News Release: Faculty Experts, Finance and Economics

Dec. 26,  2009

Can Social Media Marketing Save Retailers from a Grumpy Season?

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From Knowledge@Emory

Retailers were crossing their fingers and holding their breath the day after Thanksgiving, hoping that "Black Friday" — the traditional kick off to the all-important holiday shopping season — would be a boom.

Battered by record high jobless rates and a record low economy, shoppers didn't bring much tiding to traditional merchants, but a jump in online sales could point to a new marketing approach, according to faculty at Emory University's Goizueta Business School and other experts. The challenge is to get more businesses out of their traditional comfort zone and into the new model.

On Black Friday 2009-the moniker comes from the fact that many retailers turn their biggest profit, or go into the black, during the period that encompasses the day after Thanksgiving through New Year's Day-spending showed "a slight 0.5% increase" to $10.66 billion compared to $10.61 billion on Black Friday 2008, according to ShopperTrak, a consulting and research firm that measures retail traffic.

But the standout was online sales, which saw a surge as consumers spent an average of 35% more per order compared to 2008, according to Coremetrics, which provides online analytics and other services. The company does not release absolute dollar amounts, notes company spokeswoman Michela Stribling.

"When it comes to online marketing, companies have typically viewed it simply as an extension of traditional advertising," says Dominic Thomas, a visiting assistant professor of information systems and operations management at Goizueta. "But an effective online marketing campaign involves much more than transferring offline advertising efforts to the Web."

So even though 47.1% of retailers in Shop.org's "eHoliday Study" survey say they will be increasing their use of social media this holiday season, according to the National Retail Federation, experts like Thomas warn that the approach may not necessarily save retailers' skins this season.

Instead, he explains, as more consumers go online, companies that want to reach them have to be prepared to build a cohesive community through social networking.

"Social networking involves the creating and maintaining of a value proposition between a company and its customers," he says. "Done correctly, it can drive a deep loyalty to the brand by opening up a wide range of communication between disparate parties without regard to geography. The social network lets people know about products, can influence their buying decision and keep them satisfied while expanding the purchasing relationship."

A solid social networking group, like the one that motorcycle manufacturer Harley Davidson has developed, can extend the lifecycle of brand loyalty beyond the initial purchase and through the product or service's entire lifecycle.

"The idea behind hosting a social network is to build positive brand-equity expectation," Thomas says. "Apple has done this, where customers know they'll get good service from a product that will last."

A company with a legitimate value proposition may be able to enhance that kind of reputation through a vibrant advertising campaign, "but a social networking program can build even more enthusiasm among customers because the interaction is two way, between the customers and the company rather than a one-way message," Thomas explains. "When customers connect with each other, as well as with the company, they can form a community where users initially bond over a shared interest, and then deepen that bond by swapping tips and engaging in other interactions."

But to build that kind of bond with their customers, companies have to be honest, and they have to be ready to accept criticism as well as praise from their social network, and to respond to critics.

"That's where it gets tough," Thomas says. "It's not unusual for a company to simply play ostrich, putting its head in the sand and ignoring negative comments or simply removing them from the hosted website. But that's a mistake, because your customers will quickly pick up on this and may turn on the company."

Along with building trust, companies can utilize a social network-which may be local or that may span the globe-to tailor advertising and promotional campaigns to the individual level, a practice that for a long time was prohibitively expensive.

"Yahoo, Facebook and other social networking type sites have self-regulating interest groups that are composed of smaller groups of people that have one or more issues in common," Thomas notes. "Because they tend to be clustered, a company may be able to identify the group in a relatively easy and inexpensive manner as compared to mounting expensive and time consuming focus group or other campaigns. Once you reach that point, it's not too difficult to create digital price reduction or other promotional coupons that can be sent to tightly targeted groups or individuals. Delivery costs approach zero, and it's easy to track the response rate."

But the trust and low distribution costs can carry a price of their own, warns Chip Frame, an adjunct associate professor of marketing at Goizueta.

"The summer movie release of Paranormal Activity was a hit in part due to the grassroots excitement generated through the skillful use of social networking," Frame says. "But fans and customers can quickly turn on a company if they think it's trying to pull a fast one."

That may have happened with a rock band called Buckcherry, he adds.

"According to an article earlier this year in the Wall Street Journal, Buckcherry complained about a pirated version of its new song that was leaked onto a file-sharing site," explains Frame. "Despite its anger, the band initially got a lot of publicity out of the allegedly unauthorized early release. But fans soon turned on the group after a well-known blogger claimed he turned up digital evidence indicating that the "leak" may have actually come from someone associated with the band."

Before the advent of the Internet and mobile Web devices, advertising agencies used "buzz marketing" to generate excitement about a new product, Frame recalls.

"In the early days of cell phone cameras, some manufacturers hired attractive people to walk around with the devices and ask people on the street, ‘Would you mind using my cell phone to take a picture of me?"' Frame says. "Our technology has advanced a lot since then, but the principle has not changed: a message must be delivered in an appropriate manner."

Doing so is even more important today, he adds, "because in the old days, a promotional campaign that bombed could easily be yanked off the TV, radio or print media and would likely be quickly forgotten. But today, when something hits the Internet, it's there to stay."

Despite the potential pitfalls, more companies are getting comfortable with the philosophy behind social networking campaigns, according to Clay McDaniel. But he says there‘s a long way to go.

"What we‘re seeing right now is the tip of the spear," says McDaniel, a principal and co-founder of Spring Creek Group, a Seattle-based interactive marketing agency focused on social media and marketing campaign services. "Businesses have always gone to where customers are, and more people are on social networking sites."

That's a function of the fact that more people are on the Web, a trend that's likely to accelerate with the proliferation of "smart phones," Blackberries, Droids and other Internet-capable mobile devices.

"Humans are basically social animals, and social networking sites let them easily connect and engage with others who have similar interests and may be ardent supporters or detractors of particular products or services," McDaniel notes. "For companies, this has implications that go beyond marketing or customer support. The feedback provided by these social network sites can become quick, cost-effective sources of research and development, business operations and strategies," an approach commonly known as crowd sourcing.

Perhaps one of the key differentiators between social network sites and a traditional advertsing program is that television, print, radio and Web-based advertising typically intrudes on an observer without regard to his or her desire to access it.

"In contrast, social networking sites are invitation-only spaces," McDaniel points out. "On Facebook and other sites the users must grant permission to new entrants. Because this effectively validates any communication posted there by a business, it can be a very effective tool, if it's handled properly."

An increasing number of Fortune 500 consumer brands are already doing something with social networking, McDaniel adds. "A few years back social networking was an anomaly, but now it's an imperative."

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