If your company’s social media interactions revolve around advance announcements of sales, special offers and insider-only promo codes – to the point where receiving these things is the primary motivation for your fans and followers – then you’re essentially bribing customers to stay.

In this case, social media merely provides a pleasant, whitewashed cover for the bribery.

Thus, the very activities you’re hoping will improve your relationship with customers might well be actually hurting your reputation with them, making those customers less likely to pay your full price without balking.

This article will reveal four ways to build customer loyalty without bribery.

The Slippery Slope

How did your efforts get so off-track?

The downward slide started when you confused customer retention tactics with building true customer loyalty.

Here’s Harvard’s resident expert on service excellence, Francis Frei, explaining the difference between the two:

Francis Frei

“When companies pay customers to try out their products and services, it’s part of a customer acquisition program.  When companies pay customers to remain customers, it’s part of a customer retention program.

When companies invest in activities that increase customers’ willingness to pay, they have a customer loyalty program.  When a loyalty program works, it increases the chance that your customers will choose you over a lower-priced competitor.”

In other words:

• Retention programs bribe customers with frequent-flyer miles and “buy 10 get 1 free” cards.  They add economic incentives for current customers to return for their next purchase.  This is hardly a bad thing, but when done too often, it habituates customers to incentives, which promotes economic considerations over brand preference.
• Loyalty programs increase brand participation among high-value customers to forge bonds that trump economic decisions.  This can mean getting their input on strategic decisions, providing insider-only access to certain products and privileges, and more.  After customers have helped design the next-generation widget, they’re emotionally invested in buying and using it.  Even more so if, as a privileged insider, they’re provided with early access to those co-created products, or even exclusive access to special products as a sign of recognition for their efforts and input.

So what does this have to do with social media?

With social media, customers wish to interact with each other at least as much as they do with the business.  So to create a real customer loyalty program – and the premium price differential that goes with it – you have to create a customer community.

What’s that you say?  You already have a community?

What you likely have are thousands of single customers who have given minimal consent and “opt in” to receive communication from you. That’s not a community.  Heck, that style of one-way communication isn’t even a relationship.

Fortunately (and as you might expect), an appropriate social media strategy can transform your email list into an actual community.

Here are the 4 key elements to real communities along with the primary ways social media can foster each of them:

#1: Repeated Interaction

If I go months without seeing or talking or cross-posting or interacting with your company in some way, well, you’re probably a pretty peripheral part of my life.  The same goes for your customers.

But a sincere email traded back and forth once or twice a week for a couple of weeks in a row changes all that.  You’ve gained top-of-mind awareness as a conversational partner.  Your company has gone from an “it” to a “person” (or a “thou” for you Buber fans out there).  You could rightfully consider me part of your community.

And yet email is an extremely clumsy and intrusive platform for this kind of exchange.  Facebook, Twitter, an online forum, a Wiki or even blog comments all represent far superior methods of fostering this kind of day-to-day interaction.

But take note: what you’re looking for is back-and-forth between members, and between your company’s representatives and members.  One-off comments and one-way communication won’t cut it.  For a dramatic illustration of the difference, just compare Copyblogger’s comment section to your own blog’s comments.

#2: Interaction Involving Built-up Meaning

If your forum members or blog commenters or Twitter followers don’t have inside jokes, community-specific allusions, and their own slang, you probably don’t have a real community. It’s a harsh standard, but it’s the truth.

Unfortunately, you can’t create these things for your community.  You can only create an environment that will foster their creation. And the best way to do that is through engaging in projects that matter, which leads us to principle #3…

#3: Actual Consequences of Community Interactions

Something has to be at stake.  For communication to move past chit-chat, social grooming, and opinionated bloviating, there has to be a task or a mission or a conflict.

When people work toward a shared goal – when tomorrow’s discussion builds on today’s and so on – then decisions matter. Prior conversations matter.  And that’s when allusions, references, inside jokes, and slang build up as a natural result.

To continue with the Copyblogger theme, the whole “third tribe” meme that started off with a simple blog post and evolved into a separate community and learning site is a perfect example of this.  Third Tribers know exactly what is meant by that term, and by allusions to James Chartrand’s Underwear.

So to achieve Real Community Elements 2 & 3, you need to come up with a galvanizing goal – a project that people want to be a part of and would be willing to donate their time, efforts, and skills to.  Provide the platform(s) for interaction and the galvanizing goal and you’re off to the races.

Seth Godin routinely does this by providing an impetus and platform for meet-ups,  collaborative projects and ways for his fans to help him support his book launches.

#4: Separation of Outsiders from Insiders

Back during the initial flap following the iPhone’s barely-two-months-from-launch price drop, Seth Godin suggested that Apple offer early adopters the following considerations:

“Free exclusive ringtones, commissioned from Bob Dylan and U2, only available to the people who already had a phone. (This is my favorite because it announces to your friends – every time the phone rings – that you got in early).”

“Free pass to get to the head of the line next time a new hot product comes out.”

“Ability to buy a specially colored iPod or an iPod with limited-edition music that no-one else can buy.”

Rather than dealing with price drops by providing discounts or store credit, Apple could have provided increased recognition and therefore increased loyalty and willingness to pay a premium to maintain that loyalty and recognition.

Yet despite being one of the clearest paths to high profit margins, most companies fail to do these kinds of things at all, let alone do them through the very platforms and technologies most suited to them.  Instead they misuse social media and abuse their brand equity through ill-advised retention strategies.

What Loyalty Programs Does Your Organization Have?

How have you transformed your company’s email list or “group” into a real community?  What galvanizing goals have you used to inspire community involvement and crowdsourcing?  What special recognition do you give to your brand insiders?

Let us know your thoughts and ideas in the box below.

And if you work for a business or own one, it’s likely that social media marketing is on your radar.  More and more marketing dollars are beginning to shift toward social media marketing and this trend only continues to climb.

Here are 5 studies that show how Facebook is undoubtedly a leading online social contender and a key tool that is continually changing the landscape of online engagement and fan loyalty.

#1: Average American Spent 7 hours on Facebook in January

According to recent findings by Nielson Company, Facebook has officially become a favorite pastime for many (but we’ve known that for a while now!).  However, the findings are pretty astounding when you really break it down:

The average time users spend on Facebook is 7 hours per month (a 10% increase).  To put that into perspective, Yahoo! is in second place, but with only 2 hours 28 minutes per month. The fact that people are spending more than 4 hours extra on Facebook compared to leading sites like Yahoo! and Google is information marketers should note when creating their social media campaigns.

This chart shows the breakdown of user time spent on the major sites:

#2: 44% of Social Sharing on the Web Is Driven by Facebook

With the surge of social networking over the past year, we have seen social traffic begin to rival search traffic—and the major players, including Google, are paying close attention to this trend.

TechCrunch recently looked into the services on the web that drive the most sharing and reached out to Gigya for some stats.   What’s Gigya?  Gigya is a company that powers sharing widgets on more than 5,000 content sites, including major players like ABC.com and Reuters. As TechCrunch explains, “Consumers can click a share button on these sites and send an article link, photo, or video via a menu of different services including Facebook, Twitter, MySpace, Yahoo Mail, Gmail, and AOL. Over the past 30 days, people have shared almost a million items over the Gigya network.”

Based on Gigya’s data, here’s the distribution of shared items on the web:

• Facebook: 44%
• Twitter: 29%
• Yahoo: 18%
• MySpace: 9%

This pie chart, courtesy of TechCrunch, shows the breakdown of social sharing on 4 major sites:

In addition, some other interesting stats from Gigya include:

For share of authentication via news sites, Facebook took 31% while Google was close behind with 30% and Yahoo at 25%.

With entertainment sites, Facebook was the major leader with 52% (Google was second with 17%, Yahoo with 15% and Twitter at 11%).

As we have seen with the popularity of social sites, people like to share links with multiple people at one time, versus just one-on-one via email. Because real results are strongly tied to the amount of online traffic you’re able to generate, it’s important to break down the sources of this traffic when considering where to spend your time and marketing dollars.  These stats shed light on where the action is really happening.

#3: Facebook Yanks Number 2 Spot From Yahoo

According to a Compete.com report, there has been a changing of the guard in the online world. Facebook has surpassed Yahoo, now taking its place as the number-two most popular site in the U.S.  Facebook drew nearly 134 million unique visitors in January 2010. According to the site, “It’s been two full years since we’ve seen a shakeup at the top—In February 2008, Google overtook Yahoo as number one and never looked back. Is Facebook’s next conquest the Google traffic throne?”

Here’s a great chart that shows Facebook’s climb to the coveted #2 spot:

But as we all know, the real dollars are in the engagement—and Compete.com says it best: “Facebook is second to none.” In January, 11.6% of all time spent online was spent on Facebook (compared to 4.25% for Yahoo and 4.1% for Google).  Facebook is in it to win, to say the least!

#4: “Faking It” on Facebook Is Rarer Than Previously Imagined

The findings from a recent research study conducted by the journal Psychological Science, show that instead of “faking it” online, people are much more likely to reveal their true selves online and not the idealized image of who they want to be.

A largely held assumption (supported by analysis) suggests online profiles are less than truthful when looking at true personalities of the users, and the researchers in this study set out to test that hypothesis. “There has been no research on the most fundamental question about OSN (online social networking sites) profiles,” notes the report. “Do they convey accurate impressions of profile owners?”

The conclusion of the report was very surprising to most. The report states, “These results suggest that people are not using their OSN profiles to promote an idealized virtual identity. Instead, OSNs might be an efficient medium for expressing and communicating real personality, which may help explain their popularity.”

The study focused on both MySpace and Facebook; however, the popular site Read Write Web stated that the “real personality” results were more likely to been seen on Facebook than other social sites. They pointed out that because it only allows the use of your legal name and due to its long-standing privacy controls, Facebook “provided its users with a sense of safety, security and comfort—they could be themselves—their real selves, flaws and all, without the world watching.”

#5: Facebook Boosts Sales and Customer Loyalty

The Harvard Business Review recently featured a new study from Utpal Dholakia and Emily Durham of Rice University.  For their study, they asked the question, “How much do businesses really influence consumers when they launch pages on the site to attract ‘fans’ and pepper them with messages and offers?”

To gauge the effectiveness of Facebook fan pages, the study used one company’s page to measure the effect on customer behavior. For the experiment, the researchers partnered with Dessert Gallery (DG), a popular Houston-based bakery and café chain. They first emailed over 13,000 customers from their mailing list to gather store evaluations and information on shopping behavior. Then they launched the fan page and invited the mailing list to the page.  Over the course of three months, the company “updated its page several times a week with pictures of goodies, news about contests and promotions, links to favorable reviews, and introductions to DG employees.”

Three months after that, they resurveyed the fans and here’s the overall result: Facebook changed customer behavior for the better.

Those who had replied to both surveys and had become fans stood out as their best customers. Here’s the breakdown of the findings of their new fans:

• Store visits per month increased after people became fans.
• The new fans generated more positive word of mouth than nonfans.
• They went to DG 20% more often than nonfans.
• Fans gave the store the highest share of their overall dining-out dollars.
• They were the most likely to recommend DG to friends and had the highest average Net Promoter Score—75, compared with 53 for Facebook users who were not fans and 66 for customers not on Facebook.
• DG fans also reported significantly greater emotional attachment to DG—3.4 on a 4-point scale, compared with 3.0 for other customers.
• Fans were the most likely to say they chose DG over other establishments whenever possible.

“We must be cautious in interpreting the study’s results,” Dholakia said. “The fact that only about 5% of the firm’s 13,000 customers became Facebook fans within three months indicates that Facebook fan pages may work best as niche marketing programs targeted to customers who regularly use Facebook. Social media marketing must be employed judiciously with other types of marketing programs.”

But overall, Dholakia stated that the results indicate that Facebook fan pages offer an effective and low-cost way of social media marketing.

Your insight and opinion matter!  What is your opinion of the “power of Facebook”? Do you agree or are you not seeing the same success rates as these studies suggest?  Do you favor another social media tool over Facebook?  I want to hear your insight, so be sure to share here!

#1: Social Media Engagement Big Challenge for Many Businesses (Deloitte)

Survey results from a recent Deloitte study (2009 Tribalization of Business Study), point to some key challenges that organizations are facing as they move toward integrating online communities into their social media strategy.

Here are the top three areas respondents identified as obstacles:

• Keeping visitors engaged:  30%
• Getting people to join:  24%
• Encouraging return visits to the online community:  21%

In addition, the majority of respondents agreed that the following are key business outcomes for their online communities:

• Increase word-of-mouth:  38%
• Increase customer loyalty:  34%
• Increase brand awareness:  30%

#2: Social Media Used as a Discovery Tool by 18% of Online Population (Nielson)

With the recent integration of Twitter and Facebook with Microsoft’s Bing, there is no doubt that social media has become a top player in the world of search.  A recent study by Nielson Company examined the relationship between social media and user search options.  The report compared social sites to search engines and portals like Yahoo! Of those surveyed, 18% reported social media sites as core to finding new information.

Jon Gibs, VP Media Analytics, reports, “While still a smaller percentage than those who use search engines or portals like Yahoo! or MSN, it is a significant figure. And as social media usage continues to increase I can only expect this figure to grow.”

It is speculated that the amount of information on the web, especially on social sites, contributes to the increase in content discovery on these sites.  The report goes into much more detail and is worth a read.

#3: Businesses Slow to Incorporate Social Media Into Practice

Although numerous recent reports show how businesses plan to incorporate social media into their 2010 marketing mix, a recent study by BIA/Kelsey reports that many small- to medium-sized businesses are slow to incorporate the strategies into their plans today.

When asked about their current social media experiences, results showed many businesses are slow to adopt social media:

• Have used Twitter to market in the last 12 months:  9%
• Have used social sites in the past 12 months:  23%
• Have incorporated video into their website: 16%

In addition, according to the survey results, adoption of social media by small- and medium-sized business is more prevalent among younger businesses:

• Businesses 3 years or younger: 16% report using Twitter
• Businesses 11+ years:  2% report using Twitter

What are your thoughts? What effect, if any, do the constant changes and shifts in social media have on your overall marketing strategy?