Maya Swedowsky, Associate Research Director, Online Division
SUMMARY: As social media continues its meteoric ascent, newly empowered consumers wield more control than ever before. Although retail sales are dominated by brick and mortar stores, the influence of the Internet on offline purchases is becoming increasingly important. Retailers must listen to and engage their customers through social media by participating and encouraging conversations. The end result will improve customer service and will help turn loyal customers into passionate advocates.
Online retail sales have grown at a staggering rate—from $5 billion in the fourth quarter of 2009 to $30 billion in the first quarter of this year, according to the U.S. Census. And while this growth is extraordinary, it still represents a relatively small portion of all retail sales activity—only 3.5% of sales are transacted online. However, even though retail sales are still dominated by brick and mortar stores, the influence of the Internet on offline purchasing is becoming increasingly important. Website visitation, online advertising and social media all impact offline purchasing. Visibility into online behavior has become critical across the entire retail enterprise.
|Twitter has seen an increase of almost 1500%...|
The social media frenzy—also known as consumer-generated media (CGM)—refers to content being created 24-hours a day online on blogs, message boards, social networks like Facebook and platforms like Twitter. CGM has come a long way from the early newsgroup days and continues to grow rapidly.
Traffic to Facebook is up almost 200% over the last year, and Twitter has seen an increase of almost 1500%. Social Media is no longer just for techies or younger generations—it has become a mainstream phenomenon. Compared to a year ago, not only are more people visiting these sites, but they are also spending more time there—time spent per person is up 67% over last year.
So, why is social media so big? The answer is relatively simple: it taps into a few basic human needs and emotions. Social media satisfies our need to be heard, it provides us with a platform to reach more people than ever before and it enables us to advocate for and promote the brands and topics we feel strongly about.
|Social media provides a platform to advocate for products and stores...|
The purchase consideration process has always been a social endeavor. Before the advent of social media, a shopper may have consulted with a limited number of friends and family members before making a purchase. Today, shoppers’ networks have gone from being composed of just a handful of people to hundreds—or even thousands—many of which are likely strangers.
Social media has not only transformed the research and purchase consideration phase, but it also provides shoppers with a platform to advocate for the products and stores they love. Advocacy has always existed, but social media has made this stage even more critical, amplifying the size of the audience reached.
Listen and engage
CGM provides retailers with a unique opportunity to not only listen to what consumers have to say, but to actively take part in that conversation. Through online listening, retailers can observe conversations that occur naturally to understand consumer attitudes and needs—and then proactively engage customers transparently to answer key questions or concerns.
Listening to consumers through CGM is complementary to other more traditional methods of market research, and provides unique value. Instead of soliciting feedback through a survey or focus group, social media allows retailers to tap into what consumers are passionate about and what they proactively discuss. Companies across all industries can listen to social media to gain insight into key areas of business:
There are many unique listening opportunities for retailers. Below is a framework for how retailers should think about listening through social media:
Case in point: private label perceptions
Nielsen analyzed proprietary content systems of blogs, forums, social networks like Facebook, and micro-blogging platforms like Twitter to gain insight into consumer perception about private label brands. A review of the retailers, brands and attributes that consumers associate with the concept of “store brand” showed that, not surprisingly, consumers expect store brands to be “cheaper” and “less expensive” than brand names, but interestingly, they also expect the quality of store brands to be “as good as” brand names.
|While Costco accounts for 55% of the club-store market, it makes up 71% of the buzz...|
Costco’s private label line, Kirkland, was the only store brand name to be mentioned explicitly. This finding spurred an in-depth look at conversations around the store brands of three large club stores: Costco, Sam’s Club and BJ’s. Comparing market share (based on 2008 revenue) to buzz share (percentage of total online discussion that mentions the retailer), the data showed that while Costco accounts for 55% of the club-store market, it makes up 71% of the buzz.
What is causing this discrepancy between revenue and buzz? The high level of online advocacy is not driven by social media outreach programs, but instead by the products and services that Costco delivers. A very clear illustration of this advocacy is in the fact that when shoppers found that Costco did not have an official Facebook fan page, they created their own. There are a number of pages created by fans, with some attracting more than 50,000 fans. To put this number into perspective, the largest BJ’s Facebook fan page has just over 200 fans at the time of this publication.
Costco’s elevated level of buzz also applies to its store brand line, Kirkland. Kirkland maintains a steady lead over the store brands of its club store competitors. So, what are consumers saying when they talk about the store brands of Costco, Sam’s Club and BJ’s? Price and comparisons to big name brands are the key topics driving discussion and Baby Care is the most frequently referenced product category.
|The baby category presents a large opportunity for club stores...|
The baby category presents a large opportunity for club stores—especially for BJ’s. Almost two-thirds of discussion about BJ’s store brands focuses on diapers, formula, and baby wipes. CGM research revealed that some mothers are hesitant to give their children generic baby formula. This presents an opportunity for retailers to use social media to educate consumers on FDA regulations and address safety concerns. Additionally, retailers should offer detailed product information on their websites to help avert concerns.
According to Forrester Research, almost two-thirds of retailers have already invested in CGM in some way, and another 22% plan to get involved in the next year. Additionally, Internet Retailer reports that over 30% of retailers say that social networks perform better as a marketing vehicle than paid search engine optimization.
Retailers can use social media to engage customers in two key ways: through the retailer’s website and leveraging third-party tools like Twitter and Facebook. Through these avenues, retailers have the opportunity to connect with customers in a number of ways:
|Give shoppers a reason to visit the website and keep them engaged...|
Retailers should give shoppers a reason to visit the website and keep them engaged—know that many shoppers are not going to come proactively. Because of this, the majority of online effort should be concentrated on expanding the digital footprint and reaching shoppers where they are already congregating by participating and encouraging conversations through third-party tools (blogs, forums, social networks, Facebook, Twitter). Importantly, all forms of social media outreach, whether through the retailer website or third party tools, must be transparent and should support a common goal.
There are a number of retailers who are using best practice principles to successfully engage customers through social media:
What happens online does not stay online
Assume that consumer control/power will continue to grow—now is the time to listen to your customers. When you are ready and adequately resourced, engage, participate, and respond to customers through CGM. Nurture and protect brand credibility by being honest, open and transparent. Do not neglect your website, it is one of your best marketing vehicles, but focus majority of effort on reaching customers where they’re already congregating. Think about how you can provide better customer service through social media and turn your loyal customers into advocates. And lastly, learn from everyone in your organization.