How can we monetize social media?

It is a question I hear quite often; it’s the Holy Grail of social media. In relative terms, social media is still in its infancy, and with power moving to a more atomic level (i.e., individuals), businesses struggle to respond to this seismic shift in power and influence. To use social media effectively, businesses can’t simply focus on the old practice of accurate advertising placement on social websites. Instead, they should focus on working with these new channels to improve sales, customer service, retention and identifying new product opportunities.

The challenge to date is that most social media content includes lots of mindless chatter that most businesses find difficult to navigate through, which in turn undermines some of the platform’s credibility at an executive level. Yet a number of the common social media sites have introduced improvements in product development, making the time right for business to embrace social’s true potential and let go of previous misconceptions that would have seen their one-page social media strategies fail in the past.

Common Misconceptions

Through consulting engagements, a number of key misconceptions have surfaced.

1. Build it and they will come.

In relative terms, it’s still early days in the social media space and most businesses still don’t know how to work with it. At one point there was a presumption that once you simply build a Facebook page and open a Twitter account you’re done – the magic will just happen. Wrong.

2. Why isn’t it going viral?

Senior management used to expect thousands of followers in weeks, and that content has to be viral in order for it to be successful. This tends to occur as a result of limited investment from upstairs. Which leads us to our next issue.

3. It’s all free!

All social media is free; therefore, costs involved in extracting benefit should also be kept to a minimum. This could not be further from the truth. Investment is required to ensure that you can extract the greatest amount of value from the channels in which your audience spends most of its time.

4. Old marketing methods still work.

Traditional brand marketing is not effective when it comes to connecting with both current and prospective customers via social media. There needs to be acceptance that new tools and skills must come into the mix in order to realize maximum potential from your social media strategy.

Now that we've looked at some of the misconceptions, let’s explore what is possible with a well-executed social media gameplan.

Reality: Sharing Really Does Lead to Revenue

The first key point we now understand is that sharing does equate to real dollars. Once upon a time it was very difficult to understand the power of sharing information amongst friends or colleagues online. However, enough data now exists to demonstrate a direct correlation between “sharing” (in the social sense) and revenue generation.

One of the better examples is Eventbrite, which is essentially a self-service event management website allowing you to upload details of an upcoming event, sell tickets, track sales and manage marketing and communications of your event. It also includes the ability to easily share information of your event on Facebook and other social media websites. In 2013, Eventbrite analyzed ticket sales activity, specifically the average number of website visits generated from a social media share (from Twitter, Facebook and LinkedIn) and then the average amount of revenue generated per single “share” form each of those sites. The numbers were impressive, to say the least: the average number of additional website visits from a single social media share was 38 for Twitter, 7 for Facebook and 11 for LinkedIn.

Subsequently, the extra revenue generated from these shares was also an eye-opener. For every single share on Twitter an extra average revenue of $10.90 was generated, Facebook generated an extra $4.10 and LinkedIn generated an extra $3.20. Naturally there is some subjectivity to this, but the indicators are very strong: sharing does generate dollars.

Another question that comes out of this is why Twitter is able to generate so much extra average revenue. There’s an element of subjectivity to the answer, but one possibility is that Twitter’s user base may be more interested in the types of events being shared with them, and perhaps Twitter’s character limit (to “tweet” rather than talk) means users must click abbreviated links to view website content that in turn would encourage conversion of a website visit to a ticket sale.

Influencers Are Key

One form of marketing that is now playing a greater role thanks to social media is influencer marketing. It’s marketing that places a greater focus on key individuals rather than marketing indiscriminately to a wider audience. The concept behind this trends is that the individual has some influence over potential customers and can help dictate purchasing behaviors. With the support of an influencer, marketers can leverage social networks, letting the influencer do the promoting and decision-making – with a goal to ultimately convert some of the audience in to new customers – or in other cases retaining them. A good example that comes to mind is Mercedes-Benz’s “Smart” city-car campaign on the Sina Weibo website (China’s microblogging platform, akin to Twitter and Facebook) in partnership with prestigious Chinese jewelry designer Wan Baobao. Wan Baobao was engaged to provide a series of additional styling cues to a limited run of Smart cars, applying her unique touch that would resonate with her wealthy female fan base. Mercedes sold the cars online only via the Sina Weibo website. The 300 limited-edition models sold in 89 minutes – astounding results considering there’s no Smart car dealer network anywhere in China.

Address Negative Sentiment Fast

It’s now more important than ever to respond to negative events and negative sentiment as quickly as possible. The right mechanisms need to be in place to manage any fallout and minimize the ripple effect of people jumping on the negative bandwagon. One of the most important activities associated with this is identifying that something negative has occurred as quickly as possible; fortunately, tools that listen to those streams of data are feasible for all businesses and can easily integrate with internal process and reporting. It's critical that the process of listening and identifying these events is automated, and it’s also imperative to understand the impact of that event or experience. It's beneficial to have a plan to respond to such events and a process for determining what tools and messages you’re going to use to respond. One of the key success criteria in converting a negative event to a positive one is enforcing a deadline to respond. Having a regular online presence by responding to both positive and negative feedback will reassure customers that you're not just reactive in nature

A great example of an effective response strategy is the Four Seasons Hotel in Austin, Texas. At one point in time they were ranked 27th on TripAdvisor.com, with low levels of online customer engagement. With a more proactive strategy including management responses to both positive and negative feedback, customers are now providing positive ratings and not letting minor incidents get in the way of a great score. Since rolling out this strategy, the Four Seasons managed to massively improve its ranking - reaching number one during 2013 - and is ranked number three at the time of writing this column. This represents a massive improvement over where it was placed on TripAdvisor.com two years ago.

Improve Customer Retention

It is far cheaper to retain existing customers than to invest money finding new ones, and social media provides a powerful channel to support this. One of the most innovative demonstrations of this comes from Barclaycard, the leading credit card issuer in the United Kingdom. Barclaycard used social media to develop products in partnership with its customers, making them feel empowered and part of future products. The output of this experiment was its “Barclaycard Ring" product, claiming to be the first “social credit card” ever developed. Barclaycard claimed its Ring product was crowd-sourced and community developed - terms never previously considered in credit card development. The benefits became clear to Barclaycard early on, with a higher retention rate for the Ring product over any of its other credit card offerings. Furthermore, the Ring product received half as many complaints as it’s other products. Improved retention with a reduction in complaints equals lower costs for Barclaycard and demonstrates very clearly that win-wins are indeed possible. It also shows the power of social media in supporting successful product development.

Embrace and Encourage Social Experiences

When we review some of the points above, it’s clear that social media can be used to help improve the bottom line. However, this won’t happen until businesses let go of traditional ways of marketing, using new tools to identify key conversations and influencers and, most importantly, to understand that users are looking for experiences that are more social in nature. Businesses are able to provide these using familiar social channels, and with all the sharing going on the process should become repetitive in the longer term with greater activity.