Before getting to the results, I’d like to thank the 21 students who put their hard work into the project and made this information possible. You guys/gals rock!

Now are you ready to see who won the showdown? Here you go!

Do you agree with the students’ observations? Please tell us what you think!

Image by Flickr member slgckgc | CC 2.0

Note added on April 17, 2012:

After posting Rich’s guest post yesterday, I received an email from Lauren Salazar describing the circumstances under which she agreed to the interview with Rich. Apparently there has been a misunderstanding. She shared information with him with the pretext that it is for his class project only and that the information discussed would not be shared publicly, such as through a blog like mine. Because of this prior agreement, I have decided to honor WeightWatchers’ request and remove Rich’s post.

My take on all this? I still think Rich did a fantastic job trying to reach out to the companies themselves (and he wrote a really engaging post too). What’s interesting from all this is that, even though we think of social media as an open space, it is still sometimes too open to be comfortable for companies. There is still a lot of this “eggshellish” mentality, either from an individual perspective or from a company perspective. With the severe consequence that can result from a single sentence (or word) one says in social media, it is understandable why this eggshellish mentality may be the case. Even in personal interaction, there are often implicit but well-known boundaries of what you would disclose about yourself and what you would not. I think that, for many, this boundary in the context of social media is still very hazy. It is something that will need to be more firmly established for both companies and their employees in the near future, if social media marketing were to rise to a more central role in the enterprise.

Photo by Flickr User twitchcraft | CC 2.0

Context

The authors conducted two lab experiments. The first experiment was based on a grocery store loyalty program and involved 246 undergraduate students. Various aspects of the loyalty program were manipulated, and the respondents reported how likely they would recommend the program to others and whether the program would increase their loyalty toward the store. In the second experiment, 375 student and non-student respondents made simulated purchases given a restaurant loyalty program. At the end of the simulation, they also reported their recommendation likelihood and perceived loyalty effect.

Main Findings

• Point ratio (low: 1 point/dollar vs. high: 10 points/dollar) has opposite effects depending on whether the program has a clear point structure (i.e., a clear point ratio is applied across the board) or a mixed structure (e.g., point ratio may vary across product categories or across time).
• Under a clear point structure, a high point ratio (10 points/dollar) leads to similar reactions from consumers who are far from the reward threshold (e.g., has earned 20 out of 100 points required) as consumers who are close to the reward threshold (e.g., has earned 80 out of 100). A low point ratio, on the other hand, creates much more positive reaction among consumers who are close than among consumers who are far.
• Under a mixed point structure, the opposite is true. A high point ratio leads to much more favorable reactions among consumers who are close to the reward threshold than those who are still far. A low point ratio, in the meantime, does not make a significant difference.

What Does This All Mean to Practice?

To translate these findings to practice, we can first consider the practical equivalence for being near vs. far from the reward threshold. For low spenders at a company, they are likely to spend more time being pretty far from the reward threshold. For existing heavy buyers, in contrast, they earn points easily and probably spend a good amount of their time being very close to the reward threshold. Based on this translation, the following chart shows how to determine the best strategy to use:

		Program Goal
		Encouraging Low Spenders	Rewarding Best Customers
Point Structure	Simple e.g., Best Buy Reward Zone, where you get 1 point every dollar spent	High point ratio	Low point ratio
	Mixed e.g., Priority Club, where how many points are issued depends on the chain that you stayed at	Low point ratio	High point ratio

Do these findings make sense to you? How has your experience been dealing with point ratio? I would love to hear your thoughts!

Reference

Rajesh Bagchi and Xingbo Li (2011), “Illusionary Progress in Loyalty Programs: Magnitudes, Reward Distances, and Step-Size Ambiguity,” in Journal of Consumer Research, Vol. 37 (February), p.888-901.

Key Advantages of Having a Loyalty Program

• It encourages consumers to concentrate their purchases in your company so that they can reach a reward faster.
• It increases switching cost so that consumers who have already earned points through your loyalty program are less likely to jump ship to a competitor.
• Compared with other promotions such as price discounts, a loyalty program incurs delayed promotional cost, because consumers make purchases first and get rewards later only after they have accumulated enough points.
• Related to the above cost issue, not all points earned through a loyalty program translate into reward costs, as there will always be some consumers who never reach the reward threshold or who never redeem their points.
• A loyalty program offers a way to capture consumer transaction history and can lead to more in-depth understanding of your customers.
• If you have a sizable business such as an airline, a loyalty program can be a revenue source as you can sell program currency (e.g., miles, points, etc.) to partner businesses.
• A loyalty program, when properly designed, can make your best customers feel appreciated and become more loyal.

Key Disadvantages of Having a Loyalty Program

• A loyalty program can be expensive to implement, unless you are doing a basic punch card based “buy 10 get 1 free” type of program. Also unlike one-time promotions, a loyalty program is typically a long-term commitment and therefore needs financial support over time.
• Loyalty program points can represent significant financial liability and may increase risk to your business. (Note: This can be alleviated by setting an appropriate point expiration policy.)
• Your best customers may like you enough to want to buy from you any way. So having a loyalty program may be giving away your profit margin unnecessarily. My own research shows that existing heavy buyers barely change their behavior after joining a loyalty program.
• The long-term impact of a loyalty program on true customer loyalty is not well-established. Consumers may join your program purely for the financial incentive and will abandon you if your competitor offers a better program.

Questions to Ask

To decide whether your business should have a loyalty program or not, I suggest you ask yourself the following questions:

1. Do your customers typically buy from more than one company? If not, your financial gain from a loyalty program may be minimal. If they do typically buy from multiple businesses, figure out if they are likely to concentrate their purchases to one company. Some products are inherently variety seeking products (e.g., food), and a loyalty program may not be enough to make consumers monogamous.
2. Are your best customers attracted to you by your unique product/service offerings? If so, you may not need to add a loyalty program, which will only eat into your profit margin.
3. Do you have the analytic and management capabilities to make the most out of a loyalty program? A loyalty program can generate a gold mine of consumer data and can allow more customized and effective marketing programs. But if you plan on just turning on a loyalty program without actively managing it, many key benefits of a loyalty program will be lost.
4. Are you a business hub in your community? If so, you may be able to sell your program points to other businesses in the community so that they can issue your program points to their customers. This can generate additional revenue for your business.

If you find that having your own loyalty program is not the best way to go, sometimes it makes sense to buy loyalty program points from other businesses so that you can still reward your repeat buyers without breaking a bank.

Have you ever looked into having a loyalty program for your business? What affected your decision one way or another? If you already have a loyalty program, has there been any situation where you regretted your decision? Please do share your lessons and insights so that we can all make better decisions in the future.

After receiving a Google+ invitation from a friend, I immediately started digging into it to see if it has more potential than Google Wave, the once hyped product that has since retired into the background. My first impression when getting onto Google+ was: this looks a lot like Facebook! But after looking into it a little further, I started to see several critical differences between Google+ and the Facebook concept. I don’t plan to get into all that in this post, as there are many great articles out there discussing the Google+ concept. Instead, I want to share with you how Google+ can potentially evolve into a great tool for managing customer relationships in the online social media space.

The Old Way

To do that, let us first look at how brands now engage consumers on Facebook. Most likely, this is done through a Facebook page, where consumers can “like” a brand to show their appreciation and support of the brand. Through such a page, a business can share information such as useful articles and upcoming promotions with consumers, and at the same time consumers can interact with the business and other consumers by asking questions and posting comments. This is all good, but it happens in a very undifferentiated fashion. Everyone on a brand’s Facebook page sees exactly the same information, and a business needs to sift through tons of questions and comments to identify the priority issues that need to be addressed. This is neither very effective nor efficient.

Establishing Circles

The key feature in Google+ that can change all this is its use of Circles. These are custom created social networks that people can use to define the circles of individuals that they socialize with, such as friends, family, and co-workers. How is this relevant for managing customer relationships? Imagine a brand creates a Google+ profile, just like a regular user profile. It can then add consumers into its circles. Once that is established, the fun starts with the many circles that the brand can create to differentially interact with consumers. For instance, these consumers are frequent visitors who often help us answer other customers’ questions. Let’s put them into a “Helpers” or “Partners” circle. Those consumers have expressed concerns or dissatisfaction with our product. Let’s put them into a “Disgruntled” circle. And these other consumers buy heavily from us and are very vocal supporters of the brand. Let’s put them into a “VIPs” circle.

Using Circles

These circles are not established overnight but instead will evolve over time as consumers reveal themselves as belonging to one or another category. Because one can share information with others that are not on Google+ through email, existing company database can be used to put previously known individuals into those custom-defined circles, whether these individuals are on Google+ or not yet. Once the circles are established, information sharing and customer interaction can happen across the board or can be custom tailored to a specific circle. For example, want to reward consumers who step in to help the company solve others’ problems? Post a free reward or discount coupon to those in the “Helpers” circle. Want to find out the success of the company’s service recovery efforts? Do a poll in the “Disgruntled” circle. A couple of social media personnel are down with the flu today so only a few people are available to sort through comments? Focus first on the “VIPs” circle to make sure top-priority customers are satisfied. And because Google+ sharing is enabled through emails, these efforts can be seamlessly integrated with CRM efforts outside of Google+.

On the Consumer End

To complete this picture, we also need consumers who will want to be in a circle with the brands they like. This can easily be done through a “Brands” circle on the consumers’ side, which will allow consumers to add all the brands that they want to interact with into a circle. Consumers can choose to publicize the brands they join a circle with to their friends. Or, using the Sparks function in Google+, where users indicate what topics they are interested in, it is possible for businesses to advertise their profile and invite people with similar interests to join. (As of now, however, there are no advertisements on Sparks). Because consumers can easily filter out their stream based on specific circles, concerns about overloading user streams are minimized, potentially making consumers more receptive to brand messages.

Now granted, some of the possibilities that I raised here have not been implemented on Google+ yet. But I can see great value in what could be in the near future, and the potential to bring businesses and consumers closer and for businesses to gain a few loyal customers along the way.

What has your Google+ experience been like? Positive? Negative? What do you think of the ideas that I presented here? Please feel free to join the conversation!

Update: I should have mentioned that Google is currently working on Google+ offering for brands. According to Christian Oestlien, lead product manager for Google’s social advertising, Google+ brand pages will be available before the end of July. Although detailed features are not yet clear, here’s an article from AdAge on possible Google+ for brands features.

Christian Oestlien

Mobile Transaction Platform

Major retailers such as Amazon.com and eBay have developed their mobile apps that allow consumers to buy products directly from within the app. Compared with a mobile commerce website, these apps tend to be more user-friendly and incorporate the touch and swipe capabilities of smartphones for easier manipulation of product pictures, smoother transition between pages, and overall faster shopping experience.

Point-of-Sales Integration

Short of offering full mobile transaction capabilities, another type of app tries to mesh the mobile device with POS transactions in the physical world. A great example is the Starbucks Card Mobile app. Having registered a card in the app, a Starbucks card holder can use the app to pay for purchases at 6800 Starbucks stores in the US and additional locations in the Target store. The store POS system scans a barcode displayed in the app instead of a physical Starbucks card. Of course, this type of app requires equipment compatibility at offline locations, which can require costly investment.

Customer Self-Service

Financial institutions and airlines are fond of this type of app. Using the Bank of America mobile app, for instance, one can check account balance, see account history, and locate a branch office. Airline apps such as Fly Delta let consumers search flight schedule, find flight status, and check in to upcoming flights. Fly Delta also offers a neat feature through which users can take and store a picture of where their cars are parked to help locate the car easily upon return from their trip. This would definitely be helpful to someone like me who can be absent-minded sometimes. For consumers, it’s added convenience. For companies, they can save money on customer service.

Loyalty Program Management

One specific type of customer self-service apps allows consumers to manage their loyalty program accounts. At the most basic level, it allows consumers to check their loyalty program balance (such as in Fly Delta). With more sophisticated apps, such as TopGuest and ShopKick, consumers can also earn program points by checking in at hotel or retailer locations.

Sales and Real-Time Alerts

Similar to the use of Twitter to announce last-minute deals, mobile apps can be used to push coupons to consumers’ mobile devices. With push notification, they can alert consumers to ongoing sales at stores nearby. The convenience store chain Rutter’s, for instance, allows consumers to see in-store promotions that are available at a specific location. If POS integration is enabled, such apps can eliminate the need for consumers to clip and carry paper coupons, potentially making a deal more appealing.

Geo-Location Sensitive Services

This is less of a standalone app type than a functionality that can be integrated with the different types of services listed above. One of the key strengths of today’s smartphones is that most of them can identify consumer location via a built-in GPS system. Integrating this functionality, consumers can find a store near their current location, get driving directions, and be alerted of deals in their neighborhood.

Crowdsourcing

This last type of mobile app builds on the wisdom or buying power of the crowd. Groupon is a good example, where a good deal from one’s local area gets activated when enough consumers buy into it. The Extraordinaires app from Sparked.com is another perfect demonstration of this. The app allows consumers to “microvolunteer” right from their phone. For instance, you can help map out playgrounds for kids. All you need to do to take a picture of the playground and identify its location through your phone. As another example, you can also help museums categorize their artwork by viewing and tagging individual images.

Whichever functionality you decide to include in your mobile app, the key is to offer enough utility so that consumers have a reason to use it, whether as a handy reference or as something fun to do. Too often, I would download a company’s mobile app and then never find a reason to use it again. After a while, it simply ends up on my “delete” list. A little research beforehand on what consumers want would have prevented that.

Photo by Flickr User Widjaya Ivan | CC 2.0

What Works

Polls and questions: Asking consumers easy questions that are tangentially related to the product seems to receive good reactions from consumers, and many do respond. A key to this practice is to time the questions based on what’s on consumers’ mind at the moment (e.g., holiday, economy, etc.).

Contests and submissions: It may seem like a lot of companies are running contests nowadays. But in our observation, it still seems to work quite well among consumers. Visibility of winning is important. An example is ESPN’s use of fan-submitted photos as its profile picture. This is updated every week so that the chance of winning is pretty frequent.

Responsiveness to consumer comments: Although it takes a lot of time to wade through a potentially large number of consumer comments, the most successful communities that we observed tend to be the ones that respond to a consumer’s comment quickly. In one example, a consumer posted that she was having a bad day on Cold Stone’s Facebook page. Very quickly, the company responded with an offer to make the consumer’s day better. Not only does this create a sales opportunity, but it also builds an emotional connection with the consumer and shows that the company cares.

What Does Not Work

Complete synchronization across channels: It is important to maintain a consistent image across different social media channels. But when the synchronization is overdone (e.g., posting the same exact messages across all channels), it makes a company’s social media presence seem weak and lazy. While YouTube, Facebook, Twitter, etc. are all social media channels, people visit them for very different reasons. As a result, it is important to use each channel based on who uses it and what it is used for.

Relying solely on consumers to maintain a community: When a company establishes a presence in a social media channel, it is making a commitment to engage with consumers. While ideally the community should have many consumers participate and interact among themselves, the company should not count solely on consumers to keep the community going. In the worst managed communities, we saw companies ignore consumer questions and completely expect other consumers to answer those questions. It creates an impression of indifference and defeats the purpose of brand-customer engagement. A well-balanced social media channel should have a good amount of both consumer-consumer and consumer-brand interaction.

Miscellaneous Observations

A good portion of the companies that we observed did not do a good job with their social media channels. Participation rate was low, and consumer feedback and comments were left unaddressed. Out of all the channels that we observed, YouTube seems to be the weakest link for most brands. It receives the least amount of attention from companies. Many companies update their channels very infrequently, and treat YouTube more like a TV channel for pushing video information to consumers rather than using it effectively to engage video-oriented consumers. This is an area that we see a real need for improvement.

Another interesting phenomenon from our observations is how much passion plays a role in determining the success of a social media channel. In some ways, this almost gives unfair advantages to some brands that have a natural association with passion. For instance, as a sports news center, ESPN enjoys tremendous reaction due to consumer enthusiasm with certain sports and sports teams. But brands that do not innately draw such passion can link themselves with something people are more passionate about. For instance, both Nike and Red Bull associate the brand name with various mainstream as well as extreme sports. That strategy sparks people’s enthusiasm and puts the product in a more interesting light.

I hope these observations will prove useful as your company designs its social media presence. Please do share what you have seen or experienced as successful vs. unsuccessful social media practices.

Update (1/16/2011):

After writing this post, I came across Brian Soli’s article titled In Social Media, Failing to Plan is Planning to Fail. That really resonated with the haphazard ways many social media channels that we observed during the project were put together. What I wrote in this blog has more to do with the tactics that companies can use to increase their social media effectiveness. But without proper planning in the first place, as Brian Soli points out, social media efforts will fail.

Is this strategy effective? Business aside, let me ask you this: have you ever met someone who can talk your head off and don’t know when or how to shut up? If you can’t picture that, think about Adrian Monk’s upstairs neighbor in the hit TV show Monk. What do we do when we meet people like that? We usually try to avoid them like the plague. I did with those retailers. When I asked my students what they do, they said they simply deleted the emails. I am sure this is not what the retailers intended.

Photo by Flickr user oddharmonic | CC2.0

Now, I am not discounting the effectiveness of email marketing. When used appropriately, emails can be an effective and low-cost way of communicating with customers and keeping a business in consumers’ mind. But just like most things in this world, too much is not a good thing. Let me present a few reasons why daily or too frequent promotional emails are neither necessary nor effective:

• It is impersonal: When consumers are getting daily emails from a retailer, it is hard to imagine the retailer to put too much thought into these emails. The message is usually the same or very similar, save 20% today or get $10 off now! It lacks the personal touch that a less frequent but more thoughtful message can bring. This is true even if you plug in the consumer’s name into the emails to pretend some level of customization.
• It mismatches consumers’ purchase cycle: Unless consumers are about to make a major purchase decision, usually they do not obsess everyday about most of the products that they buy at regular intervals. In those situations, a weekly email is typically sufficient to alert consumers to available deals and to be on the radar when consumers are ready to take the plunge.
• It is cheap (and not in a good way): The way we perceive the world is very much directed by our expectations. When consumers receive promotional emails at high frequencies from a retailer, the expectation is that the retailer will be on sale all the time. This cheapens the retailer image and makes regular product prices seem high in the future.
• It is mis-targeted: Deal-oriented emails are usually appealing to deal shoppers. These consumers love a great deal and tend to hop from store to store to find the best deal possible. In marketing research, we call these consumers cherry pickers. Cherry pickers typically hold little loyalty toward any particular company and will easily deflect when a competitor offers a better deal. Therefore, from a long-term financial health perspective, those daily deal emails are attracting the wrong type of customer base.
• It is unethical: This may sound a little too serious. But think about who is much more likely to respond to these frequent emails promoting incredibly good deals? The impulsive shoppers! Especially the “buy now” deals give these consumers a justification to splurge and buy things that they either cannot afford or do not have a need for. They become the prey of these emails. In addition, these unnecessary emails clog up the Internet highway. Assuming an online retailer has 100,000 consumers (not a very large number for big retailers) on its email list and it sends out one email per day, that amounts to 36.5 million emails a year. What a waste of bandwidth!

Having made my case, I acknowledge the need for retailers to offer sales promotions at times and the niche segment of consumers who will respond well to such promotions. So how can retailers do that properly? I offer two suggestions:

1. Create a two-tiered email communication strategy. For consumers who by default are included in the email database because they have made some kind of purchase in the past, offer less frequent (e.g., weekly, monthly) emails. For those who value more frequent deal and communications, offer them the option to opt-in for more frequent emails. After all, @DellOutlet Twitter account and Amazon.com’s Golden Box and lightning deals are effective not because they shove the deals in consumers’ face, but because consumers voluntarily go hunt down those deals, either by following the account or by visiting the website.

2. Use better behavioral modeling to optimize email communication content and frequency. With electronic communication, it is not difficult for retailers to keep track of who opened the email, who clicked through the email, and what made the consumers do so. Combining this with consumers’ purchase history and good analytics, retailers have a rich data set to understand what may or may not be appealing to a particular consumer. With this deeper understanding, it is then possible to offer more targeted and therefore effective emails and achieve more in a single email, subsequently eliminating the need to send out so many emails.

To end this post, I issue a personal call to all retailers who bombard consumers with emails: please reconsider your communication strategy, make every one of your interactions with consumers positive and productive, and stop talking so much and instead listen just once.

Campaign Summary

The Old Spice marketing campaign is called “Smell Like a Man, Man”. So far, the campaign has gone through three phases:

Phase 1: Launched around the Superbowl time, it uses humorous vignettes featuring a sexy man to convey the brand’s role in the journey from a young man to full manhood. During that same time period, Dove was planning to launch a competing new men’s personal care product line Dove Men+Care on Superbowl. But Old Spice decided to launch its campaign “around” Superbowl rather than on Superbowl for cost efficiency and proper audience reach (more on that later). Below is a commercial from this phase.

Phase 2: Followed a few months later, this is mainly a continuation and reinforcement of messages from Phase 1. The creatives featured a similar tone and approach. You can see the resemblance with Phase 1 from the video below.

Phase 3: This is the climax of the entire campaign. At this point, the funny commercials were already creating a lot of buzz, and consumers were seeking out Old Spice in social media channels. To utilize this opportunity and to engage in a more intimate relationship with consumers, Old Spice took the approach of a viral engagement campaign. On July 13, it announced that the Old Spice Man will be coming around its Twitter account and invited consumers to ask him questions. During the course of the next 48 hours, a total of 186 user-submitted questions were selected, and each was responded to with a funny video featuring the Old Spice Man. One of the videos helped Twitter user @Jsbeals propose to his girlfriend:

And she said yes!

Campaign Outcome

Over the course of the campaign, Old Spice gained over 2 billion impressions. Their Youtube videos had a cumulative view of 50 million, out of which 40 million were from the first four days of posting. Although no exact sales figures were revealed at the session, Moorhead stated that Old Spice is now the #1 body wash and deodorant brand and that its products have been flying off the shelf since the start of the campaign. Another significant gain is reduced media cost. By using the Internet and social media to reach consumers, Old Spice was able to lower its media expenditure by 15%.

Why Was the Campaign So Successful?

A key reason why the “Smell like a Man, Man” campaign was so successful is its reaching beyond a traditional audience. As a male personal care brand, Old Spice has traditionally targeted male consumers. But the company research showed that 60% of the time, females have significant input in purchase decisions. Inspired by this, Old Spice decided to target both men and women with this campaign. It further aimed to create a conversation between males and females surrounding the product category. One tactic the company used was to reach out to men and women when they are most likely to be together. For instance, during Valentine’s Day and Independence Day, with big movies arriving at the theaters and families/couples often going to movie theaters together, Old Spice showed its commercials before movie previews. Although the unit cost for this media channel is higher, it reached men and women when they were idle together and therefore were in the best position to discuss the funny and somewhat controversial Old Spice messages.

Another success contributor is the creative engagement of consumers in the campaign. James Moorhead said during the presentation that “this is not a viral story. It’s an engagement story.” He pointed to the successful integration across media channels. While the original campaign creatives in the form of TV commercials were already a hit among consumers, Old Spice went one step further to capitalize on the early success with its Old Spice Man viral videos. It invited consumers to openly “converse” with the brand and then used what the brand does best (videos) to respond to consumers. While there have been other brands creating wildly popular viral campaigns, Old Spice is one of the few that tightly integrated the viral campaign into its main brand theme (rather than as a standalone viral campaign) and at the same time developed a close relationship with consumers through social media channels. This helped turning one-night viral success into actual purchase behavior (i.e., ROI). At the time of this writing, Old Spice’s Facebook page is liked by 1,079,063 consumers, and the brand’s postings on the page is actively commented on by these fans.

Lessons Learned

James Moorhead shared a few lessons that the brand has learned from the campaign:

• Trust between client/agency enables you to be nimble, flexible, timely — key elements for real-time success in the digital world. During the Old Spice Man viral campaign, the company gave its agency complete creative control over the 186 videos, which contributed to its creativity, authenticity, and consistency.
• Prioritizing consumer interactions can lead to optimal influence and viral effect. Old Spice picked the Twitter questions to respond to based on user influence and creative potential, and it tried to select a mixture of celebrities and ordinary people. While the exact selection mechanism is proprietary, I am sure the proper selection of these individuals helped propel the campaign into wild success.
• Creative briefs must be laser focused.
• Collaboration across disciplines = Greater, deeper impact

So what do you think of the Old Spice campaign? Where the brand should go from here? What have you learned about integrating social media with traditional marketing channels? Please feel free to share your thoughts.

Why ROI-oriented social media strategy?

Because it is a sound business decision. Just like savvy investors who would not jump into the market without a target in mind, a company’s social media strategy should not be without the guidance of clearly-defined returns. After all, if social media spending are to increase as fast as 34% a year, as Forrester Research predicts to be the case between 2009 and 2014, it is important to know that that money is not just thrown away to chase after some fad.

Photo by Flickr user Mike Manuel | CC 2.0

Another advantage of having a ROI-oriented social media strategy is company internal support. Not every organization welcomes social media with open arms. While on first look, many social media channels do not charge businesses a fee for using them, engaging in social media requires major investment in human resources and man hours, in order to effectively listen to the social media space and to turn the information thus gained into actionable business intelligence. When a social media strategy has ROI in mind right from the start, it will be much easier to gain top management support and consequently the resources needed to make it successful.

Key pointers for a ROI-oriented social media strategy

The initial step to a ROI-oriented social media strategy is to have clearly defined, measurable goals in mind as the strategy is developed. What does the company want to achieve on Facebook? What is the relevance of YouTube? In the book How to Make Money with Social Media, the authors Jamie Turner and Reshma Shah argue that it is important to look beyond mere brand awareness as one defines social media goals. Instead, different social media components should work together to contribute to getting users to take action and eventually conversion. The book further explains how the various social media tools can be used for their ability to network, promote, and share. I won’t repeat it all here. But it suffices to say that realistic and measurable goals are key to a ROI-oriented social media strategy, instead of trying to figure out what to measure after the fact.

Another important thing to remember is that ROI ≠ short-term financial return. It is easy to confuse the two and to ask that every social media campaign generates a certain amount of sales and profit. While that would be nice, ROI goes much beyond instant sales and profit. Instead, it can incorporate a wide array of other measurements such as customer engagement, brand image, research insight, etc. In the long run, these will turn into healthy profit increase for the company. But focusing solely on short-term financial return will miss the hidden opportunities offered by social media, such as its ability to build customer goodwill and emotional loyalty.

In a recent article in MIT Sloan Management Review, Professor Donna Hoffman and Mr. Marek Fodor offer a useful list of ROIs to measure for different social media platforms under various goal categories. Most importantly, they argue that social media ROI differ from traditional marketing ROI in that it needs to be more customer-focused. In other words, customers’ needs and motivations should be the first consideration in social media strategy development. Then when it comes to measuring ROI, it is not about how much the company invests into social media, but rather how much customers are investing into social media (e.g., market mavenism, dialogue with the company) that is a true indicator of social media campaign success.

An effective social media campaign needs to be guided by ROI. In this post, I’ve discussed some of the fundamental aspects of a ROI-oriented social media strategy. There is much more to be said on this topic beyond a blog post. What is your take on social media ROI? What does your company measure? Please do share your thoughts.

In keeping with the spirit of the Social Good Day, in this post, I would like to talk about how companies can contribute to social good and at the same time earn their customers’ goodwill and respect. Although all businesses operate under a profit motive, they are also obligated to give back to the society and fulfill their role as a corporate citizen. Starbucks, for instance, challenges and encourages its employees to contribute to their local community. Brands such as Gap, Nike, and Apple have all become part of Product (Red), where up to 50% the profit from these products’ sales go to fight AIDS in Africa.

Doing Social Good the Right Way

Done in the right way, charitable behavior from businesses can increase customer loyalty and lead to goodwill among consumers, investors and the general public. But corporate philanthropy does not always touch people in the right way. Sometimes it becomes an ostensible tool that some corporations use to cover up their bad behavior or manipulate public opinion. As a consumer and a member of the general public, I asked myself what corporations do that truly touches me as being kind and generous and what appears suspicious and fake to me. Here are a few things that came back to my mind:

• Be genuine. Things coming from a true heart ring differently from those that do not. Being perceived as genuinely caring is what will fundamentally determine the success or failure of a corporate philanthropic effort. There is an old Chinese saying “paper cannot contain fire”. If a company engages in charitable efforts from a manipulative or false motive, consumers will eventually discover, especially with the help of today’s wide-reaching and real-time social media. When that happens, the backfire can be more damaging than not engaging in any false charitable activity at all.
• Be local. While nationwide charitable activities have large scale and high visibility, it is often local events and efforts that bring real closeness to consumers. As national chains take over local markets everywhere in the country and around the globe, a hyperlocal sentiment has taken hold among consumers. People increasingly care about what happens in their local community. With this mentality, charitable activities targeted toward local communities are much more meaningful to consumers, and they bring the otherwise distant corporate personality to a much more intimate light.
• Invite consumers to participate. Consumers like to do good deeds themselves. By involving consumers in philanthropic efforts, companies not only give consumers an opportunity to fulfill their desire, but large-scale consumer participation also creates a natural viral effect that greatly broaden the reach of such efforts. In the Pepsi Refresh campaign, Pepsi invited consumers to submit ideas on improving their communities and then vote on the ideas that were eventually funded. The project touched way more lives in a real way than a single Super Bowl ad.
• Don’t over-publicize philanthropic efforts after a crisis. Just like a guilty child who is eager to get back to the good side of things, it is tempting to overdo charitable activities right after a PR crisis. While there is nothing wrong with doing good, it is better to do the deeds without over-publicizing it. When in the middle of or right after a negative event, it is better to deal with the issue at hand and resolve consumers’ negative feelings than to conjure up conflicting images about the company.

Side Benefits of Being Charitable

Perhaps you will think I am an idealist. But I believe that all corporate philanthropic activities should be done for the sole purpose of doing something good. After all, true kindness does not ask for anything in return. Yet it is amazing how when one does something good, lots of blessings can follow from that kind action. In the case of corporate philanthropy, research has shown that companies gain plenty of side bonuses by engaging in charitable activities.

In a recent study published in the Strategic Management Journal, Professor Baruch Lev and his colleagues tracked 251 companies from a wide variety of industry across a 12-year time span. Using a special statistical technique, the researchers were able to identify the causal effect of corporate charitable giving on future revenue. Their results show that, in the consumer goods and finance sectors, a $500,000 increase in charitable giving contributes to $3 million increase in sales and $1.32 million increase in gross profit. They also found large total giving to lead to higher customer satisfaction ratings. In the B2B and business-to-government sectors, there is no significant effect of charitable giving on revenue. However, there is still a marginal positive effect on customer satisfaction.

In a separate study by Professor Hanjoon Lee and colleagues, the researchers found that corporate philanthropy has a positive impact on public attitude when the action is considered to originate from altruistic motives.

Although there are also studies that show mixed or negative impact of corporate philanthropy on financial performance, the eventual effect seems to be contingent on the nature of the business and why companies do what they do, hence back to the right way and wrong way of engaging in charitable activities. If the true intention behind such activities are for the social good, eventually the public will realize that and will appreciate the actions.

How do you feel about corporate philanthropy? Is there any good or bad example that you would like to share? Remember that for every comment on this post, I will contribute $1 to the UN’s Global Fund dedicated to fighting AIDS in Africa. Below is a list of other blogs that are also doing the same thing today.

• My Aim is True (http://www.MyAimIsTrue.com)
• Bake It Pretty (http:www.BakeItPretty.com/blog)
• Reina Communications (http://www.ReinaCommunications.com/posts)
• Greater Good Life (http://www.GreaterGoodLife.com)
• Powerful Learning Practice (http://www.PLPnetwork.com/blog)
• Outer Banks Design Works (http://obxdesignworks.posterous.com/)
• JASE Digital Media (http://www.jasedigitalmedia.com/blog)

Please take a moment to check them out and comment on their Social Good Day posts. And of course, you can also help by tweeting about the Social Good Day (use #socialgood hashtag) or by donating to the Global Fund yourself. Thanks in advance for your help with a worthy cause!

Photo by Flickr user Anthony Quintano | CC 2.0

Mobile Check-Ins and Loyalty

The fast growth of mobile check-in services has sprung other services that target more specifically at customer loyalty. Some of these services are built on existing mobile platforms such as Foursquare, and others use their own proprietary system. Here I would like to briefly mention three such services as examples of what is taking shape in the field of location-sensitive loyalty.

• Topguest: So far, it is focusing on the travel industry, especially hotels. When you sign up for a Topguest account, you can sync your existing location service accounts with your Topguest account. Services supported include Facebook, Twitter, Foursquare, Gowalla, and brightkite. Once synced, when you check in at Topguest’s network of partners, say, a Holiday Inn, you will receive bonus points or rewards in your Priority Club account. Topguest website says it is planning to expand to fine dining restaurants and other travel services.
• shopkick: A new kid on the block, shopkick differs from the other services by requiring a special equipment to be installed at the retailer’s location. With this TV-screen looking equipment inside a store, consumers with the shopkick app on their mobile phone can pair up with the device to receive reward points for being there. While this equipment requirement certainly raises deployment cost for retailers, it rewards loyalty based on more precise location, instead of mere proximity to a business. Imagine, for instance, an apparel retailer can place one such device in its dressing room area to encourage consumers to try on its clothes.
• Get Glue: In many ways, Get Glue works very similarly to Foursquare. But instead of checking into physical locations, Get Glue checks into a variety of entertainment activities, such as listening to a new Coldplay CD or watching an episode of Entourage. Similar to Foursquare, Get Glue users can express their opinions about the various entertainment activities, and they earn rewards in the form of stickers that are displayed on their profile pages. So far, HBO, Showtime, Barnes & Noble, and Universal have all partnered with Get Glue to reward their viewers/readers for their loyalty.

Relevance/Context is Key

As a very new field, this location-sensitive marketplace is seeing new apps arriving every day. It is too early to tell which one of these will eventually come out ahead. But as a business wanting to use such services to enhance business and reward loyalty, the myriad of choices can be confusing. Instead of getting lost in the sea of possible choices, the most important word to remember is relevance. When one takes a step back and looks at the bigger picture, all of these location-based services really promise one potentially great thing: interaction based on the context in which the consumer is in, be it physical locations or specific activities. Like traditional loyalty programs, check-ins offer businesses information not captured before on consumers’ whereabouts (or contexts) and subsequently an opportunity to interact or reward based on that knowledge.

The ability to build on this context-relevance will be key to the success of any efforts in this area. As a business, before you get stuck trying to figure out exactly what services to use, here are a few more important questions to consider:

• In what contexts (physical locations, consumption situations, etc.) are your products and services relevant to consumers?
• What are the different needs consumers may have under different contexts?
• Can your marketing messages be varied and adapted to the different contexts?
• What analytical capabilities do you have to capture and understand the contextual information you can get from consumers?
• How can you integrate contexts into your existing customer relationship management system?

For most marketing channels and platforms, clutter always becomes an issue at later stages of development. To stand out in this mobile playground, relevance will have to rule, and your marketing needs to shift towards thinking contextually. As some say, success is all about being at the right place at the right time. Only when you can prove yourself useful or helpful to your customers at the right moments will they reward you with their loyalty and overcome their privacy concerns to give you their invaluable information.

What/Whom Are People Loyal to?

When we talk about loyalty, we usually imply an object or person that we are loyal to. From the tweets that I have analyzed, here are the most often objects of loyal passion:

• A romantic relationship or partners in the romantic relationship
• Friends and family
• Sports team
• Brands/products
• Co-workers/boss
• Dogs’ loyalty to their owners (such as this touching story from Wikipedia about this Hachiko dog)

Interestingly, when specific brands or products were mentioned as objects of loyalty, mobile products such as cellphones and mobile providers were the most frequently referred-to product category. For instance, earlier today, there were a few retweets of the message by @Natemz below.

In this case, the tweet is actually a counter-loyalty message, where product features beat loyalty. But it still implies loyalty that some people used to have for BlackBerry before they switched to Android. Of course, this frequent association between mobile products and loyalty in tweets is most likely biased, given that Twitter is very much a mobile platform. But I have yet to come across any other product or product category that gets mentioned nearly as frequently.

What is Loyalty?

It would be rather ambitious to try to capture the full meaning of loyalty in 140 characters. But exactly because tweets are short, they also tend to be very on the point. The most frequent words I have seen tweeple use to describe loyalty are: trust, respect, honesty, and commitment. If I were to summarize a general definition of loyalty from these tweets, it would go something like this: a loyal relationship is one in which all parties respect one other, are honest to and able to trust one another, and are committed to making the relationship last.

Another word that was often brought up with loyalty is love. While you would think love and loyalty go hand in hand as those other words above, many tweets contrast love with loyalty, and most if not all prefer loyalty over love. That certainly shows the power of loyalty in people’s minds. But one tweet led me to this simple poll on Tagged asking you to choose love or loyalty. On completing the poll, I saw that 57% of respondents chose love and 42% preferred loyalty. While the relative importance of love vs. loyalty cannot be determined just yet, the fact that loyalty is being compared to and almost comes close to one of the most universal concept among the human race suggests it is something we cannot ignore.

Who Are These Tweeple?

So who are all these people that have been talking about loyalty on Twitter? While I have not been able to run a complete demographic analysis on these individuals, I am going to classify them psychologically into three categories based on their message content:

1. The loyalty advocates/evangelists: these are individuals who fully appreciate the power and importance of loyalty and express it passionately in their tweets. To these people, loyalty is critical to the cohesion of a family and a relationship, the strength of an army and a nation, and even success in life in general. They are also the ones who say they will choose loyalty over money and everything else in a heartbeat.
2. The loyalty wounded: individuals who express disappointment in loyalty in general, most often from their experience of betrayal by someone in the past. In their tweets, they question the existence of true loyalty in today’s society, and they lament the loss of it in their life and their relationship.
3. The loyalty objectives: these are most often individuals who work in the customer loyalty industry. They certainly cherish the value of loyalty like the first group. But their messages express a more neutral tone of support. They focus mostly on the approaches to take to achieve customer loyalty, whether it’s technology, product superiority, or customer service.

Through this interesting exercise on Twitter, I find my eyes opened by what other people are thinking about loyalty. As I move further along with my analysis, I see potential for more ideas and concepts to emerge, and the best part is that these are all natural conversations that people are having. Do you have a loyalty question you would like to see answered in my analysis? If so, please leave a comment here and I will try to find the answer for you.

 
Photo by Flickr user yachtfan | CC 2.0

Of course, those who can afford to buy luxury brands are still far and few in between. According to the World Bank, 1% of Chinese families now possess 41.4% of China’s wealth. This represents a bigger gap than that of the United States, whose corresponding number is 5% families owning 60% of national wealth. The Gini coefficient, an index used to measure income inequality, has also surpassed the warning level of 40 in China ten years ago to reach 47 today.

Although the wealth in China is concentrated in a very small group of consumers, the sheer population in China makes this small group not so small in absolute size. Together, these consumers spent $9.4 billion on luxury goods last year, well on the way to overtaking the US to become the second largest market for such goods, only after Japan. According to the same China Daily article that reported this number, the luxury buyers in China fall into three different groups:

• The really wealthy consumers
• The trendy young consumers who want to be on the cutting edge
• The white-collar professional workers who earn a sizable salary in China

The article reports that one unique characteristic of the luxury goods marketplace in China is this third group of consumers. While in the US these professional workers are often well-educated bargain hunters, the same group of consumers are major consumers of luxury goods. I contribute this to two reasons. One is the much higher than average income of these workers, especially those who work for foreign-owned or joint venture enterprises. The other reason is the low quality plaguing many domestic products and the general low consumer confidence in businesses. Take my parents’ landline telephones as an example. In the last few years, they have had to replace multiple phones because they all broke within a short period of use. In contrast, the phones that I bought more than ten years ago in the US are still functioning perfectly. No wonder Chinese consumers are willing to shell out money to buy quality products that they can trust.

Before I end this discussion about the new rich in China, I’d like to leave you with a humorous video from China Daily. It will give you a flavor of rich Chinese’s obsession with luxury goods and its related issues. Enjoy!

Discretionary Spending on the Rise

When I graduated from college in 1996, I was paid slightly over 1000 Yuan (about $140) a month as an assistant editor at a publishing company in Beijing. Today, my college classmates are often paid more than ten times that working in their professional jobs. Without a doubt, the standard of living has increased dramatically in China. As the cost of basic living items (excluding housing) is still pretty low, Chinese consumers in metropolitan areas are enjoying more and more discretionary income. This has boosted spending on discretionary items such as travel and automobiles. A lot more consumers are traveling both within China and aboard. Having a car is also becoming more commonplace.

Housing Gap

With the high population density in China, housing (sold by square meters) is still expensive and is one of the largest expenses in many consumers’ budget. In popular metropolitan areas such as the capital city Beijing, condominiums cost from a few thousand yuan (= a few hundred dollars) per square meter to upwards of $10,000 per square meter, which puts the price tag of a 2000sqft condo at $1.8 million. Real estate is also where the big gap comes in. While some consumers can barely afford a decent-sized dwelling, others are buying multiple homes (and even more amazingly, having all of them paid off already). These latter buyers have helped make the already expensive housing market even less affordable. As a result, the Chinese government has imposed a limitation of three homes per household. If you want to buy more than that, you will have to pay by cash and won’t be able to obtain a mortgage for it. The purpose of the regulation is to help bring housing price down so that more consumers can afford a decent home.

Groupons Extremely Popular

Chinese consumers love a great deal. With the help of the Internet, companies are reaching out to consumers with attractive offers for their products. One particularly popular promotional technique is groupons (group coupons). Basically visitors to a groupon website choose an incredibly low-price offer that they are interested in. When the pre-specified number of signups is reached, these consumers get to buy the product at the low price. For instance, a complete meal at a local restaurant may be offered at half the price or even lower. The idea is to use such groupons to introduce one’s products and services to a large group of consumers. Similar business models have been tried in the US during the dotcom era. But none of them was very successful, due to low adoption rate. In China, the sheer size of the marketplace makes this business model much more feasible, and many groupons’ imposed threshold is reached within an hour of their initial posting. Many Chinese workers are rumored to spend a large amount of work time scouting such groupons online.

Cards instead of Cash

It has been a while since Chinese consumers first started using plastic cards. But a few years ago, most cards are ATM cards mainly used to withdraw cash. Today, both debit/check cards and credit cards have become more common. Many retail establishments accept such plastic cards as payment. When it comes to e-commerce, however, the situation is slightly different. It is not very common to pay by credit card for an online transaction. Instead, consumers usually pay at product delivery, which is often handled by small delivery firms rather than large companies such as Fedex or UPS. This personal delivery system works well in China for two reasons: high population density in metropolitan areas, and low-cost labor. As a result of this personal delivery system, taking payment at delivery becomes a low cost option compared with paying transaction fees for credit cards.

Social Media is Developing

Social media is evolving with its own unique flavor in China. While websites similar to Match.com and Classmates.com have been around in China for years, there are still no dominant social networking websites in China. Both Twitter and Facebook are still blocked or function intermittently in China. I am also having trouble using my Google Reader here. Blogs and discussion boards are popular in China, however. Their topics range widely from daily living to making money in the stock market to social issues. Another unique phenomenon is social networks formed around games. There are a few popular gaming websites, and many consumers avidly participate in such communities.

Mobile Advertising Adoption Ahead of the US

Mobile advertising is a daily phenomenon in China. Most mobile users receive tons of promotional text messages on their cellphone. These messages are typically free to the receivers. But because of the sheer volume, many consumers ignore these messages by either not opening them or deleting them right away. So the effectiveness of such mobile ads is unknown. Internet access on the mobile phone is also commonplace in China, but usually at 2G speed. This is about to change, however, as the technology gets updated.

All in all, I am quite amazed by how far China has come along in just a few years. No wonder my mom, who visited me in the US last year, called me poor.