Article

Deploying social media to cultivate customer loyalty

Average spending on social media to achieve loyalty increased by 193 percent over the past year.

November 29, 2010

In mid 2010, Facebook passed the 500-million-user mark, a milestone that certainly fuels marketers’ already-strong incentive to accelerate the transition out of the experimental stage of the social media era.

This transition confronts marketers with a dual challenge. First, new media spending may be difficult to justify in what feels like a never-ending recession, yet neglecting the present opportunity to learn how to utilize these new channels now may doom your company to second-place status for years. You must "ante-up" now. Second, the game will be risky, since there are few well understood strategies and almost no best practices to easily fall back on. You’ve got to throw your chips in and build your strategies as you learn.

This paradoxical challenge is a lot like the dynamic at a poker table. Poker is an exercise in intense competition and odds calculation where no one is certain what cards anyone else is holding. Similarly, the process of setting social media strategies and budgets in this competitive economy inevitably involves evaluating your cards, estimating where your best bets will be, studying your competitors’ moves, having the discipline to fold on losing hands, and even bluffing a little when you need to. Most of all, it means learning more rapidly than the others at the table.

Let’s take a peek at the face-down cards. U.S. companies using social media primarily to deepen customer loyalty spend almost twice as much as competitors who use it for brand awareness, customer acquisition and other core marketing purposes, according to a recent survey of 369 marketers from COLLOQUY and the U.S. Direct Marketing Association (DMA).

The survey found that loyalty marketing objectives have called and raised the bets of other social media plays. The average amount devoted to social media among companies with a primary focus on customer loyalty objectives was found to be $88,000 in 2009, compared to $53,000 in companies devoted to brand awareness and $30,000 in those seeking new customer acquisition, the three objectives that attracted the next highest spending levels. Additionally, the survey showed that the average spending on a social media budget to achieve loyalty objectives increased by 193 percent over the previous 12 months, which easily trumped social media allocations geared to other marketing goals.

While this data offers some direction for future social media spending, these remain divergent times for marketers. Despite having some spending profiles available and several years of experience in the space, active learning continues. Marketers who experiment in the new frontier and pursue the cultivation of customer loyalty using social media, like the canny poker player who resists the urge to draw to an inside straight, must exercise the same discipline they’ve traditionally applied to other channels.

As a starting point, marketers should lead with their strong suit by harnessing the power of their loyalty program to identify their brand’s word-of-mouth (WOM) "Champions." These are consumers who are both influencer in their social circles and advocates of a brand. Previous COLLOQUY research shows that WOM Champions can be found most easily in the marketer’s loyalty program. A much greater percentage of loyalty program members, 70 percent more to be exact, are WOM Champions than the percentage among general consumers.

And savvy marketers will recognize that winning the most hands at the social media poker table will require turning first to their best customers and applying the same principles inherent to loyalty—which are combining economic incentives with social capital. Target some of your social media spending directly at your program membership, with offers and strategies that get the Champions talking. Offer these Champion customers the opportunity to become brand heroes who serve as the go-to resource for the network.

Brainstorm other ways to identify and leverage WOM Champions to help you identify new customers. Also, marketers must develop proprietary WOM metrics. They should leverage familiar best practices to measure social media success, including click-through rates or page-visit frequency, the good old-fashioned metrics that have been used in other channels.

Though the players in the game of social media may seem quite different, and the table stakes particularly high, experienced direct marketers know many of the rules already. The game is about connection and conversation, modifications of familiar rules of engagement of direct marketing. Some marketers make the mistake of becoming preoccupied with the novelty of social media, and analyzing which specific social media sites are here to stay and which will flame out. This time-waster misses the main point, because what’s not going away is social media’s platform for real-time connection and conversation, two characteristics that make social media an excellent venue to engage consumers.

Loyalty practitioners should feel comfortable knowing that even in this new frontier the three R’s still apply. No, not "readin’, writin’, and ’rithmetic," but reward, recognition and relevance. These three remain the keys to enticing customers to pay attention, even in a busy and fragmented environment. As in poker, the hands may change from game to game, but the basics of play remain the same.

Jim Sullivan is a COLLOQUY partner and contributing editor.