Social Loyalty

Social Loyalty: A New Way to Make Friends

and Influence Business

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© 2011 Peppers & Rogers Group. All rights protected and reserved. 2

Meet Amy. She is 32 years old and works as a store manager for a local clothing retailer in Chi-

cago. Amy is active on Facebook, LinkedIn, Twitter and has her own music blog on Tumblr. She uses

these sites to keep up with family, friends, coworkers and fellow music fans. She also visits social

media review sites like Yelp, TripAdvisor and Mint.com to learn about new travel ideas, get help

managing her money, and offer her own opinions.

When Amy developed a presentation for her boss about a new clothing line, she tapped into her

fashion connections on LinkedIn for help. Before planning a vacation to Germany, she asked her Ger-

man friends on Facebook for advice. And when the latest U2 record came out, she wrote a scathing

review on her blog about how it fails at trying to recapture their “Joshua Tree” sound, sharing it with

her music fan friends via Twitter, Facebook, and her blog.

Amy is an example of today’s typical social media user. While she is an individual online, she is

also a member of numerous unstructured social groups. In some groups she is an influencer. In oth-

ers, she is looking to be influenced. People and businesses have the ability to interact with her to

build both personal and professional relationships.

The social media landscape is one of simultaneous individuals and groups. Companies that un-

derstand these nuances in the one-to-one, one-to-many, and many-to-one world can build engage-

ment and loyalty.

Social Loyalty: A New Way to Make Friends and Influence Business

This white paper explores how companies can:

• Leverage the power of social groups and indi-viduals online to build social loyalty

• Develop interconnected contacts and under-standing with customers

• Generate ROI and bottom-line impact

Amy’s Social Spheres of Influence and Experience

Amy is both an individual and a member of numerous groups online.

Linkedin

Tumblr

family

Amy

coworkers friends

music blog fans

Facebook

Twitter

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Source: Peppers & Rogers Group


Human Nature on Steroids

The collective intelligence of consumers interacting together can have astounding implications.

Human beings are naturally social – we want to be with other human beings, and the feeling that

others want to be with us is pleasing. We like to go to parties, and we enjoy telling stories, pass-

ing along rumors, playing games, keeping secrets, laughing, entertaining, and being entertained.

These actions make us “human.” They are human nature.

As important as our social nature is, however, within just the past few years technology has in-

jected it with steroids. We are being transformed into a dynamic and robust network of electronically

connected people in a worldwide, always-on festival of creating and sharing, collaborating, editing,

publishing, uploading, entertaining, critiquing, commenting, helping, learning, and having fun.

This has immense implication for how we make technological progress, because progress owes much

more to our social nature than to our knowledge or intelligence, per se. The conveniences we take for

granted today, from frozen pizza to Wi-Fi, represent the accumulated improvements and innovations of

many generations of human beings documenting and sharing their ideas with others over time.

The truth is, no matter how brilliant any single individual may be, acting alone he or she could not

possibly make even the simplest tool or device in use today. Nearly every artifact around you that is

“manmade” can only be produced through the collective efforts of many, organized in a way that is far

too complex for any single person to understand fully.

Today’s technologies are injecting our social nature with steroids. One of the first and longest-term ef-

fects of this is likely to be a further acceleration in the rate of economic progress. Companies that can tap

into this potential with individual customers as well as groups can accelerate their own progress while

building customer loyalty. Another effect is the ability to build social loyalty in a different way.

Understanding a person’s online social activity provides companies the opportunity to make an emo-

tional connection with customers and prospects in this new, vibrant environment. By tapping into cus-

tomers’ passions, there is the potential to deepen engagement, build the brand and grow the business.

Companies can extend their loyalty strategy to meet the unique attributes of the social media world.

Social Engagement Drives Loyalty

Peppers & Rogers Group conducted a study of 306 online shoppers in the fall of 2010 to ask them about their propensity to be socially loyal.

If your participation in a loyalty program rewarded you as an individual as well as rewarded you as a part of a group (friends, family, co-workers), would you be more like-ly to join?

If your participation in a loyalty program re-warded you as an individual as well as re-warded you as a part of a group, would you be more likely to recruit friends, family, and co-workers to join?

When your family, friends, or colleagues buy a specific brand, how much does it increase your likelihood to buy the same brand?

How often do you use Facebook?

Companies that can tap into this potential with individual customers as well as groups can accelerate their own progress while building customer loyalty.

19%Considerably

above averagein our industry

19%Considerably


19%Considerably


19%Considerably


Yes 60%

Yes 50%

40% No

50% No

Hourly

Daily

Weekly

Monthly

Never

3%

35%

21%

17%

24%

8%

47%

38%

7%

Not at all

Small extent

Moderate extent

Large extent

Do you own a smartphone?

19%Considerably


68%

32%

Yes

No

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Social LoyaltyBefore devising a strategy to build social loyalty, the first step is to understand its definition. If traditional

customer loyalty is defined as customers’ emotional and rational attachment to an entity on a personal

(1to1) level, then social loyalty leverages the “influencer” factor of social networks while becoming more

relevant as customers reveal their interests and social behavior by engaging with their friends, family and

colleagues; what we at Peppers & Rogers Group call their entourage.

Elements such as emotion and two-way dialogue definitely exist, but they are also the fundamental

rules of traditional loyalty marketing. The unique factor of social loyalty is the way it allows consumers

to get together and label themselves with their distinct characteristics in a way that tells companies what

they need and what their interests are. Those companies that can provide the correct environment to fa-

cilitate interaction, smartly observe, and respond in a customized manner will reap the benefits.

The good news is that many of these networks already exist. Most consumers have already tagged

friends, family, and colleagues on Facebook, Twitter, LinkedIn, etc. They “like” and “suggest” brands,

products, services, and events, they join “groups,” and they share details about where they are and where

they’re going through Foursquare, Plancast, TripIt, and others. In other words, most consumers have al-

ready publicly segmented themselves.

Influencers within the social media spectrum, as in the offline world, are of the highest value. They

are classified as most the active and “social” people in these networks – people with highest and most

branched reach. When investing extra effort, resources, and money in a subset of customers, make sure

they are influencers. More specifically, if you want to send a discount coupon to one of your customers

who shopped from your website, see if he has a lot of friends and if he tweets often.

Leveraging these valuable customers is simply an extension of current segmentation strategy. Social

loyalty will in a way enrich the customer data companies have on customers. In addition to customers’

value to the company and usage behavior, it will identify priority customers, where and how they use your

products, and other useful nuggets consumers drop on social media. The cherry on top is that companies

will get to communicate with these groups/networks directly through the social media platforms, an ef-

ficient and quick way to create positive return rates.

The Evolution of Social Loyalty

Interactions between companies and their customers has evolved from one-way communication to two-way dialog, and is now moving toward interconnected contacts and understanding.

Stage 1: Company A pushes messages to the mass market Stage 3: Company A creates a learning relationship with individual customers, but also understands how they interact with other spheres of influence. Enlightened companies will interact with all of these groups within the context of the individual to encourage social loyalty.

Stage 2: Company A creates a dialog with individual customers to develop a learning relationship

EntourageA social sphere of fam-ily, friends, co-workers and other connections that a person interacts with online. Depending on the situation, they can be influencers of an individual, or influenced by an individual.

Influencers> People with a large

number of friends, wall posts, activity (share, like, etc.) on Facebook

> People most followed and tweeting people on Twitter, specifically within niche categories that appeal to your company

> Well-connected people who participate in relevant groups on LinkedIn

> Mayors of Foursquare locations important to your industry or company

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Two Ways to Leverage Social LoyaltyNo one has cracked the code of how best to build social loyalty online. But two strategies have emerged

as potentially beneficial.

1. Incorporate social segmentationAs previously mentioned, simply expanding a segmentation strategy to add social media insight can be

a first step. The idea is to segment customers based on social media engagement levels (influencers etc.)

and directly communicate with them. This approach still requires some analysis and segmentation, but

works as a one-to-one marketing activity to leverage a good customer’s sense of loyalty.

Forward-thinking companies are beginning to create a sub-dimension within these networks that func-

tions on an integrated platform to drive loyalty—collect information, segment users based on behavior,

needs, and demographics, and act accordingly. For example, retailer Urban Outfitters identifies recent pur-

chasers who are also on Facebook and considered influencers or connectors. The company encourages

these customers via opt-in email communications to like or recommend the product they just purchased, as

well as ask friends to “rate my outfit.” The goal is to get their friends to see their recommendations on Fa-

cebook and visit UrbanOutfitters.com. In addition, Urban Outfitters uses social media to win back dormant

customers with email campaigns and social media promotions based on insight gathered from those sites1.

2. Create a full-fledged, integrated social loyalty program This is where the true benefit of social loyalty can be seen, but it also involves the most complexity. Brands

can reward customers in traditional ways – visiting venues and making purchases – but they will also

reward customers for their engagement in social media and their interaction with other customers of a

brand, simultaneously as individuals and groups.

Social media platforms are evolving to be more customized, making this concept more possible to

execute. Facebook, for example, added a Groups feature in October 2010 so users can categorize their

friends and family. And in November 2010, the company launched “Friendship Pages” to show exactly

how specific friends interact. According to developer Wayne Kao, “they contain the public Wall posts and

comments between two friends, photos in which both are tagged, Events they RSVP’d for together and

more. You’ll be able to see a friendship page if you are friends with one of the people and have permission

• Understand your customer base by segmenting them based on different dimensions

• Identify social media groups within your customer base

Social Integration• Extended customer base

• Improved customer engagement

• Accelerated social media presence

• Accurate market positioning

Social Audience SegmentsEnriched customer insight and target groups with integra-tion of social media information

• Match customers to social behaviors for integration of information

• Develop target groups

23

1

• Leverage social media for marketing activities

• Understand your customer base by segmenting 1

Social Media GroupsSocial media user profiles based on social network volume and activity

Customer SegmentationCustomer segmentation based on value, needs and behavior

Influencer

Participator

Spectator

Neutral

Social Loyalty Program in Action

Understand how your customer base is engaged with social media, gain insight, and develop targeting opportunities.

1Getting Social: Integrated Social Marketing. Presented at the MErkle CRM Executive Summit 2010, June 7-9, 2010



blogto view both people’s profiles.” It is basically a visual representation of a one-to-one relationship online.

With segmentation happening naturally online, it opens up the potential for companies to take ad-

vantage of these valuable social connections. Let’s look at a hypothetical telecom example. Imagine a

mobile telecom provider launches a new loyalty program called “Telecom X Entourage.” Customers

subscribe through Facebook by clicking the “Facebook Connect” icon on the homepage and then en-

tering their customer ID to link to their account. Members can invite their friends via Facebook and start

clustering social networks within the system.

As for the data collection, “Facebook Connect” and “Sign-in With Twitter” programs allow the telecom

company to integrate its website with these platforms. Everything can happen within the environments

users already visit. Telecom X can track the friends customers invite to the program and whatever custom-

er enters in his Facebook and Twitter profile. The company can encourage customers to visit its website

as well to collect more data.

New members can register as individuals or connect to a friend’s “Entourage.” After a few months,

when the company has enough data to analyze patterns and behaviors of these “entourages,” it offers

customized plans to Entourage members. Groups can select a price plan as an entourage, get a lump sum

of minutes to be shared within the entourage, etc. Individuals can also earn personal rewards based on

their individual and group behavior, needs, and value. What’s more, the company can collect feedback

right away online, and use social media tools to build a one-to-one dialogue with them.

As mentioned earlier, the power of the group should not be ignored. Peppers & Rogers Group conducted

a study of 306 online shoppers in the fall of 2010. It found that 60 percent of respondents would be more like-

ly to join a loyalty program if their participation rewarded them as both individuals and part of a group.

The Evolution of Social Loyalty

Below is a hypothetical example of a social loyalty program for a music-themed loyalty program. Rewards and pre-miums are experienced individually but they are earned socially. Members move up in status for both the individual and group levels as they hit individual value and behavior thresholds and expand their entourage.

IndividualFrom “Fan” to “Rock Star”

GroupFrom “Garage Band” to “World Tour”


Enrollment

Engagement

Advocacy

Experience

ConclusionThe social media ecosystem continuously evolves to mimic real-world personal interactions. There is

opportunity for businesses to mix online and offline loyalty in their own unique ways. Companies that

understand these nuances in the one-to-one, one-to-many, and many-to-one world can build engage-

ment and social loyalty. It’s a changing world, and those with the courage to try something new can

reap rewards in the form of strong customer relationships in both the real and virtual worlds. n

With segmentation happening naturally online, it opens up the potential for companies to take advantage of these valuable social connections.


About the TeamThis paper was written by a team of consultants, editors and marketers at Peppers & Rogers Group who

have a passion for social media and a deep understanding of customer loyalty strategy and execution

including Peppers & Rogers Group co-founder Don Peppers (twitter @dpeppers), Partner Marc Ruggia-

no, Consultant Can Elbeyli (twitter@CanElbeyli), Editor Elizabeth Glagowski (twitter@1to1mediaeditor)

and marketers Thomas Schmalzl and Marjorie Chimes (twitter @mchimes).

About Peppers & Rogers GroupPeppers & Rogers Group is dedicated to helping its clients improve business performance by shifting

focus from transactions to managing relationships. As products or services become commodities

and globalization picks up speed, customers have become more demanding and harder to satisfy.

They hold the keys to higher profit today and stronger enterprise value tomorrow. The same applies

to governments. Constituents hold the keys to public institutional trust today and higher competition

and quality of life tomorrow. We help clients achieve these goals by building the right relationships

with the right customers over the right channels.

We earn our keep by solving the business problems of our clients. By delivering a superior 1to1

Strategy, we remove the operational and organizational barriers that stand in the way of profitable

customer relationships. We show clients where to focus resources and efforts to improve the perfor-

mance of their marketing, sales and service initiatives. For more information, visit www.peppersan-

drogersgroup.com.

the team

Don PeppersTom Schmalzl

Liz Glagowski

Marc RuggianoMarji Chimes

Can Elbeyli

Social Loyalty

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