While consumer-branded businesses are abuzz with social media’s potential, no one yet really understands the medium’s potential to affect financial performance. Just as with the early days of the Internet, this leaves executives grappling with tough choices on how to invest in the channel and what tactics to employ to maximize that investment. While talking to and studying the industry’s leading pioneers in social media marketing, we found four good bets that retailers—of almost any size and from any segment—can employ to both maximize customer loyalty benefits and minimize brand risk.

1. Tailored messaging
Whole Foods, REI and lululemon athletica are experts at targeting specific customers with relevant messages. Whole Foods tweets from separate specialized accounts for cheese, wine and beer, recipes and store locations. Lululemon and REI stores have separate Facebook pages to keep customers up to date on local events and activities. These retailers bring relevant information to the customers who care the most about it, reinforcing their relationship with the brand.

2. Empower the right employees
Blasting messages to a million customers with a single click is a powerful, albeit scary, tool. While traditional marketing is typically controlled by an SVP or VP of marketing, there are fewer rules when it comes to social media. Take Best Buy’s Twelpforce, comprised of store employees who tweet responses to customer inquiries through a crowd-sourced model. Communications are not filtered and slowed down at headquarters, enabling customers to instantaneously receive information from those closest to the products.

3. Don’t neglect email
Despite the growth of social media, email is currently still the dominant means of connecting with customers. But smart retailers know that social media used in concert with email communications can exponentially increase the power of a retailer’s messaging. Tracking social media activity and transactions stemming from links in emails can help identify a brand’s most active brand advocates and help to determine the most effective email content.

4. Remember the power of peers
Several retailers have found success in channeling the positive effect of social recommendations for younger customers. Consider Urban Outfitters’ website, which features a Facebook “Like” button next to each product—the products with the most “likes” are then pooled into a special collection on the site. JCPenney is one of the first major retailers to launch a “haul” campaign, providing teen customers with gift cards and a directive to create YouTube videos showcasing their back-to-school purchases. It is considered one of JCP’s most innovative marketing campaigns, as they bank on these videos reaching the eyes and wallets of the haulers’ friends.

The Golden Rule

If nothing else, it is essential to monitor social networks regularly for complaints about a retailer’s products. An entire genre of blogging exists to rant about failures in customer service among cellular carriers and cable providers. Every unhappy customer can now post a digital billboard expressing their dissatisfaction.

A lesson can be learned from a retailer who offered a $10 online coupon intended for shoes only, but did not specify this. The coupon, not surprisingly, went viral and customers used the coupon instead to buy lower-priced items like socks essentially for free. After the coupon code was removed, customers became angry and bloggers launched a negative PR campaign. The risk inherent in social media is that both positive and negative actions can go viral quickly. Retailers need to have a dedicated team and internal process to manage PR under this assumption.

Remember that the retailer is not in charge of these conversations, but can turn them into opportunities for positive interaction. For example, Ann Taylor’s LOFT brand responded to its Facebook fans’ requests to show a pant style on “real” women as opposed to a model; the next day photos of employees wearing the pant appeared on the site. Analysts attribute the company’s growing customer base and strong online business to more aggressive adoption of social media.

Who are the biggest players in social networking?

500 million active users around the world spend 700 billion minutes on the site monthly. The average user is 38 years old, with 61% of its users 35 or older. Victoria’s Secret, H&M, Nike and Kohl’s are among the retailers or brands with the highest number of Facebook fans (well over 1 million). 1

Twitter draws 180 million unique monthly visitors, 300,000 new users register per day and 55 million messages are tweeted daily. Twitter users skew slightly older than Facebook users: 39 is the average age with 64% of them 35 or older. Urban Outfitters, American Apparel, Hot Topic, Forever 21 and Whole Foods rank among the retail companies with the greatest number of Twitter followers. 1

YouTube is used by many online retailers to demonstrate product functionality. Home improvement retailers Lowe’s and Home Depot share how-to videos for DIY projects, while French Connection’s YouTique shows wardrobing options by occasion with links to buy product. Video content also comes from customers; retailers often hold video contests or invite customers to create “haul” videos to endorse products they have purchased.

1 Apparel magazine, July 2010; Retail Insight, July 2010; pewinternet.org, cnn.com, royalpingdom.com, September 2010

This is the first in a four-part series on leveraging social media for more than just marketing. Please see our related insights below.

Enhancing Internal and External Decisions with Social Media
Using Social Media to Improve Marketing ROI
Upgrade Intelligence Gathering with Social Media

17 December 2010