Commentary

Deepening Customer Loyalty Through Social Media

When was the last time you said to yourself: "Wow, I'd recommend this product or service to a friend"? Within the last month? Six months? If you have to think about this question, you've already made my point. Over the last 50 years, outsourced manufacturing, poor customer service and an overall commoditization of products and services have served to erode consumers' affections for most brands.

While the idea of diminished customer loyalty may be disheartening--after all, if customers aren't loyal, they don't rave about your brand to other customers and they certainly can't be tricked into forking over a greater share of their wallet--all hope is not lost. In fact, smart brands like Dell, Ford and Sears are starting to see increases in brand affinity as a result of their social endeavors.

Before we talk about some of these examples, let's start by reminding ourselves why loyalty is important. Arguably the biggest benefit is highlighted in an article by loyalty guru Fred Reichheld, titled "Leading with Loyalty." Based on research Reichheld's employer, Bain & Company, conducted last year, "companies that enjoy [the] 'loyalty effect' grow at better than twice the average for their industry."

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If doubling your growth rate isn't enticing enough in and of itself, Reichheld also proves in his landmark book, The Loyalty Effect, that "as little as a 5 percent increase in retention can improve a company's bottom-line profitability between 25 percent and 85 percent, depending on the industry." Not too shabby, but also easier said than done.

Let's take a look at how a few well-known companies are using social media to dramatically improve their customer loyalty:

  • Dell Computers: As recently as 2005, Dell was struggling mightily to keep its customers. Complaints of poor customer service combined with a scathing barrage of bad press stemming from stories of laptop batteries catching on fire led CEO and founder, Michael Dell to tap current "chief blogger" Lionel Menchaca to help right the ship. Through a campaign of open and honest communications via the Dell blogs and proactive participation by its employees in Dell's support forums, customer satisfaction and loyalty have started to come back in full force.
  • Ford: It's no secret that the auto industry has come under heavy scrutiny over the last 12 months. The big three in particular have suffered huge PR and sales hits during that time as they attempt to figure out what's next. During that time, Ford made a giant leap into the world of social by bringing in social media head Scotty Monty. Through tools like Twitter, Scott's blog and Ford's Sync My Ride community, they have slowly begun to win back customer and influencer confidence. Ford still has a long road ahead, but they are reaping the benefits of being reconnected.
  • Sears: you'll be surprised to find out that the company you used to know as Sears is not your father's department store. In fact, you may be surprised to know that Sears launched its SKU community last summer, and now has more than 200,000 members.

According to VP of Community, Rob Harles, Sears is starting to see some little wins with their community: "Overall, customers are starting to feel that they are being listened to, core members skew toward being some of the most valuable/profitable customers and the ability to reach out to customers and solve their issues proactively is definitively turning around customer perceptions." Rob mentioned that in one extreme case, the SKU community turned a client from "I would never shop with you again" to "I have put my store card back in wallet."

If Dell, Ford and Sears can do it, why can't you? For anyone interested, here are a few steps to help get you started:

  1. Listen first - You may already know why your customers aren't as loyal as they might be. If you don't know, you should start by listening to what they are saying.
  2. Engage - Unless you are one of the lucky few brands that instill passion in your base, think about giving your customers a reason to engage with you. This is most easily and simply accomplished by offering compelling content that is not about your company's products, but is germane to the customers' lifestyle. Wrapping this content in social tools makes it more scalable and repeatable.
  3. Measure - If you are diligent about putting steps one and two into practice, make sure you measure. Not only will it help you gauge the effectiveness of your program, it can help you get more funding to fuel it--especially during tough economic times like we're living through now.
5 comments about "Deepening Customer Loyalty Through Social Media ".
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  1. Kevin Horne from Lairig Marketing, January 30, 2009 at 11:03 a.m.

    Dell Computers: "customer satisfaction and loyalty have started to come back in full force."
    Stats please?

    Ford: "they are reaping the benefits of being reconnected."
    Biggest profit loss in its history in 2008.

    Sears: "SKU community...now has more than 200,000 members."
    So? This is the new measure of loyalty - how many regis you get? If Sears survives this recession it will only be because it is too big too die.

  2. Aaron Strout from Powered, January 30, 2009 at 3:52 p.m.

    Kevin - Thank you for your thoughtful comment. One of the things you may not know about me is that I always welcome healthy skepticism and debate for any article or post I write. The comments are usually where the real conversation takes place so to that end, thank you for starting the ball rolling.

    Interestingly enough, I'm probably more in your camp than you might imagine. I regularly challenge folks that talk about the ROI of social but then neglect to show actual numbers. In this case, however, neither Dell, Ford or Sears are my companies or my clients so I didn't have actual numbers to report. What I will tell you though is that I am friends with the heads of social media/online community at all three companies and all three have privately let me know that their efforts are 1) working and 2) helping to create loyalty with their brands.

    One place where I can help you get real data is with our client, Sony. While I was prohibited from writing about Sony (or any of Powered's clients) in the article in order to maintain a sense of journalistic integrity, I can point you to an engaging case study that MarketingProfs did with Sony just a few weeks ago. Here is the link to MP's site (it requires premium sign in): http://is.gd/hQub If you don't have a subscription, follow me on Twitter at http://twitter.com/aaronstrout and DM your e-mail address. I will gladly send you a PDF of the case study.

    I look forward to more healthy discourse and I thank you for keeping me honest on such an important topic.

    Best,
    Aaron | @aaronstrout

  3. Derek Showerman from Derek Showerman, January 31, 2009 at 11:48 a.m.

    Kevin, you can contact Michael Dell directly for hard data on Facebook. He has been known to get back to folks with requests. If not him someone will. Having worked on some of FORD's social media ventures-I can say with certainty they are starting to "get it". They are listening to why Toyota, Honda, Nissan, etc have been beating them pretty hard in recent years. They are in the process of listening to become a better company-a company that can succeed in 2009 and beyond. Bear in mind-I have never bought a FORD in my life and still may never buy one. But I have seen them tuck their tails between their legs and do the right thing. As for Sears, anytime you have 200,000 members interacting you as a company are receiving organically:

    Business Intelligence
    Competitive Analysis
    Market Research
    and a change at innovating thier business to the voice of the customer.

    Once again, these three companies are in the process of evolving their business. Process is the key word-it is not done over night. Social Media is a way to right the ship for these legacy businesses. I am happy they are doing it and not arrogantly marching forward and not listening (see the Financial sector).

  4. Kevin Horne from Lairig Marketing, February 3, 2009 at 1:22 p.m.

    Derek & Aaron:

    Thanks for responding to my comments.

    Aaron - I understand the points in your follow-up, and I appreciate your insights on Sony. This doesn't change my reaction to the positioning of your original post, and I am happy to see you are open to skepticism.

    Without hard facts, we are nowhere on this topic, but unfortunately MediaPost will publish anything. Hopefully we can get more proof-positive articles this year - maybe we need to stop looking at the Fortune 50 for case studies and talk about more measurable successes coming from smaller clients?

    To wit, following my comments about Sears, it laid off 7000 and slashed its dividend. I'm sorry - but I am not going to accept any case study from a company in a slow death spiral.

    Derek - thanks for the tip on Michael Dell. Perhaps I'll contact him and ask which customers of Dell exactly are the ones asking Dell to enter the smartphone space? Hope it works better than the "DJ" mp3 player i bought from Dell years ago - it lasted about 8 months before it crapped out. How can a machine with NO MOVING PARTS crap out?

  5. Scott Monty from Ford Motor Company, February 6, 2009 at 1:56 p.m.

    There's much, much more planned, but we're off to a good start. And who's this "Scotty" Monty guy? ;-)

    @Kevin - if you think it's completely about sales or that there's an instantaneous effect, you're sorely mistaken. Ford did post a profit the first quarter of 2008. As you know, the entire auto industry has tanked - to the point where Toyota is now posting its first loss since 1950. There are obviously other factors involved.

    But when you look at the fact that Ford has gained market share for four consecutive months, that our Fusion has reached its highest sales levels since 2006, that the Fiesta was the best-selling vehicle in Europe in December, and that the F-150 continues to be the best-selling vehicle overall in America, there's something going right.

    Scott Monty
    Global Digital Communications
    Ford Motor Company

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