I plead guilty to enjoying a cold beer or two, and I’ve watched with amazement as the decade-long bull market in the craft beer industry shows no signs of abating.
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 percent 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.<br clear="none" /> <br clear="none" /> <b>Mainstream Phenomenon</b><br clear="none" /> 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 such as Facebook and platforms such as Twitter. CGM has come a long way from the early newsgroup days and continues to grow rapidly. <br clear="none" /> <br clear="none" /> Traffic to Facebook is up almost 200 percent over the last year, and Twitter has seen an increase of almost 1,500 percent. 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 percent over last year.<br clear="none" /> <br clear="none" /> 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. <br clear="none" /> <br clear="none" /> <b>Amplified Advocacy</b><br clear="none" /> 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 whom are likely strangers. <br clear="none" /> <br clear="none" /> 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.<br clear="none" /> <br clear="none" /> <b>Listen and Engage</b><br clear="none" /> 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 <i>transparently</i> to answer key questions or concerns.<br clear="none" /> <br clear="none" /> 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: <br clear="none" /> • <b>Brand Health Tracking:</b> Keep a finger on the pulse of consumer sentiment toward brands.<br clear="none" /> • <b>Consumer Insights:</b> Delve into specific issues facing brands and identify opportunities to make improvements.<br clear="none" /> • <b>Campaign Tracking:</b> Assess a campaign's impact and whether the marketing message is resonating.<br clear="none" /> • <b>Reputation Monitoring:</b> Uncover risks and address them in real time.<br clear="none" /> • <b>Online Customer Relations:</b> Identify customers in need of support and pinpoint the issues they are discussing.<br clear="none" /> <br clear="none" /> <b>Take Note</b><br clear="none" /> There are many unique listening opportunities for retailers. Below is a framework for how retailers should think about listening through social media:<br clear="none" /> <b>1. In-Store Experience—</b>Shoppers actively discuss their experiences at brick-and-mortar locations online. Find out what consumers are saying about shopping experience, employees, return policy, store layout and more.<br clear="none" /> <b>2. Website—</b>Understand how consumers are using your Website regardless of whether or not you sell products online. Are they using it as an informational or couponing resource? If it is a transactional Website, what are shoppers saying about the shipping charges and delivery windows?<br clear="none" /> <b>3. Products—</b>Learn how shoppers feel about your product selection, availability, pricing and quality, as well as private-label brands.<br clear="none" /> <b>4. Marketing—</b>From brand health to community relations to coupons and circulars, listening to social media gives retailers the opportunity to gauge awareness of corporate initiatives and marketing.<br clear="none" /> <br clear="none" /> <b>Case in Point: Private-Label Perceptions</b><br clear="none" /> Nielsen analyzed proprietary content systems of blogs, forums, social networks such as Facebook, and micro-blogging platforms such as 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. <br clear="none" /> <br clear="none" /> 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 percent of the club-store market, it makes up 71 percent of the buzz. <br clear="none" /> <br clear="none" /> 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 Costco delivers. A 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 had just more than 200 fans at the time of this posting. <br clear="none" /> <br clear="none" /> 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. <br clear="none" /> <br clear="none" /> 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.<br clear="none" /> <br clear="none" /> <b>Reaching Out</b><br clear="none" /> According to Forrester Research, almost two-thirds of retailers already have invested in CGM in some way, and another 22 percent plan to get involved in the next year. Additionally, in 2009, Internet Retailer reports that more than 30 percent of retailers say social networks perform better as a marketing vehicle than paid search engine optimization in 2009. <br clear="none" /> <br clear="none" /> Retailers can use social media to engage customers in two key ways: through the retailer's Website and leveraging third-party tools such as Twitter and Facebook. Through these avenues, retailers have the opportunity to connect with customers in several ways:<br clear="none" /> • <b>Marketing Campaigns:</b> Drive awareness, attract new customers.<br clear="none" /> • <b>Customer Service:</b> Increase customer satisfaction through proactive outreach and timely response.<br clear="none" /> • <b>Corporate Communication:</b> Give the retailer a voice; promote transparency; manage crises quickly. <br clear="none" /> • <b>Product Reviews:</b> Take the risk out of trying new products.<br clear="none" /> • <b>Crowd Sourcing:</b> Leverage the wisdom of customers for product/service development.<br clear="none" /> •<b>Internal Communications:</b> Increase employee satisfaction, promote sharing of product/service ideas.<br clear="none" /> <br clear="none" /> 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. <br clear="none" /> <br clear="none" /> There are several retailers that are using best practice principles to successfully engage customers through social media: <br clear="none" /> • Zappos uses Twitter as a key customer service platform in addition to a 24/7 phone line and e-mail. <br clear="none" /> • WalMart takes advantage of product review platforms. <br clear="none" /> • Starbucks' "My Starbucks Idea" program encourages customers to submit ideas for new products and services. <br clear="none" /> • Best Buy uses a private social media network for internal communications with its employees to promote employee satisfaction and idea sharing.<br clear="none" /> <br clear="none" /> <b>What Happens Online Does Not Stay Online</b><br clear="none" /> 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, after all), but focus the 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.<br clear="none" /> <br clear="none" /> <i>Maya Swedowsky is associate research director, Online Division, The Nielsen Company.</i><br clear="none" /> <br clear="none" /> <a href="http://en-us.nielsen.com/main/insights/consumer_insight/september_2009" target="_blank">—Nielsen Business Media</a>