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Is there value in socialising with customers?

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3rd Apr 2008
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Social media is the latest topic to get business buzzing. But is there really any tangible benefit in using Web 2.0 to communicate with customers? Jennifer Kirkby believes that opportunity and value can be gleaned from three areas.

By Jennifer Kirkby, consulting editor

‘Web 2.0’, ‘conversational marketing’, ‘customer-made’ – social media is the latest business ‘buzz’. But the big question is: is there any value in socialising with customers’?

The long (term) answer is ‘yes’.

The short (term) answer is ‘well it depends’.

Web 2.0 = reciprocal information sharing for mutual gain through networks

What it depends on is where you see value. If you see it in collaboration, knowledge sharing and mutual benefit together with all that context endows you with, there is huge potential value. If you see value primarily in today’s revenue and share price, then it is limited. Many executives will claim that the latter type of value from their current socialising efforts is unproven, but in a 2007 McKinsey study three quarter of them were ‘enthusiastic’ about overall results from the contextual value of socialising.

The same McKinsey research on the use of Web 2.0 technologies around the world concluded that traditional ROI models were at best inhibiting and at worst destructive in evaluating socialising benefits. Companies just didn’t invest capital in executive approved business cases with estimated bottom line returns: Web 2.0 investment tended to be Web2.0 in nature. Usually started through pilot projects using open source software, and based on a business case of ‘wow that looks good let’s try it’, by innovative, customer- driven, enthusiasts. The best results came through experimentation and mistakes – this is pioneering ground for everyone, and customers don’t know the best solutions to their needs.

“Don’t let the command and control freaks strangle initiatives with quantitative mechanistic model” – senior manager, McKinsey Report

Proctor & Gamble has been experimenting with social media since 2001 when a plummeting share price led it to conclude that it needed market responsive R&D. It set up its ‘connect and develop’ programme, and detailed a group of technology entrepreneurs to search out new ideas, and connect with “the majority of the world’s consumers” – a tall order. It then left them to work out how to do it. The result is now a huge bank of workable social techniques that gives P&G competitive advantage and which, as a by product, has reduced R&D costs by over 20%.

It is, perhaps, prophetic that one of the great 20th century mass consumption, product marketing brands is now doing the same with 21st century relationship marketing for mass innovation. For as manufacturing moves to lower cost economies that is where Western competitive advantage lies. Sustainable business is why socialising with customers in the long-term is of enormous value. Rather than the one way ticket of ‘go to market’ channels and communication media, we have to create the return on social networking.

“People listen better and longer when you just converse with them and listen back. Marketing loses credibility with hyperbole, hubris and amplification.” Conversational Marketing – Wikipedia

Analysing the reams of reports on the use of social media, it seems that opportunity and value fall into three baskets. They are not mutually exclusive, but considering each one individually is a useful analytical framework for evaluating a pilot. They are:

1. Managing your brand’s image and reputation
2. Building customer engagement
3. Creating an adaptive customer value proposition

Online social media

Offline social media

Forums

Events

Sharing resources, eg  YouTube, Flickr, del.icious

Education courses, trials, sessions

Blogs

Best practice sharing groups

Networking communities, eg Facebook, P&G

Co-creation development panels

3D worlds, eg Second Life

Networking groups

Extranets

Fan/owner clubs

Open source knowledge building, eg Wikis

Product trials

Linking, eg RSS

Qualitative research methods, eg focus group

Within each basket you can use relevant value measures and also consider the threats; what if social networking damages your brand? What assets can you count on if you don’t engage customers? What will your competitive position be if you leave dialogue and collaboration out of your CVP?

1. Brand image and reputation

Brand image cannot be dictated, it’s the sum of the stories that others tell about you, based on experience and ‘what they hear’. Advertising and PR used to be the tools to manage desired image, but no longer. Reputations are now built by word of mouth as potential buyers turn to ‘your customers’ for advice; whilst influencers have fragmented into a myriad of citizen journalists. Between 30-50% of brand switching can be put down to recommendation, as opposed to 20% each for advertising and sales promotions.

Getting out and about, socialising with your customers where they socialise is now a must to listen to the stories and provide new ones. Companies such as Red Bull and Zara deliver their CVP through great experiences, listen to the stories people tell about them and then ‘amplify’ them back in their own communications: saves an enormous amount on advertising creative costs.

The amount you socialise equates to the old advertising effectiveness measure of ‘reach’, and the more you socialise with network influencers, be they of the hub type (connectors of different networks) or the subject expert type (Mavens) the more reach into niche market segments and new opportunities your company will have.

Ways of socialising that add reciprocal value through brand image and reputation include:

  • Use independent networking sites such as Facebook and YouTube. Monitor videos and groups about you to find useful stories, case studies and issues as Coco-Cola do. Place your own educational or entertainment material ‘out there’ so that other’s can link to it.
  • Run an education event or programme like the Lindt Lounge. A touring exhibition that set up in shopping malls and invited customers to relax, chat, try the chocolate and watch a demonstration by a chocolatier, the idea is to demonstrate brand values, and leave lasting impressions for future purchase support. Value is measured in brand value recall and recommendations, rather than the shorter term blip of before and after promotion purchase.
  • If there are CSR issues in your markets set up communities where these can be debated – or create links to blogs already there. Meanwhile, monitor anti-brand sites for coverage and influence. Some are knowledgeable and well versed in the subject attracting influencers, eg www. Biased-BBC.com, others are less noteworthy blogs for opportunists’ rants against corporations. The value to you is in gaining trust, setting the agenda, and early damage limitation; to participants’ value is in a supported platform where they can share views and be heard by a company with the power to act.

2. Engaging with customers

There is a favourite brand image research question which asks “who would this brand be at a party; what would they be doing, drinking, dressed as?” If you want to be seen as a social brand rather than a wallflower then you need to be good at customer engagement. That means expanding your buying process with its ‘one night campaigns’ into a more committed engagement process. Not only will this add customer value, but fewer resources will be wasted as functions such as sales and marketing collaborate rather than fight. Companies such as Cisco and Nortel have found that an engagement processes confers benefits such as 38% more proposals closed, and 36% fewer customers lost.

Customer engagement builds up in four stages, and a variety of social media can be employed. The overall reciprocal value is in measured customer advocacy from a customer who feels you are ‘on their side’; advocates have been found to have six times the value of a ‘run of the mill’ customer. The return on the parts is in detailed research and development on effect.

  • Draw customer’s interest – Social media techniques in experiential marketing are ideal for attracting quality customers by demonstrating brand values. For example Jack Daniels sent field staff to bars with specific client profiles. They offered to buy customers a Jack Daniels in honour of his birthday, whilst recounting the ‘Jack Daniels’ story – their measure of success over a year was the ‘reach’ of the JD story with relevant groups. This same idea can be translated on line; TradeKing, the US stockbroking company set up its online community to attract interest from enthusiasts. Its distinct promise: “You've arrived at the place where savvy traders come to rub virtual elbows. Grab a tasty beverage, kick back and learn from watching others, or dive right in and share your favourite trade ideas.”
  • Invite interaction in order to listen and respond to needs – Direct marketing was frequently used for this stage in the past – but with social media the customer’s response can come first. The Royal Society for the Protection of Birds (RSPB) runs a popular annual Garden Bird Watch survey which invites the public to file results via its interactive website; RSPB follow this up with personalised emails of the findings and invite deeper membership. At the other end of the scale Starwood Hotels invite avatar interaction in their Second Life resorts whilst showing off their facilities.

    Other companies find thriving blogs in relevant spheres and link their website RSS feeds to them – so providing useful knowledge. The value to the blog is support and reader recruitment, whilst the company gains market intelligence from target consumers. The main rules are for companies to be honest and not hide behind aliases, nor ask for payment for the link as one naive Women’s networking group did.

  • Provide customised solutions – This is where social media can reach into the ‘long tail’ of the market and economically provide services to small ‘specific interest groups’ or individual corporate accounts. Self help communities, where customers can ask other customers about issues and problems are a particularly valuable service. Apple and software companies such as WordPress have most successfully utilised a passionate and knowledgeable customer base in this way. Harvard Law Schools meanwhile offer tailored parts of their courses on 3D sites such as Second Life. The value is in the market opportunity that it opens up.

“Customers who contribute product reviews or post messages visit community sites nine times more often than sites without communities, remain twice as loyal and buy almost twice as often, even customers who just read community interaction are more frequent visitors and buyers.” 2001 McKinsey Report

  • Open up to participation – Inviting customers to suggest product improvements is not new, but inviting them to be a part of development is. Socialising with customers through co-creation can be very rewarding for both parties. There are a myriad of examples from Felix cat food and Dove inviting customers to be part of brand design and trials – through to Boeing inviting customers to help design a new airline. The benefits to the company include customer advocacy, less product failure, early warning of market changes, and more creative muscle for innovation and competitive advantage.

    When building customer engagement through socialising there are two keys to success to keep in mind. Firstly, the greater the personal affinity in knowledge sharing the greater the ‘contextual’ value. Secondly, creativity thrives more when there are mutual goals, so helping customers achieve their goals will bring more value to the company. That is why pharmaceutical company Merck with their customer ethos of “We try never to forget that medicine is for the people. It is not for the profit alone” achieved better r corporate results in the late 1990s than Pfizer with their shareholder philosophy of “So far as humanly possible we aim to get profit out of everything we do.”

3. An adaptive customer value proposition

Customers’ own needs and expectations about ‘corporate socialising’ are changing. They want to be more involved with companies, they are beginning to expect dialogue and they look for groups of like mind they can interact with to share and learn. They see these features of a CVP as companies being ‘of service’ to them - a slightly different concept to traditional ‘after sales service’ so frequently seen as a cost on the company books.

The payback for companies for including these services is both competitive advantage and contextual feedback that keeps the whole value proposition up to date with customised market solutions. Give your customers valuables services and they will give you valuables information to help them and others – a web-based answer to a query on a forum from an ‘expert’ customer can be way below the cost of a telephone call to a contact centre, as well as being a better response in a more sociable environment.

“Customer-creation will not take over the world, but will creep into the mainstream where it is appropriate.” Warwick Cairns, brand expert

Bottom line

When you tease out the objective of socialising then how to ascertain value becomes more apparent. Call it Web 2.0 or conversational marketing this is a very different way of networked interaction that will break twentieth century marketing techniques and overturn traditional value measures. Therefore, an R&D approach via methodologies such as RAD (rapid application design) should be considered as a primary path to value laden adoption.

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