Chris Barry, Rob Markey, Eric Almquist and Chris Brahm, of Bain & Co. have pertinent advice for companies on how to make social media work. They analysed what companies like Dell, Starbucks, Nestle, JetBlue, Zappos, Best Buy, Microsoft and Proctor & Gamble are doing, and suggest a systematic approach based on 5 principles. Read on below.
"Five years ago, few general managers outside of the tech industry had heard the term “social media.” As social networking services such as Facebook and Twitter broke loose on the mainstream business scene, the majority of companies stood on the sidelines trying to make sense of it all.
Despite the proliferation of corporate Facebook pages and Twitter accounts during the last couple of years, most businesses still effectively remain on the sidelines. The gap between the early adopters and those waiting to take the plunge has actually widened. While the average billion-dollar company spends $750,000 a year on social media, according to Bain & Company analysis, some early adopters such as Dell, Wal-Mart, Starbucks, JetBlue and American Express invest significantly more. In some instances, the investment is tens of millions of dollars. Who is right—the early adopters or the companies still waiting it out?
Our research shows that several early adopters have captured real economic value from their investments. But the social media scene is so turbulent and frothy that many others have poured good money after bad in their attempts to engage customers. The leaders typically employ the same tried-and-true business principles—refined through traditional marketing, service and operations— applied in new ways. While they often experiment and sometimes fail, they don’t allow themselves to fall into the trap of thinking that somehow “everything has changed” in this new world.
As part of a broader customer engagement strategy, social media can be an effective and cost-efficient marketing, sales, service, insight and retention tool. Our recent survey of more than 3,000 consumers helped to identify what makes social media effective. We found that customers who engage with companies over social media spend 20 percent to 40 percent more money with those companies than other customers. They also demonstrate a deeper emotional commitment to the companies, granting them an average 33 points higher Net Promoter® score (NPS®), a common measure of customer loyalty (see below, “NPS 101”).
Embracing empowered consumers
More than 60 percent of Internet-connected individuals in the US now engage on social media platforms every day. The speed and access to information that they’ve come to appreciate has made them more demanding customers. For example, many now expect real-time customer service recovery and quick responses to their online feedback. Hyper-connected individuals regularly broadcast their opinions. And they rely on their friends and social networks for news, reviews and recommendations for products and businesses.
Social media leaders understand and appreciate the magnitude of the shift in customer empowerment and the opportunities and risks that these tools create. As a result, they approach their social media efforts differently. While the average company may maintain Facebook and Twitter accounts and have other discrete programs run by their marketing or customer service teams, in our experience, these efforts tend to be uncoordinated, with different business units, brands or geographies conducting their own social media experiments.
By contrast, the leading firms invest significantly more. They pursue integrated social media strategies, with a more holistic assessment of the value that social media can create across the businesses, and with efforts directly tied to strategic business objectives. As the early adopters continue to invest, their peers take different approaches. Some feel that they have social media at least partially sorted out with their Facebook pages and Twitter accounts. But others are beginning to ask more questions:
- What is the business case for investing further in social media? Where and how much should we invest?
- Fundamentally, how much is consumer behavior changing? What are the biggest opportunities and threats? How aggressively are my competitors investing in these tools, and are they capturing differential advantage?
- What are the best practices in deploying social media strategies? What are the pitfalls to avoid?
- Should we build or buy our own “community” or partner with one of today’s leading platforms? Or both? Where should we place our bets?
- How should we organize and coordinate our efforts? Across brands? Across business units? Across geographies?
- How should we measure results? How do we know whether we are creating real business impact?
While no one can say for sure how social media will evolve, and no one can know which platforms will ultimately endure, the long-term winners are likely to take a systematic approach based on five key principles."
The five principles outlined in the article are the following:
- Link social media efforts to concrete business objectives
- Focus and tailor your efforts to engage your key customers
- Build a social media organization to deliver results
- Monitor and measure the results—then close the loop
- Be flexible and adaptive. It’s still early days"