Tread carefully with social media-based customer loyalty programs

Companies can deploy social channels to cultivate customer loyalty programs, but shouldn’t rely on these channels to define these programs.

Many companies are searching for ways to use social channels to improve their customer loyalty programs, but are discovering there is more to this effort than generating Facebook "likes."

The lure of social channels is significant because they hold the promise of immediate access to many customers and their personal information. Also, companies can more efficiently manage and track loyalty programs with the right social tools, such as listening tools or even free online analytics tools.

"A customer's value on social [media]  is measured not just in their lifetime value to you, but also in their network and their propensity to talk about you on their network," said Denis Pombriant, president of Beagle Research, LLC in Stoughton, Mass. "It's about turning a customer into an influencer."

But, Pombriant and other industry observers caution that if companies do not correctly deploy social channels, they could end up actually hurting rather than helping their loyalty programs.

The key is to use social channels as an extension of a loyalty program rather than create a program with a social channel as the centerpiece.

"This is about a conversation on social media," said Ben Watson, principal customer experience strategist at Adobe Systems Inc. in Mountain View, Calif. "The reality is, we are dealing with a person,  just like when they walk into a store, only I am just using a different channel."

Give customers a reason to be loyal

The more successful programs today are ones that use the channels to efficiently deliver additional value to customers, such as job-related content. In other words, customers need a reason to stay loyal, analysts said.

Ask if the level of intimacy is going to be appropriate, When the customer bought something from you, did they want a relationship?
Ben Watsonprincipal customer experience strategist, Adobe Systems Inc.

"Social media is great for visibility, but the wisest companies use it to encourage a call to action," said Jake Wengroff, global director of social media research at San Antonio-based Frost & Sullivan. "In order to capture and retain interest, there has to be a steady stream of useful content for a customer. If it is no longer compelling, they will zone out."

Wengroff, said he considers content marketing "extremely important" for building customer loyalty because it not only gives customers value but  enables companies to easily measure the effectiveness of a campaign.

Find the right balance when connecting with customers

What seems to challenge many companies, however, is determining the right balance in delivering this content. The problem is when companies create a social loyalty strategy that is either too superficial or too personal.

"Social [media] opens the doors to mine more information about customers' wants, needs and desires," said Kim Collins, a vice president and analyst with Gartner Group in Stamford, Conn. "But that's personal information. It will be interesting to see how this evolves."

On the superficial side are programs that simply trade Facebook "likes" for a coupon. Analysts noted that while these bring in a fair share of customers, many of them are interested in the coupon only. They grab the discount and move on.

"The metric now is we have to have more 'likes' than the other guy," said Gartner's Collins. "You may hit that, but you still may not have much that's translating into more revenue. You have to realize the next layer. What are we getting for those 'likes'?"

At the other end of the spectrum are companies that are getting very personal with customers.

KLM Royal Dutch Airlines, for example, uses Salesforce.com's Radian 6 social monitoring tools to gather personal information customers have made public on channels such as Twitter. The airline uses that information to give customers a small gift while they are waiting to board a KLM flight.

So far, KLM's strategy appears to be a big hit. But analysts said companies need to be careful when using customers' personal data. If customers feel a company is crossing a line with personal information, they could be turned off.

"Ask if the level of intimacy is going to be appropriate," added Adobe's Watson. "When the customer bought something from you, did they want a relationship? You need to question the appropriateness and sustainability and how it will reflect on your brand."

Determine what an individual customer perceives as value

When used effectively, social channels can be a big boost to loyalty programs. One way to use social information effectively is to determine where the customer is in the buying process. A customer at a decision point is far different from a customer who is having a service problem. Each has a different idea of what kind of added value they want from a company.

One of the better delivery mechanisms of added value is through social communities built around specific products or issues, analysts said. When companies create a social community and actively engage customers, they can share targeted content that is truly useful.  By delivering added value to customers, companies will build relationships and increase loyalty in their customer base, analysts said.

Often, brand ambassadors emerge from these communities and companies can benefit from loyal customers who essentially become spokespeople.

"They may be designated [as ambassadors] or reach some sort of customer level so they can respond to other customers' questions on message boards," Frost & Sullivan's Wengroff said. "There's a psychic reward in helping other customers."

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