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Social loyalty: the four key benefits

In the second part of his article on social loyalty, Loyalty LabTM Group’s Marc Darling looks at the four key benefits it can bring to retailers…. View Article


Social loyalty: the four key benefits

In the second part of his article on social loyalty, Loyalty LabTM Group’s Marc Darling looks at the four key benefits it can bring to retailers.

1. Quantifying customer value

In the past, customer value was measured in spend, since this was the only real way to track customer behaviour. The traditional definition of Customer Lifetime Value is the net present value of the future stream of customer profits. The main inputs are estimated sales, net margin rate, attrition rate, and the discount rate.

While always there, now marketers can better quantify true customer lifetime value based on the combination of purchase and social behaviours. Two new metrics drive the new equation:

Influencer value – the positive or negative contribution to acquisition and retention by a customer through direct or indirect influence

Contributor value – the value of contributed content  We separate these two value sources in order to ensure contributed content is properly valued, since it can be extremely valuable in certain circumstances.  

(a) Influencer value

The marketing world is still in the early stages of quantifying influencer value. Social media monitoring, including text mining and other methods for understanding context and intent are not yet fully realised for the typical marketer. However, basic methods for approximating influence can be used, with changes made as better information or methods are available.  

Given current data sources, there are still many ways to estimate this value, such as:

  • Count of contacts on social networks
  • Number of comments on blogs
  • Number of posts via micro-blogs or status updates
  • Number of followers on micro-blogs
  • Use of Facebook applications and/or fan pages

A simple example illustrates this point. Less than 1% of Facebook users have more than 1,000 friends. All things being equal, a customer who spends £1,000/year with more than 1,000 Facebook friends has much greater potential to influence revenue than one that has only a few friends.

(b) Contributor value

The content generated by a customer has real value to many companies. Content helps sell additional product, reduce support costs, or augment company-supplied content with independent third party content.

Community sites (such as forums) and product reviews are the most common ways this value is generated. Methods for quantifying this type of value are more advanced than influencer value, primarily via peer scoring.

Our experience has shown that customers contributing content seek both recognition and remuneration for their efforts. In fact, customers whose contributions have the potential for the greatest impact often stay on the side-lines because companies are not explicitly valuing their input either with tangible rewards or ego-stroking recognition.

Programmes solely rewarding contributor value already exist, and incorporating this value in CLV calculations helps identify an important segment in your customer base.  

2. Amplified experiences

For better or worse, Social Marketing provides a platform for customers to express their thoughts to a broad audience, which in turn can broadcast outward to an even broader audience.

Imagine again the customer with 1,000 friends on Facebook, each with an average of 20 friends. In just three forwards or status streams, one customer can touch 400,000 customers. This amplification has two important ramifications:

Amplifying a good or bad experience – a happy or irate customer can broadcast their feelings to their network quickly and efficiently, leading to disproportionate impact on your brand equity. This is the most typical influencing factor, where well-connected and vocal customers impact a much wider range of customers than the average. Identifying these customers can be difficult, but the payoff can be large, since front line service and relationship marketing efforts can be upgraded for these customers.

Amplifying marketing – traditional relationship marketing, such as invitation only events, secret bonuses, or heightened service can now be focused even more narrowly, generating even greater levels of ROI. Focusing on those customers with the highest likelihood to amplify your message can move the needle far more dramatically than traditional methods.  

3. Accelerated interactions

Once upon a time, developing customer relationships took time and patience, since most interactions were direct. Your company carefully planned and designed the experience via your website, email, call centre, advertising, and physical locations, and built up relationships over time through these interactions.

Now customers can develop an understanding of your brand through their peers, both directly (by asking opinions of those they trust) and indirectly (by listening to or searching on what others say about you). In many ways this parallels the changes wrought by the advent of the internet, where customers greatly increased their knowledge of companies, products, and services and forced widespread change.

The main difference is access to unfiltered information provided by peers and trustworthy sources.

A second area of accelerated interactions relates to content contribution. Social Loyalty encourages greater participation in user-generated content, in many cases providing the important first nudge to get customers over the hurdle of a first post or comment.

Since the value of user-generated content is directly proportional to the volume of content, this is a hugely important component in creating the critical mass necessary to achieve real value. For some companies, migrating even a small portion of customers from consumers of information to contributors of information  

4. Cultivating relationships

In many ways, Social Marketing adds new interactions channels to the existing mix. This lets diligent companies interact with customers on a more personal level, enabling a higher level of service and support for valuable customers.

The changed definition of customer valuation allows creation of highly targeted customer segments that represent much (if not most) of a company’s profitability or radically improved segmentation methodologies. For example, for some companies, the mere presence of a LinkedIn network of five or more defines a profoundly different group of customers, one that is far more likely to be professional, with stable income, low risk of default, and with few financial barriers to purchase.

By identifying your most viral, loyal, social customers, you gain the ability to cultivate those relationships and further develop the depth and breadth of their influence and value to you.  


Social marketing introduces exciting new opportunities for marketers to build stronger relationships with customers. The new technologies provide visibility into customer influence for the first time, allowing marketers to move beyond customer spending to value the customer’s contribution to the enterprise.

But gaining visibility into this valuable new data requires the introduction of Social Loyalty, a concerted effort to structure a “give to get” that customers will respect and respond to. The task of the marketer is to design, implement, and update programmes that make Social Loyalty a reality, bringing tremendous short and long-term benefits around identification, amplification, acceleration, and relationship cultivation.

In these days of what promises to be a long cycle of change, marketers must start experimenting with the programmes and structures that will deliver Social Loyalty, in order to stay competitive with forward thinking competitors who are now investing in the identification and development of their socially connected and active customers.

Experiment, learn, and stay competitive in what promises to be a long cycle of marketing innovation.





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