How the Rapid Rise of Social Media, Social CRM Impacts Customer Loyalty

It seems to me that almost daily the Wall Street Journal runs stories about a new social media technology raising millions of dollars from an assortment of venture capital firms. And then there’s the unsolicited inquiries I receive weekly wanting to know if any new loyalty/engagement/media entity is in need of a capital infusion or a buyout solicitation.

The technologies that can create, engender, and enhance loyalty marketing specifically, as well as CRM, CEM, and marketing/engagement in general are very interesting --- such as Social CRM and its ability to follow numerous web/mobile-based conversations and give meaning to them for their “additive attributes”. I do not look to these new technologies as a replacement for loyalty or CRM, but rather as a complimentary technology that can increase the efficacy of existing infrastructures.

Over this past weekend, I was reading about the 100 “Brilliant companies” in Entrepreneur magazine and I was amazed at all of the new social media entities that are aimed at helping distinct groups ---- from firms that are trying to solve the glass problem in wine distribution to technologies that help you find your lost laptop to tools to help non-profits with fundraising. I didn’t realize these problems even existed, but I feel more bombastic after reading of them.

Included in the 100 “Brilliant Companies” are: Game Salad (which raised $6.1 million in its initial fund raise)) which enables users to create sophisticated games that require little need for code or special skills for development; Location labs which has a multitude of applications that allow “Helicopter” parents to monitor and track the location of their children in real time; and, Bevvy, the Groupon/Living Social for Bars and night clubs.

How does one keep up with this rapid rise in the new “technology of the week, day or minute”? Can the expectations for their long-term survival be any different than in the traditional business world? A typical mid-sized grocery store has 60,000 stock keeping units (SKU’s) and 20,000 new SKU’s come out each year (55 a day). Do you want to take a guess at what percentage of those 20,000 fail? 95% fail in the first year! So you are left with 1,000 new products that get accepted in the CPG world in a typical year --- a 5% success rate.

So what is going to make social media different? It should be more strategic and data centric, right? Yes. But, according to the 2010 COLLOQUY/DMA survey, two-thirds of respondents were unable to express what the most important measure of social media success would be. Shouldn’t this be defined, or is it too much change too fast? All new media seems “promising,” but consumer and brands have a hard time defining what the promise is and what it should be. To quote a CMO at a large Fortune 500 brand recently, “We realize there is potential in all of these new technologies and media and there IS a need for us, but how do we define it? It seems to be a moving goalpost.”

My question is: With this rapid proliferation of technologies, how can the individuals who run marketing programs for brands, merchants and banks of all sizes better understand this? How can they tell if the product (new media or packaged good) is going to be the next New Coke or Red Bull, the next My Space or Facebook?

I think this space is even more challenging with respect to bandwidth. We live in a day and age of increased responsibilities, opportunities and time constraints. I know most of my friends and colleagues are short on one quality: TIME. How does the average individual have time to engage all of these new products and technologies given their lack of time?

According to the 2010 Cone Consumer New Media Study, more than 80% of consumers say they follow only five or fewer brands online, whether through Facebook, Twitter or an RSS feed. Marketers now have to question not only what the next new, break-through technology is going to be, but “how do you get to be one of those five?” Increased complexity, and the proliferation of choice to the rational individual should lead to an increase in happiness and engagement, well we know that through the Neuroscience of behavior this is just not true. People want to be engaged, involved in a more socially conscious and targeted approach. So how do you get to be considered? "They (consumers) really only have room in their minds for less than five brands," says Mike Hollywood, Cone’s Director of New Media. "It’s a pretty exclusive club—if you think about the number of marketing messages a consumer receives daily—to be welcomed into that inner circle of brands.“

I will leave you with a quote from one or my favorite authors, Dan Ariely, a renowned expert on the neuroscience of behavior. “Standard economics assumes that we are rational -- that we know all the pertinent information about our decisions …can calculate the value of the different options we face, and that we are cognitively unhindered in weighing the ramifications of each potential choice.” How can one be rational when faced with the onslaught of new products and technologies that emerge every day?

Companies, in my view, will be challenged with regard to where to next look for actionable data and how to quickly identify the new sites where dialogues are forming and can be measured and monetized in this quickly evolving social landscape. It will be challenging to not only keep up with Twitter, Foursquare, Flickr, Living Social, Gowalla, Facebook, the company blog, communities, etc ….. but also to keep up with quickly evolving social media (not to mention mobile) landscape. The opportunity lies in the ability to get a comprehensive and consolidated perspective of the conversations happening across this landscape and to give it insight. Yet, every day this becomes more complex.

I would love to have your feedback on this. What challenges are you seeing? How is your organization adapting?


Mark Johnson is President and CEO of Loyalty 360 - The Loyalty Marketer’s Association ( Loyalty 360 is the only organization that addresses the full spectrum of both customer and employee loyalty issues. An unbiased, market driven clearinghouse and think-tank for loyalty and engagement opportunities, insights, and responses, Loyalty 360 is the source business leaders trust for industry metrics, market driven research, actionable case studies, and network...

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