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How to make the business case for social media

This guest post is by Eva Schmatz, president of Summus, a market-research firm specializing in strategic insight.

We asked executives, “What one question would you most want answered about social media for business?”

Two questions came to the top*: “What can I measure that will get me buy in from the entire organization?” and “How can we measure social media ROI?” Both questions are about metrics and how to write the business case to justify a focused social media initiative.

Our research among executives shows that even the 29.2% of companies who are “using social media to improve customer satisfaction” still have these questions. Our recommendation: Don’t start with the communications metrics. Instead, start looking at cost avoidance in customer service and it will be alarmingly easy to make the business case for a dedicated social media team. The communications benefits will then follow.

Here’s an outstanding case in point. Kelly Cook, vice president of customer strategy and engagement at shoe retailer DSW puts forward a four-part measurement of return on investment for social media.

  1. Sales generation by social media sites.
  2. Referred traffic.
  3. Lifetime value of a social media customer.
  4. Cost avoidance through new ways of handling problem inquiries.

The first three are seductive but hard to design if you don’t have a robust loyalty program, a relatively high product sales velocity and fairly wide-open channels for customer dialogue. The fourth, on the other hand, is the gift.

The right metrics

DSW has a large, active fan base on Facebook, and the singular advantage that people love to talk about shoes. It’s easier to rack up “likes” when there’s a lot to like.

More tangible to an operations executive is the fact that it costs them only half as much to help a customer this way than it would through the regular call center on a per contact basis. Because they are actively watching all comments, they are able to siphon off a significant percentage of the problem volume.

Not yet measured is the prevention effect that occurs through fans answering questions and heading off problems.

The “I have a friend on the inside” effect

DSW answers every post or chimes in when a fan beats the company to it. There’s nothing better than having a friend on the inside to call when something goes wrong. If there’s anything that needs attention in the post, the company jumps on it and gets the details. While the full interaction might not be conducted online, everyone sees the responsiveness and often a public compliment from the fan when it’s handled.

The end result:

  1. A customer who feels good about how he or she was taken care of and says so.
  2. The DSW FB voice is that of a very genuine, attentive, understanding person who will help you when you need it.
  3. Fans observe DSW is not at all afraid to solve problems in public and therefore, as a company, it “has nothing to hide.”

In this context, the idea of a fan base as a family starts to move from mere promotional simile to more of a reality.

Integrated view

Social media posts at DSW are handled through a dedicated customer-experience team, located outside the customer service center but with regular participation from inside customer service. This helps carry customer feedback through the company and helps to promote a singular integrated view of what is really important.

Solving problems cheaper and better — what senior leadership team would say no to that?

For more on this topic, SmartBrief on Social Media recently ran a special issue titled Spotlight on Turning Social Media Into a Cost Saver.

How are you making the business case for social media?

*Check out the report “The State of Social Media for Business” from Summus and SmartBrief.

Image credit: JamesBrey, via iStockphoto