Customer engagement may decrease value of customer-specific sales
It is often thought that getting customers to participate in activities connected with a business, such as social media discussions, has a positive effect on sales revenue. In her doctoral defence on Friday 9 December, Essi Pöyry from Aalto University School of Business demonstrates, however, that the effect of participation on a customer’s own purchases may be insignificant or may even be negative.
The effect of participation in social media discussions on consumers’ own purchases was studied in the case of a travel agency’s Facebook community and forum discussions for online games. In the questionnaire survey of 1,162 Facebook community members, it was observed that the members that were active discussion participants were not interested in purchasing travel agency services in the near future. Instead, those members that were only browsing the community’s content were those that were planning to purchase something.
When the discussion and gaming information for 4,475 members of a gaming community was analysed over the course of nearly five years, it was observed that for individual customers increased discussing meant decreased playing. This was especially the case for those members that were already active discussion participants.
According to Essi Pöyry, the research results could result from the pleasure derived from customer participation. Discussing trips and gaming creates value for consumers in itself, without them needing to buy or consume actual services. Marketers don’t normally take this into consideration. On the other hand, social media offers new business opportunities for those customers who find participation to be a value in itself.
Customer social identity affects participants’ pricing decisions
The doctoral study also studied customer involvement in setting prices for products or services using the so-called ‘pay what you want’ pricing system. According to customer engagement ideology, good customer–seller relationships should be visible in the prices paid, but it seems that tactical price presentation decisions have a more significant impact. In addition, some consumers may find participation in price setting so stressful that they decide not to buy the product at all even if they could pay whatever price for it.
‘Pay what you want’ pricing was studied using two experimental set-ups in which seminar participation and business books were sold to customers for a price of their own choosing. The results indicated that those customers with a close relationship to the seller or to other customers paid significantly more than the average amount when they were told that the payment would be made public. If the payment was anonymous, these customers paid the same as other customers.
‘Regardless of whether it is a question of participation in pricing decisions or social media discussions, the consumer’s social identity seems to determine the manner and level of their participation. The customer considers whether he or she wants to become publicly connected with the seller. This explains both the failure of many campaigns aimed at increasing participation and also why small and restricted communication channels such as Snapchat have become so popular. Companies should carefully consider which engagement methods are public and which are private because they have an impact on both purchasing and the value of purchases,’ Ms Pöyry concludes.