Insights
Marketing
Given the growing marketing power of social media, it no longer makes sense to think of it as an experiment. Here is how leaders can use social media to influence consumer decision making in predictable ways.
Executives certainly know what social media is. After all, if Facebook users were a country, it would be the third largest in the world, behind China and India. Executives can even claim to know what makes social media so effective: its ability to amplify word of mouth. Yet the vast majority of executives have no idea how to harness the power of social media. Companies diligently set up Twitter feeds and branded Facebook pages, but few have a deep understanding of how social media interacts with consumers to increase product and brand awareness, boost sales and profitability, and generate loyalty.
We believe there are two interrelated reasons why social media remains a mystery to many executives, especially non-marketers. The first reason is its seemingly nebulous nature. It's no secret that consumers are increasingly going online to discuss products and brands, seek advice, and get guidance. Yet it's often difficult to know where and how to influence these conversations, which take place across an ever-growing variety of platforms and in diverse and dispersed communities, and can evolve either in a flash or over months. Second, there is no single measure of the financial impact of social media, and many companies find it difficult to justify devoting significant resources - financial or human - to an activity whose precise impact remains unclear.
We hope to demystify social media here. We have identified the four main functions of social media-watching, responding, amplifying, and directing consumer behavior-and linked them to the path consumers take in making purchasing decisions. When executives know exactly how, when, and where social media influences consumers, they can develop marketing strategies that take advantage of social media's unique ability to connect with customers. It should also help executives develop, launch, and demonstrate the financial impact of social media campaigns.
In short, today's business leader can no longer think of social media as a side activity only undertaken by managers in marketing or public relations. It's much more than just another form of paid marketing, and it also requires more: a clear framework to help CEOs and other top executives evaluate investments in social media, a plan for building a supporting infrastructure, and performance management systems to help executives scale their social presence intelligently. Companies that have these three elements in place can create important new brand assets (e.g., content from customers or insights from their feedback), open up new channels for interactions (Twitter-based customer service, Facebook news feeds), and completely reposition a brand through the way its employees interact with customers or other parties.
Businesses have quickly learned that social media works: 39 percent of the companies we surveyed already use social media services as their primary digital tool to reach customers, and that percentage is expected to grow to 47 percent in the next four years. This growth is fueled by a growing list of success stories from mainstream businesses:
But countless others could not match these successes: Knowing something works and understanding how it works are very different things. As the number of companies with Facebook pages, Twitter feeds, or online communities continues to grow, we think it's time for executives to remember how social media relates to a company's broader marketing mission.
The primary goal of marketing is to reach consumers at the moments or touchpoints that influence their buying behavior. Nearly three years ago, our colleagues proposed a framework - the Consumer Decision Journey - to understand how consumers interact with companies when making purchase decisions. This new framework, which depicted consumer behavior as a winding journey with multiple feedback loops, differed from the traditional description of consumer buying behavior as a linear march down a funnel. Social media is a unique component of the Consumer Decision Journey: it is the only form of marketing that can touch consumers at every single stage, from the stage when they are thinking about brands and products to the post-purchase period, as their experiences influence the brands they prefer and their potential advocacy influences others.
The fact that social media can influence customers at every stage of the journey does not mean it should. Depending on the company and industry, some touchpoints are more important to competitive advantage than others. Our work with dozens of companies adapting to the new marketing environment also strongly suggests that the most effective social media strategies focus on a limited number of marketing responses that are closely tied to individual touchpoints along the consumer decision-making journey. The top ten responses range from providing customer service to fostering online communities (see figure). One of these tenresponses - monitoring what people are saying about your brand - is so important that we consider it a core function of social media that is relevant to the overall consumer decision-making process. The remaining nine responses, divided into three groups in the figure, underpin efforts to use social media to respond to consumer comments, amplify positive sentiment and activity, and bring about changes in consumer behavior and mindset.
Gatorade, a sports drink manufactured by PepsiCo, has been working diligently toward its goal of becoming the "world's largest participatory brand. " The company has created a "war room" in its Chicago marketing department to monitor the brand on social media in real time. There, team members can track custom data visualizations and dashboards (including terms related to the brand, sponsored athletes, and competitors) and perform sentiment analysis on product and campaign launches. All of this feedback feeds into products and marketing on a daily basis, helping to optimize the landing page on the company's website, for example. Since the War Room was created, average traffic to Gatorade's online pages, duration of visitor interactions, and viral spread of campaigns have more than doubled.
Brand monitoring like this—simply knowing what's being said online about your products and services—should be a standard social media function, done all the time. Even without direct contact with consumers, companies can gain insights from an effective monitoring program that can range from product design to marketing and provide a heads-up on potentially negative publicity. It is also critical that such feedback is communicated quickly within the company: Whoever is tasked with brand monitoring must ensure that the information reaches relevant functions such as communications, design, marketing, public relations, or risk.
As valuable as it is to learn how you are doing and what you can do to improve, broad and passive monitoring is only a start. Another form of social media engagement is responding specifically to conversations on a personal level. This type of response can be quite positive if it serves to improve customer service or develop new customer leads. Most of the time, however, responding is part of crisis management.
A few years back, for example, a hoax photo was posted online claiming McDonald's was charging African-Americans an additional service fee. The hoax first surfaced on Twitter, where the image quickly spread just before the weekend and was retweeted with the hashtag #seriouslymcdonalds. It turned out to be a busy weekend for McDonald's social media team. On Saturday, the company's head of social media released a statement via Twitter declaring the photo a hoax and asking key influencers to "let their followers know." The company reiterated that message throughout the weekend, even responding personally to concerned Twitterers. By Sunday, the number of people who thought the image was real had dwindled, and McDonald's stock price rose 5 percent the next day.
It will become increasingly important to respond to counteract negative comments and amplify positive comments. The responsibility for taking action may fall on functions outside of marketing, and the message will vary depending on the situation. No response can be fast enough, and the ability to act quickly requires constant, proactive monitoring of social media -even on weekends. By responding quickly, transparently and honestly, companies can positively influence consumer sentiment and behavior.
"Amplification" means designing your marketing activities so that they have an inherent social appeal that encourages broader engagement and sharing. This approach means more than just getting to the end of planning a marketing campaign and then thinking "we should do something social" - e.g. uploading a TV spot to YouTube. It means that core campaign concepts need to invite customers into an experience that they can extend by participating in a conversation with the brand, the product, other users and other enthusiasts. It means having ongoing programs that share new content with customers and allow them to share that content with others. It means offering experiences that customers are happy to share because they get some sort of badge of honor by posting content that piques the interest of others.
In the early stages of the buying decision, when consumers are perusing brands and products to determine their preferred options, recommendations and referrals are powerful social media tools. A simple example of this is the way online deal sites like Groupon and Gilt Groupe give consumers credit for every first-time buyer they refer. Our research shows that such direct recommendations from peers achieve engagement rates 30 times higher than traditional online advertising.
Once a consumer has decided on a product and makes a purchase, companies can use social media to boost engagement and drive loyalty. For example, when Starbucks wanted to increase awareness of its brand, it launched a contest asking users to be the first to tweet a photo of one of the new billboards the company had installed in six major U.S. cities, with the winners receiving a $20 gift card. This social media brand promotion had a marketing impact that far exceeded its budget. Starbucks said that this promotion made "the difference between launching with millions of dollars and millions of fans. "
Marketers can also build communities around their brands and products to reinforce consumers' belief that they have made a wise decision and to provide guidance on how to get the most out of a purchase. Software company Intuit, for example, has created customer service forums for its Quicken and QuickBooks financial software so users can help each other with product problems. The result? About 80 percent of questions are answered by users, not Intuit employees, and the company has used users' comments to make dozens of important changes to its software.
Social media can be used most proactively to encourage consumers to make long-term behavioral changes. In the early stages of consumer decision-making, this can mean increasing brand awareness by driving Internet traffic to content about existing products and services. When personal care products manufacturer Old Spice introduced its Old Spice Man character in the US in 2010 National Football League Super Bowl , the company wanted to increase its reach and relevance to both men and women. The commercial became a phenomenon: starring the former football player Isaiah Mustafa, it was viewed more than 19 million times across all platforms, and sales of the company's products increased 27 percent year-over-year in six months.
Marketers can also use social media to create buzz around product launches, as Ford did with the launch of its Fiesta in the US. For example, social media played a key role in the success of "Small Business Saturday," the U.S. shopping promotion created by American Express for the weekend immediately following Thanksgiving. When consumers are ready to buy, businesses can use social media to offer limited-time, targeted deals to drive traffic and sales. Online menswear company Bonobos, for example, offered an incentive to its Twitter followers by unlocking a discount code after its messages were retweeted a certain number of times. As a result of this campaign, nearly 100 customers purchased products on the site for the first time. The campaign generated a 1,200 percent return on investment in just 24 hours.
Finally, social media can also solicit consumer opinions after the purchase. This ability to gain product development insights from customers in a relatively inexpensive way is proving to be one of the most important benefits of social media. Intuit, for example, has its community forums. Starbucks uses MyStarbucksIdea.com to collect opinions from its customers about how to improve the company's products and services, collects the ideas submitted, and displays them prominently on a special website. This site groups ideas by product, experience, and involvement, rates user participation, and displays the ideas the company is actively considering as well as those that have already been implemented.
Although social media offers numerous opportunities to influence consumers, in our experience it still accounts for less than 1 percent of an average marketing budget. Many chief marketing officers say they want to increase that percentage to 5 percent. One problem is that many executives know little about social media. But the main obstacle is the perception that the return on investment (ROI) of such initiatives is uncertain.
Without a clear sense of the value that social media creates, it is perhaps not surprising that so many CEOs and other executives are uncomfortable with their companies moving beyond mere "experimentation" with social media strategies. However, we can measure the impact of social media far beyond just volume and sentiment data. In fact, we can pinpoint the buzz around a product or brand and then calculate how social media affects buying behavior. Of course, to accomplish this and ensure that social media complements broader marketing strategies, companies must coordinate data, tools, technology and talent across multiple functions. In many cases, senior executives need to open up their agendas and recognize the importance of supporting or even taking on initiatives that have traditionally been left to the chief marketing officer. As our colleagues noted last year, "we are all marketers now."
Consider the experience of a telecommunications company that was proactively using social media but had no idea if its efforts were successful. The company had launched Twitter-based customer service, multiple ad campaigns with social contests, a fan page with discounts and tech tips, and an active response program to engage with people talking about the brand. By social media standards, the investment was relatively large, and company executives wanted more than anecdotal evidence that the strategy was paying off. To make sure it was doing a good job of designing and implementing its social presence, the company compared its efforts to the approaches of other companies known to be successful on social media. The following hypotheses were then formulated:
The company then tested its options. At various points in time, it spent less money on traditional advertising, especially as social media activity increased, and it modeled rising positive sentiment and higher search rankings just as it would using traditional metrics. The company concluded that social media activity not only increased sales, but also had a higher ROI than traditional marketing. So the company took a risk by focusing on social media activities before it had data to confirm that this was the right path, but the bet paid off. Moreover, the analytical foundation that now exists has given the company the confidence to continue exploring the growing role of social media.
In other cases, social media may play a more specific role, such as launching a new product or mitigating negative word-of-mouth. Similar types of analysis can focus on blending the impact of buzz, search, and traffic, correlating that with sales or renewals (or whatever the key metric might be), and then comparing the result to total cost of ownership. This approach can give executives the confidence and focus they need to invest more money, time and resources in social media.
As these social media activities grow in scale, the challenges focus less on justifying funding and more on organizational issues such as developing the right processes and governance structure, establishing clear roles - for everyone involved in the social media strategy, from marketing to customer service to product development - and strengthening the talent base and improving performance standards. New opportunities abound, and social media best practices are just beginning to emerge. However, one thing we do know is that as social media impacts every element of consumer decision-making, communication must occur both between and within functions. This complicates reporting and decision-making.
If insights from social media monitoring are relevant to non-marketing functions such as product development, how can you efficiently and effectively identify and disseminate this information - and then ensure it is used? When you identify an opportunity for a meaningful conversation with a key influencer, how can you quickly engage the right executive to make it happen? When you identify a quick service issue, how can you respond quickly and openly - and when should you do so outside of the traditional service organization? Leaders across the organization need to be able to recognize and answer questions like these.