-sided view is redundant in a multifaceted interactive environment.

Figure 2. From CRM to CVM. Kukkonen 2016, modified from Ahmed Kajee 2014. CRM is a company’s picture of its customers. CEM turns focus toward the customers’ picture of a company, while CEV highlights the value of a customer relationship from both the customers and company’s perspective. Online, companies must look at all three to enable Customer Value Management, CVM.

All companies operating online can benefit from evaluating customer behavior and using analytics to help engage customers into more versatile value creation.

“If a customer has high visitor value but low monetary value, a trial period may be a good way to lure the customer into creating more monetary value,” Kukkonen says and points out that customer value created online can be positive or negative. “Negative value can also benefit a company in the long run: critique can turn out to be a great growth driver, if it is used to improve customer experience.”

Kukkonen emphasizes that managing online customer experiences can lead to beneficial, mutual value creation where the company and its present and potential customers all win. However, customer experiences can only be managed when customer expectations are known:

“Online, the majority of a customer’s experience is built up by expectations. Especially younger customers are becoming more and more selective about leaving any digital trail of their online behavior, while simultaneously social network endorsements by peers are progressively significant drivers of consumption. Consequently, brands are highly important,” reminds Kukkonen.

Enhancing Customer Engagement Value

“Our society is increasingly network driven. Companies seeking growth in the digital business environment should measure and enhance Customer Engagement Value,” says Kukkonen. She recommends that companies frequently appraise the yardsticks they use and ensure all metrics are directly linked to clearly set goals which support the company’s vision.

Kukkonen explains that in an evolving network society, a company may be measuring the right things one day to wake up the next and notice its measures are no longer relevant. For instance, advocacy, paying intent and continued use are clear-cut examples of issues that every company operating online should measure today – but new measures will emerge, at times replacing old ones.

“Metrics should help companies understand how they can engage customers and harness them into loyal spokespeople for their goods or services, which in turn drives growth,” she underscores.

“Measuring random clicks, or sales generated by individual campaigns does little to steer the company toward new growth. Marketing measures and rewards should be directly linked to the direction the company is going, and driving growth in clearly defined segments. Finland’s economy might look very different if marketing measures were set by top management,” Kukkonen concludes.

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