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Reboot Your Social Media Program: From Likes to ROI – Part 4

June 24, 2014 by Olivier Blanchard - 4 Comments

Before we begin…

If you missed the first three parts of this series, here is how you can get caught up:

Part 1 

Part 2

Part 3

Quick recap:

1. Social Media channels, when used for business purposes, are not exclusively marketing channels (and shouldn’t be “owned” by Marketing or Digital Marketing… or any other Marketing/Advertising/PR function).

2. Social Media channels, when used for business purposes, are not exclusively customer acquisition channels. (Stop here. Take a breath, a sip of coffee, a bite of that scone or croissant or muffin. Read it again. And again. And again.)

3. Customer acquisition tends to cost companies 6x more than customer retention and customer development. (If you have been using social channels exclusively for marketing, your social media spending and the activities it funds have not been properly aligned.)

4. Advertising, reputation, design, great products and outstanding customer experiences are key drivers of customer acquisition. Engagement via social media channels, when used for business purposes, may be far more effective in regards to driving customer development and customer retention (which most companies tend to neglect, especially on social channels. BIG mistake.)

5.  If 80% of a company’s profits will come from 20% of its existing customers (Gartner), and an increase of just 5% in loyalty can produce profit increases up to 85% (Frederick F. Reichheld and W. Earl Sasser, Jr., “Zero Defections: Quality Comes to Services,” HBR September–October 1990), then it stands to reason that Social Media channels, when used for business purposes, should perhaps focus a little less on direct customer acquisition and a lot more on customer development and customer retention.

A brief message from our friends at Status-Quo, Inc.

… Or you could just keep throwing content at Facebook and Twitter in hopes that you will a) magically attract likes and followers, b) convert most of those fans into customers, and c) end up with a net positive increase in sales.

(How’s that working out so far?)

And now, back to our regularly scheduled programming: the value of retention vs. the cost of erosion.

Let’s not talk about customer acquisition just now. Social channels can be leveraged to acquire new customers in a number of simple and clever ways, but we will circle back to that topic later in the series. For now, we need to focus on more immediate and important social channel activity: customer development and retention.

Earlier in the series, we talked about the importance of knowing what your customer erosion rate is. Hopefully, you have some clear notion of what that number might be by now. (You will get a lot more out of this series if you can apply its lessons to your business and do a little quick math. For instance, knowing how many of your customers walk away each year (or each quarter) can give you some sense of how much business – in net sales and net revenue$ – you lose for those time periods. It’s pretty important to do the math and have as clear a view as possible on what is happening in parts of your business that you might not think to keep an eye on.)

One of the mistakes I see a lot of small and mid-sized business owners do is look at revenue and spend/costs without digging a little deeper into customer erosion. You might have the most effective marketing and customer acquisition program on the planet, but you won’t be able to tell if the reason why your sales are flat because your existing customers are leaving you at roughly the same rate as you are creating new ones. In other words, you need to look for holes in your bucket before spending all of your time and energy trying to fill it. (And to make matters worse, it costs 6x more to do that than to patch the holes.)

Carrot vs. Stick.

Still on the fence about focusing more on customer development and retention? Here is a little motivation (and useful business insights) for you:

1. The probability of selling to a new prospect is about 5-20%. The probability of selling to an existing customer is somewhere between 60 and 70%.  (Marketing Metrics) So basically, chasing new customers guarantees that even on a good day, 80% of your acquisition costs will be wasted. Meanwhile, focusing on your existing customers guarantees that only 30-40% of your business development budget will fall on dead ears. Go with the better odds: customer retention is very good for business. Do more of it.

2. A customer is 4x more likely to leave you if the problem is service-related than if it is price or product related. (Bain & Company) It doesn’t even have to be bad service. It could just be slow service, or lukewarm service, or disinterested service. Don’t take your customers for granted. Don’t make them feel like a faceless number on a spreadsheet. They’ll forgive higher prices but they won’t forgive apathy. So… don’t give your customers a reason to leave. Blow this off and your numbers will keep feeling more like a bag of sticks than a box of carrots.

3. 55% of customers would pay extra to guarantee a better service. – (Defaqto research) So… Don’t lower your price to win over business. That’s just fear talking, by the way. Increase your value instead. Make that little extra price worth it. If it works for Apple and Starbucks, it can also work for you. It doesn’t matter of you’re an IT firm, a creative agency or a business consultancy: most people will favor better experiences over the lowest price. Less gimmicks, more cowbell.  Case in point:

4. Price is not the main reason for customer churn. Overall poor quality of customer service is. (Accenture global customer satisfaction report 2008) Too many companies default to scheduling a special sale or some kind of discount scheme to boost short term sales, but that’s a lot like putting a fancy band-aid on an ankle-sprain: wrong short-term solution for a completely unrelated long-term problem. And to make matters worse, not only do unnecessary sales not fix the real problem, they also a) eat into your margins, and b) teach your customers to wait for your next quarterly freakout, when they will be able to score a better deal on your products and/or services. Be smart: sell value, not price. You aren’t losing customers or clients because your competitor is 0.1% cheaper than you are. You are losing customers because you aren’t giving them a reason to stay.

By focusing on aspects of your business that may contribute to customer erosion, you could drive business up 3-5% (or more) this year without having to acquire a single new customer. If your business normally grows at a rate of 9% per year, that could mean 12% or more this year, just by focusing a little on customer retention. Not bad, right? And you don’t even need a 10% increase in your marketing budget to do it.

The question that’s probably brewing right now is but… Olivier… what does any of this have to do with Social Media?

There’s a short answer to that question and there’s a long answer. We’ll just focus on the short one today and get to the long one later in the series. So for now, let’s talk about what you could be doing right now that you probably aren’t doing.

Building a customer development and retention program on social channels: the basics.

First, it’s really important to realize that so much of your business depends on a) value and b) positive customer experiences, that before you do anything on social channels, you start focusing on improving both. You must be a customer-service focused company to be successful and competitive in today’s market. There is always going to be someone with a cheaper version of what you are offering, and Google will be all too happy to point your angry customers to a half dozen of those cheaper options.

“But we’re better than those guys,” you say. Well, maybe so, but by the time your angry customers realize that, it will be too late.

Hang on. We’re getting ahead of ourselves. Before we can talk about reputation and effective customer development, we need to talk about getting eyes on the right thing: why are some of your customers leaving in the first place?

1. Get Customer Service involved in your social business program. 

Most businesses are notoriously bad at diagnosing their own customer satisfaction (or rather customer dissatisfaction). It isn’t that the data isn’t there. Customer Service departments typically know what customers tend to complain about. Most make lists and collect that data. You might even occasionally see those numbers turn up in a pie chart once per quarter if you are lucky enough to be present for that ten minute meeting.

Typically, the overall response to whatever Customer Service has to say is this:

Part 1 – “Thanks guys. See you next month/quarter/year.”

Part 2 – How much more cost can we take out of Customer Service?

This isn’t the part where I teach you how to change that, not really, but this is the part where I tell you how to get more bang out of your customer service buck, how to make customer service more valuable than you think it is, and, if anything, how to start thinking about customer service as a profit center rather than a cost center. (How much revenue could your customer service department save you from losing each year just by cutting customer erosion by 5%? 20%? 50%? Go ahead and do the math if you have the data you need.)

For starters, your Customer Service department understands what your customers dislike about your business better than anyone else at your company. You need to leverage that. They see all of the holes at the bottom of your bucket. They know what they are. Given how much business is pouring out of those holes every year, that’s a pretty important place to start. The problem that your Customer Service department is dealing with, however, is that while they might understand what is wrong, they may not have the means or the resources to quantify it. (It is one thing to know that your client portal is poorly designed. It is another completely to know that 300 people complain about it every month, and that this is costing you somewhere between $7M and $13M in revenue per year.)

Here’s a sobering statistic:  96% of unhappy customers don’t complain, and 91% will simply leave and never come back. (1Financial Training services)

In other words, most of the data you probably have from Customer Service comes from less than 10% of your angry/frustrated customers. (Sorry… ex-customers.) That’s it. Unless your Customer Service department is doing some pretty in-depth data analysis, all you are probably seeing in terms of complaints and numbers is the proverbial tip of the iceberg.

Here’s another one: A dissatisfied customer will tell between 9-15 people about their experience. Around 13% of dissatisfied customers tell more than 20 people. (White House Office of Consumer Affairs) That’s a real world number, by the way. It doesn’t include the amplification effect of social media, where one bad review (whether it happens to be on Yelp or Amazon or Facebook or Twitter or YouTube) could potentially reach hundreds, thousands, even millions of people. So… while over 90% your angry customers aren’t telling you why they are leaving you (or that they are), they are telling everyone else, and doing so on every social media channel they can.

Your first reaction should fall somewhere between a cold chill and complete terror. Your second reaction should be “wait a minute… that kind of information could be really useful to us!”

Yes. That kind of information is pretty important if you are serious about wanting to plug all the holes in your customer bucket.

2. Task your Customer Service Department with listening to complaints (and praise) on social media channels.

You already have a social media guy who does that? Awesome. Is he working with Customer Service most of the day? If not, that needs to change.

Your social media guy mostly does “content stuff?” Sorry but that’s no good. Go back to Part 1 in the series and start over.

Here’s what needs to happen: Your Customer Service department (or whomever does your Customer Service audits) needs to set up a social monitoring/social listening practice for you. This post isn’t the ideal place to teach you how to do that in minute detail, but we can go over the basics. The program should focus on: 1) Capturing all mentions of your company and products on any and all relevant channels (Facebook, Twitter, blogs, Instagram, Youtube, Pinterest, Tumblr, Yelp, etc.) 2) Separating the positive mentions from the negative mentions. 3) Quantifying that data to look for trends, changes over time, baselines, and so on. 4) Reporting to the organization as a whole, so common problems can be addressed adequately (meaning solved, not just nodded to and put aside for someone else to look at in some imaginary future).

It all starts with listening better. It’s basically just a focus on better data acquisition, better consumer insights research, better business intelligence, using social channels to amplify what data you are already collecting. You can’t fix what you don’t know needs fixing… so you have to get better at knowing what to fix. Twenty years ago, this was hard. Today, any company can have access to that kind of information in real time. There’s just no reason not to do it.

If you don’t know how to do this, do a quick search for “social listening” or “social media, mission control center.” There are dozens of great tools out there (software) that will help you monitor keywords online and help you manage a social channel listening program.

3. Enable your Customer Service Department to engage with potential customers, angry customers and frustrated customers online, in real time, using social channels.

I know, I know: “Content is king.” That’s nice and everything, but digital marketing mantras don’t fix real business problems like customer churn. (Newsflash: your angry customers couldn’t care less about your social content. They just want someone to solve their problem.)

Train your customer service team to start responding to the complaints and questions they capture during the course of their social listening duties. Don’t wait for someone to send you an angry email. Don’t wait for someone to call your 1-800 number. The complaint box lives online now, and on people’s phones, and that digital complaint card can’t afford to sit unanswered for three weeks or three days or even three hours. It needs to be answered now, in the next three minutes.

Remember: 96% of unhappy customers will never complain to you, but they will complain… so listen for it, and catch them before they walk out and slam the door behind them. A simple response like “Hi, this is Joe with [insert company name here]. I’m so sorry you had a bad experience. How can I help?” can make the difference between a customer leaving you forever, and a customer whose business you won’t lose today. Three of those per day, or ten, or fifty, can add up to very big bucks over the course of a year. If you aren’t using social channels to curb customer churn (or kill it outright), you aren’t focusing on the right thing.

Something else to consider: listening for trouble and responding to it effectively can also mean the difference between hundreds of negative recommendations from that one customer (poisoning the well of potential customers) and hundreds of positive recommendations, which feeds into your customer acquisition funnel.

The basic carrot/stick math:

Carrot – Having a responsive social customer service team is good for a healthy, growth-oriented business.

Stick – not listening for trouble on social channels = more customer & revenue erosion + missed opportunities to retain, develop and acquire customers. Lost revenue, high customer erosion, higher customer acquisition costs. It’s a vicious cycle.

Simple.

4) Build value around Customer Service’s role in your Social Media/Social Business program, and build bridges around it across your organization.

Fix your problems: Once you have a clearer understanding of some of the most common problems your customers complain about (social listening is a game-changer), work with Product Management (or whatever line of business is responsible for the problem(s) you have identified) to rectify said problem(s).

Add a dose of content: Then work with your social content team to create content around the changes. Letting customers know that you have fixed a pain point is always a win. Giving them credit for having brought the problem to the company’s attention in the first place is an even bigger win.

Upgrade your customer support capabilities: Shifting technical support to a platform like Twitter is quick and easy, and might even result in a cost savings. (One CSR on Twitter might be able to handle 4x more questions per day than a telephone operator sitting in a call center half way around the world.) Bonus: the experience could be a lot more pain-free for the customer looking for help.

Answer more questions: It isn’t all about fixing problems. It’s also about answering basic questions. I have seen businesses answer questions in real time on social channels ranging from basic “how late are you open today?” and “how do I get to your office from the airport?” to complex technical questions about a service or product. Look for opportunities to be helpful. If you listen, you’ll find them.

Partner with community management: Your community managers are already finding ways of “engaging” with the community and driving “conversations” and whatnot. Customer Service is basically the same thing but with clearer purpose and more immediate value. The thing is that Customer Service probably shouldn’t be driving your customer relations on social channels. Community Management is a broader, softer vehicle for that friendly digital handshake. We will take a closer look at how to combine Community Management and other social touch points in another post, but for now, be aware that engineering collaboration between departments in your social ecosystem is going to be important.

Partner with IT: IT’s role in your Social Business ecosystem deserves its own chapter. For now, start talking to them about how they might be able to help build and support your fledgling program. Good news: most of the hardware you will need is fairly easy to come by, the heavy lifting will almost essentially be done by software and headcount, and most of the computing capacity you will need can be hosted in the cloud now.

Make your content more helpful: Get enough of the same questions over and over again, and that should clue you in to the fact that you might need to make changes to your website. For more product/services-specific questions, it might require a short video or how-to blog post. For really short videos, you can use Vine or Instagram. For longer ones, Youtube and Vimeo might be better options. Seed channels with this new value-added content that your customers actually asked for. It doesn’t matter that it isn’t intended to be “marketing.” It’s all marketing if if helps you grow your business.

Creating a collaboration model around social listening, social consumer insights, social customer support and social content is a very different type of direction from just pushing content to social channels, but it is the basic framework for a true Social Business model. Digital marketing and marketing-focused content still have a part to play in all of this, but you should be able to glimpse a bit of a difference between the usual “we need more likes this month so we’re going to need more content” strategy and the more business-relevant “we should use social media channels to help us become a better business” strategy. Bringing Customer Service into the program to manage social listening and social customer support is a very good start if the latter seems more valuable to your organization.

Before moving on to Part 5…

Today’s piece on Customer Service’s role in a healthy social business program is only one small aspect of the overall reboot that this series is tasked with outlining. There’s a lot more to cover in regards to how Customer Service can be used in Social, and how Social can be used better by Customer Service. This post is intended to help you think beyond the “content is king” mantra that drives most of social marketing today, and start understanding the greater implications of Social Business as an integrated practice. Once you understand the value of retaining customers over time, the question becomes “how do we do that?” First, by understanding what makes them leave in the first place, then by fixing what needs fixing so they won’t.

The problems and solutions you might be dealing with exist well outside the little universe of Social Media channels, so don’t think that a great social customer service practice will solve a product quality problem or a chronic logistics problem or any number of issues that create real pain points for customers in the real world, but social media channels can be leveraged to identify then solve many of them, and that can be far more valuable to the average business than doubling-down on easily digestible content on attention-challenged social channels.

In Part 5, we will take a break from customer retention and take a closer look at customer development.

Cheers,

Olivier

PS: If you have a specific question, post it in the comments. The answer might become its own post within this series.

This post was written as part of the IBM for Midsize Business program, which provides midsize businesses with the tools, expertise and solutions they need to become engines of a smarter planet. I have been compensated to contribute to this program, but the opinions expressed in this post are my own and don’t necessarily represent IBM’s positions, strategies or opinions.



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If this post provides the kinds of practical insight that can help your business, you will find 300 pages of it in  Social Media ROI – Managing and Measuring Social Media Efforts in your Organization. It didn’t become the #1 Social Business desk reference for executives and digital managers 3 years in a row by accident. Pick up a few copies for yourself and your team if you haven’t already. You’ll be glad you did.

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