• by Hjalmar Winbladh , October 8, 2012

Retailers worldwide have invested considerable financial and human resources in recent years to establish a presence on social networks, thanks to persuasive arguments from marketing teams about the importance and value to brand awareness and advocacy.

And almost universally the marketing teams have won the argument.             

Using social networks to monitor what’s said about you, rapidly respond to issues at a personal level, amplify offline marketing initiatives, or create new product buzz without question are very important and practical uses -- but certainly tough to measure, if measurable at all.

Now, as the holidays approach, executives at leading retailers are rightfully asking whether any of their social media investments are directly generating profitable sales in the brick-and-mortar stores, where more than 90 percent of all purchases are still made.

Many have tried to transform social network fans into sales with coupons, discounts, and daily deals -- only to find they actually dilute brand value, damage the retailer’s reputation, and especially in this economic climate, are overall bad business.

So what’s a retail executive to do?

We all know that people trust recommendations above all forms of advertising. But not just any online recommendations, according to Nielsen’s April survey of over 28,000 Internet people in 56 countries. Those days are over. Today, the trustworthy recommendations said 92 percent of respondents come strictly from friends and family -- the same friends and family fueling the social gifting phenomena that is now sweeping retail marketing.

Social gifting as a concept is quite simple. For consumers it allows them to give gift cards or vouchers for actual gifts to their friends and family on social networks.

And rather than requiring the giver(s) to present the gift card in person or send it by mail, the more sophisticated of these platforms deliver the gifts digitally, so they are stored in the recipients’ mobile phones, where they are always there, ready to be redeemed in-store as part of a purchase.

The best of the platforms now allow retailers to provide free, low-value gift cards -- $5 or $10 -- that consumers can give to their online friends and family who meet the demographics of consumers the retailer wants to have shopping in their offline stores.

And some of the more sophisticated services also facilitate group gifting so consumers can coordinate contributions from everyone in their social network to send one big gift card.

For consumers, the benefits of social gifting are obvious. But for retailers they are far more profound. 

For merchants, social gifting done right can be a discount-free marketing platform for conducting measurable, performance-based customer acquisition and retention campaigns. Because in essence, social gifting flips mass discounting and the daily deal model on its head. 

No one wants to give a coupon as a gift for Christmas.  But they gladly give gift cards of real value to friends and family on a social network, positively inserting the retailer into the social network conversation, and thereby endorsing -- recommending -- the brand in a totally unobtrusive way.

Because there is no cost to the retailer until the recipient walks into the store and purchases something, social gifting can be zero risk. And early returns indicate people are spending four to six times the value of the free gift cards provided by retailers, so it’s not just a sale -- it’s a profitable sale.

Despite offering numerous opportunities to influence consumers, social media still accounts for less than 1 percent of an average marketing budget, according to a recent article in the McKinsey Quarterly. Many chief marketing officers say they now want to increase that share to 5 percent before the holidays, but the main obstacle is the perception that the return on investment from such initiatives is uncertain.

Show the naysayers that social gifting is built on friend-to-friend marketing. I’m sure they will agree it’s a no-brainer.