• September 23, 2009
  • By Jessica Tsai, Assistant Editor, CRM magazine

Retail Buys Into New Social Media Tools

Chicago-based retail consultancy The E-tailing Group released the results of its first annual community and social media survey today. Commissioned by customer reviews platform provider PowerReviews, the study is based on a methodology and merchant list proprietary to The E-tailing Group. According to the report, merchants and brands are taking a "more aggressive" approach toward implementing social media strategies, driven largely by the intent to foster greater customer engagement. Surprisingly, however, newer channels like Facebook fan pages and Twitter publishing are being adopted more readily than older, more well-proven tools like customer reviews and viral videos, with community forums and product suggestion boxes coming in at the bottom.

The study surveyed 117 merchants and brands, with company sizes ranging from $20 million in annual revenue or less (29 percent of respondents), to over $1 billion (21 percent). Company types include:

  • mutli-channel retailers (44 percent);
  • brand/manufacturer (26 percent);
  • pure-play (12 percent);
  • cataloguer (9 percent); and
  • supplier/agency (9 percent).

Of these respondents, the breakdown of companies that attribute online sales as part of their overall business is as follows:

  • 1 to 10 percent of overall business: 34 percent of respondents;
  • 11 to 30 percent of overall business: 13 percent of respondents;
  • 31 to 50 percent of overall business: 16 percent of respondents; and
  • 50 percent or greater: 37 percent of respondents.

The social media tools evaluated in this study include:

  • blogs;
  • community forums;
  • Facebook;
  • product suggestion boxes;
  • customer Q&As;
  • customer reviews;
  • social listening tools;
  • Twitter; and
  • viral videos.

Lauren Freedman, president of The E-tailing Group, admits that while she didn't go into the study with any preconceived notions, she was surprised that the percentage of companies employing Facebook fan pages (86 percent) today far trumped those using a tried and true solution like customer reviews (55 percent). She speculates that this may be due simply to the fact that a fan page is far easier to set up and manage than customer reviews; and given the buzz around social media, setting up a fan page may have just been an easy task to check off.

The top social media and community tools adopt today are:

  • Facebook fan pages (86 percent);
  • Twitter publishing (65 percent);
  • customer reviews (55 percent);
  • blogs (55 percent); and
  • viral videos (50 percent).

However, when asked which tools lead in terms of generating the greatest increase in sales, respondents ranked customer reviews as the most effective with 78 percent of 100 responses ranking it as number one.

Freedman points out the what was also surprising is the quick escalation of the new social media tools. Customer reviews, which by now is considered commonplace for most merchants, is no more than a few years old. However, Freedman adds that "with some of these things like community forums, they may have been around for a long time but retail hasn't necessarily adopted them." A few years may seem like an eternity given the speedy rise of tools like Twitter, which exploded from just 1.5 million users in 2008 to become the fastest growing Web property in history, said Auren Hoffman, chief executive officer of marketing service provider Rapleaf, at Clickability's Digital Strategies Conference last week in New York City. The Wall Street Journal reported today that marketing research firm eMarketer raised its 12.1 million estimate to 18 million people who are expected to use Twitter at least once a month.

Despite wide adoption, merchants and brands are still plagued with concerns about social media, the top three of which are:

  1. people can trash my products in front of a large audience;
  2. I am using outdated marketing/merchandising techniques; and
  3. customers might leave my site to find a socially-engaging site.

"People are realizing that if they don't get into [social media], consumers will leave," Freedman says. Fear will likely dissipate in time. "The more you know, the more your comfort zone comes into play." Retailers have accepted the fact that consumer wants to engage through social media. Now they have to figure out how to make it "part and parcel of the shopping experience," Freedman says. Therefore, companies are struggling to put the right resources and finding the people to manage this side of the business. Nevertheless, Freedman is seeing is merchants and brands taking a more of an aggressive approach toward social media (75 percent of respondents say that brands and manufacturers have become more aggressive in their commitment to social media in the last six months, over the previous six months). Freedman is seeing evidence of social media's value from something as simple as an increasing number of companies including PowerPoint decks in their presentations detailing the number of followers they have on Twitter or fans on Facebook. Despite the fact that retail has historically been such a return on investment driven industry, the top reasons retailers are committed to social media are for:

  • greater customer engagement;
  • increasing brand loyalty; and
  • mobilizing advocates to drive word-of-mouth.

Beyond just the sale, Freedman anticipates that the value of engagement will become so critical and apparent to the company such that, despite current obstacles surrounding immeasurability, "it will no longer be necessary to quantify [it]."

News relevant to the customer relationship management industry is posted several times a day on destinationCRM.com, in addition to the news section Insight that appears every month in the pages of CRM magazine. You may leave a public comment regarding this article by clicking on "Comments" at the top; to contact the editors, please email editor@destinationCRM.com.

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