Trialogue: The Intersection of Social Media and Loyalty

The powerful reach of social media enables loyalty marketers to extend their mastery of dialogue with customers on a grand scale, achieving trialogue: proactive three-way conversation between customers and their friends and the companies they really about. How can companies truly interject themselves into the customer-to-friend equation and harness social media? Listen in as COLLOQUY asks such questions and joins the conversationand be sure to tell your friends.
For KLM Royal Dutch Airlines, creating relationships with consumers has always been challenging, as its wideranging international customer base represents numerous cultures speaking a variety of languages 70% of passengers, in fact, originate outside of Holland. That has prompted the airline to be consistently creative in its marketing, and the airline has relied on the nimble nature of online marketing to take its customer dialogue to the next level. However, even this online-marketingfriendly company wasnt sure how consumers would react to its experimental dive into the social media swimming pool: Last fall, the airline piloted its "KLM Surprise" program, which presented select passengers checking in at Amsterdams Schiphol airport with a customized giftbased on information the passengers had shared on such social-networking sites as Twitter and Facebook. One customer traveling to New York had lamented that he would miss his favorite teams biggest soccer game of the year, so the airline surprised him with a Lonely Planet guide to New York, highlighting the best bars showing the soccer games. Another received a glass of champagne after he mentioned his upcoming birthday, and yet another received a voucher for iPad apps after mentioning that he was excited about using his new iPad on his KLM flight. KLM was shocked by the huge response to the Surprise campaign, a simple soft-benefit customer dialogue that swiftly blossomed into a runaway viral success, with consumers sharing videos and comments about the campaign with other consumers. It was a leap from dialogue to "trialogue." "We were surprised by the effect, but I can certainly say we are now addicted to the effect," says Martijn van der Zee, Vice President of E-Commerce for KLM. "When you engage in a real, authentic way, it takes more effort from the company, but the viral effect is so much bigger than anything weve done in a higher-volume or more organized way."

It was a mere half-decade ago that loyalty marketers began to truly delve into how social networks and loyalty relate to one another. In early 2006, both BusinessWeek and COLLOQUY acknowledged the rising power of social networks and customer word-of-mouth. More specifically, COLLOQUYs TrendTalk white paper predicted that nurturing and leveraging virtual consumer networks would be a prime evolutionary trend in loyalty over the next few years. Obviously, consumer use of social media has exploded since then, led by the seemingly boundless popularity of Facebook, followed by Twitter, YouTube, LinkedIn and blogs, as well as the more recent location-based success stories such as Foursquare and raise-your-hand-together models such as Groupon. In 2010, Americans spent nearly a quarter of their online time on social networking sites and blogs, an increase of almost 16% over 2009, according to Nielsena 43% change in the share of online time Americans devote to social media. And, thanks to the iPhone and other smartphones, the use of social networks through the mobile phone is increasing at a rapid clip, as well. According to eMarketer, the number of mobile social network users will more than double between 2010 and 2015, from around 40 million users to close to 80 million. Taming social medias wide-open "Wild West" Social media from the very beginning offered many natural connections to loyalty marketers seeking to cultivate customer loyalty. With its emphasis on word-of-mouth, sharing, linking, "friending" and "liking," social media provides powerful, ever-evolving tools to implement such core loyalty principles as relationship-building, customer service, personalization and data gathering/analytics. COLLOQUYs prediction of social networks as a "prime evolutionary trend" in loyalty has come to pass manyfold. Loyalty marketers have worked overtime trying to leverage the social media-loyalty link. More companies than ever look to social media not just to acquire new customers and build brand awareness, but also to increase loyalty as a business objective. From 2009 to 2010 alone, social media budget growth tied to customer loyalty grew nearly 300%, according to a 2010 COLLOQUY/DMA industry benchmarking study, "Deploying Social Media to Cultivate Customer Loyalty." Attempts to tame social medias wide-open frontier has led to a number of examples of forward-thinking marketers taking bold steps beyond marketing promotions and push technology into the social media universe to influence customer loyalty, and the learnings from these companies provide essential lessons for others. However, significant challenges remain, as companies struggle to keep up with quick-changing social tools, more demanding consumers, and the difficulty of quantifying loyalty impact in a space that thrives on difficult-to-track sharing and word-of-mouth activities. The COLLOQUY and DMA joint study confirmed that active experimentation has been at the core of marketing through social mediabut it also stressed that the time has come to determine how these channels can drive profits, and how they can connect in a measurable way to increased customer loyalty. "Id say most companies arent there yet [in terms of linking social media and loyalty]," says Yuping Liu-Thompkins, Ph.D., Associate Professor of Marketing at Old Dominion University in Norfolk, Virginia. "What I see most often are companies that treat social media just as another marketing channel. They post information about the company, and they indicate what they have on sale, but no real dialogue is happening between the company and the consumers."

Frank Eliason, Senior Vice President of Social Media at Citi (who has been credited by some as a pioneer in using Twitter to offer fast, personalized customer care in his role in customer operations at Comcast), agrees that taking advantage of social medias unique features challenges companies accustomed to traditional marketing approaches. "The number-one social media challenge that I see with a lot of companies is that they try to force a message out with a traditional marketing approach," he says. "But social is about human dialogue, so how do you do that in a manner that still meets all internal as well as regulatory controls and is fast?because social is a place very much about speed." A significant element of the challenge in effectively linking social media and loyalty is that building long-term loyalty isnt always top-of-mind when entering the social media space25% of companies surveyed in the COLLOQUY/DMA benchmarking Study said they wanted to increase loyalty and engagement from existing customers, but 28% identified building brand awareness and 19% identified customer acquisition as their top goals. So, issues surrounding customer retention may not get the attention they deserve. "Social media is really a space for engaging existing customers, and that piece is what really leads to loyalty, whether youre striving to get feedback from them, to thank them for feedback, or to provide more of the benefits you can offer," says Citis Eliason. Another continuing problem is that, while social media budgets have grown, most companies dont yet understand how to use that investment, let alone how to measure and analyze the results from using it. According to the 2010 COLLOQUY/DMA survey, two-thirds of respondents were unable to express what the most important measure of social media success would be. The ad hoc efforts that have often resulted from such lack of understanding are fairly typical for early-stage development of any unfamiliar and promising frontier, but those results mean that most companies havent yet fully reaped the potential benefits of their investment. Put some skin in the social media gamea thick skin Whether companies succeed or fail in their initial efforts, there is no question that they must put skin in the social media game today. Once in the mix, though, companies must develop a thick skin, facing a fiercely competitive landscape filled with finicky, busy consumers with the power not only to instantly turn off and tune out marketing messages, but also to quickly and easily share information, both negative and positive, about a company with others. In fact, consumers can be choosy when expressing loyalty in social media: According to the 2010 Cone Consumer New Media Study, more than 80% of consumers say they follow only five or fewer brands online, whether through Facebook, Twitter or an RSS feed. "They really only have room in their minds for less than five brands," says Mike Hollywood, Cones Director of New Media. "Its a pretty exclusive clubif you think about the number of marketing messages a consumer receives dailyto be welcomed into that inner circle of brands." It doesnt take much for a companys social media efforts to turn consumers off, though, which can quickly present significant dilemmas. According to Cone, almost 60% of its survey respondents say that they would no longer be fans of brands acting irresponsibly, either toward the respondents or toward others and the action was publicly visible. And 58% say that brands that over-communicate risk alienating consumers. Yet, a third of consumers said theyd stop following brands that didnt communicate often enough. "Its definitely a delicate balancing act," says Hollywood. "You need to figure out the cadence of communications and make sure youre always acting responsibly as far as your consumers are concerned."

The Trek to Trialogue: A Framework

Trialogue is a key component of COLLOQUYs definition of Enterprise Loyaltyviewing the enterprise as a highperformance system designed to build loyal relationships with all stakeholders. Trialogue takes the dialogue between customers and brands (powerful in itself) a step further by leveraging the customers increasing ability to share opinions on a massive scale within the networks made possible by social media. The companies that can combine effective trialogue with organization-wide data-sharing and innovations are the ones that will achieve true Enterprise Loyalty. The biggest opportunities in this Great Frontier Loyalty marketers have discovered many links between social media and loyalty that offer potential opportunities for success. At COLLOQUY, weve identified two main forces that truly offer the chance for companies to move the needle on loyalty: 1. Social media as a catalyst for story-tellingand story-sharing through trialogue. Many marketing channels offer two-way dialoguephone, email, traditional loyalty programs and instant messaging all facilitate back-and-forth customer conversations. But Facebook, Twitter, YouTube and blogs offer tools that allow customers not only to communicate with companies directly but also to share ideas, reviews, feedback and stories with their friends and possibly their friends friends and beyondthe essence of the three-way customer relationships elemental to trialogue. To reach such engagement, companies have worked extensively to motivate consumers to join their Facebook pages or follow their tweets, enticing them with everything from discounts to donations. However, the problem is that Facebook "likes"no matter how many there aredont necessarily translate to true trialogue, or even to dialogue. Sites such as Facebook and Twitter are littered with top brands with millions of followers that do little or nothing in terms to engage with their "fans." Discovering the right way to effectively communicate is a challenge unique to each company, says Citis Eliason. He points out that in financial services, for example, privacy concerns are paramount. If a back-and-forth is happening on Twitter, for instance, how can the conversation continue off the public page? At Citi, one planned solution will be a click-to-call and click-to-chat feature that steers users away from the social network after engagement. "This way, youll still be talking to the same person you were Twittering with, but youll continue that conversation in a secure environment," he says. Over the past few years, some companies have discovered creative ways to encourage and stimulate true trialogue. One such company is online retailer Zappos, which has famously used the power of CEO Tony Hsieh as the "face" of

its Twitter feed. Not only do Zappos customers directly respond to Hsiehs tweets, but they also re-tweet them to friends, virally spreading the Zappos mantra and championing the company to other potential customers. Many experts also point to Starbucks MyStarbucksIdea program as an early, continually-successful effort to create that three-way conversation on a wide scale. Customers submit ideas on the MyStarbucksIdea website for new products or campaigns, and ideas get thumbed up or down by other consumers, and, ultimately, by Starbucks itself. Some have quibbled with its successa relatively small number of the customer ideas have truly been put into practicebut most agree it was an early game-changer when it comes to developing trialogue. Another brand, energy drink Red Bull, has created successful social media trialogue simply by understanding and honing in on the brands target audience. It offers interactive content related to activities that energy drink lovers likeparticularly adventure sports from freestyle skiing and motocross to skateboarding. Wall posts can receive hundreds of "likes" and comments, while the companys Facebook page adds to the three-way fun with interactive games offered up to its more than 14 million fans. Closed, sometimes exclusive, social communities offer further ways for companies to increase personalization and encourage long-term loyalty within branded walls, particularly for those with loyalty programs. For instance, hotel chain IHG (InterContinental Hotels Group)s three private online communities drawn from their 52-million-strong Priority Club membership have been a key element in the chains social media efforts. These invitation-only communities each comprise about 300 rotating members, with more-active members invited to stay on longer than less-active ones. IHG explores and addresses strategic goals and questions with the members, creating a deep dialogue between members and executives, executives and members, and each other. "We think of it as a three-way conversation," says Nick Ayres, Director of Social Marketing at IHG, of the trialogue potential. "These private communities have given us an opportunity to test the waters and evaluate what our customers think about us across a wide range of activities, brands and topics we present to them." 2. New platforms for engagement and involvement harness fundamental loyalty factors. The social media universe is ever-changing, with new tools and platforms constantly evolving. But these new options are really harnessing fundamental factors of loyalty, albeit in new, entertaining waysthey quench customers desire for status, and play into peoples innate need to compete in fresh ways, for examplewhile boosting the potential for reinvigorated soft benefits. The rapid rise of Foursquare after its March 2009 launch showed off the powerful one-two punch of location-based rewards combined with social sharing, which has now been replicated with other tools such as Facebook Places. Rewarding top customers with "Mayor" bragging rights and special discounts, while providing companies with useful data and analytics about customers, has offered new and exciting options for loyalty marketers. Brands such as Tasti D-Lite, Gap and Starbucks have taken advantage of Foursquares ability to socialize loyalty, while a recent Pepsi/Vons partnership has taken Foursquares opportunities to the next levelenabling users to link their Vons loyalty accounts to Foursquare. "Were trying to take the loyalty card as it exists today and make it smarter and more engaging," says Tristan Walker, Head of Business Development at Foursquare. "Loyalty offers are just the cherry on the icing on a very large loyalty

cake, and one thing that we try to focus on is the retention piece as opposed to the acquisition because its a lot more valuable." Retailer Sports Authority recently used Foursquare to great effect: During Black Friday 2010, the company gave away $500 gift cards to 20 randomly selected Foursquare users who checked in at one of the brands 400-plus stores. Participants were required to publish the check-in on Twitter to have a chance to win. "The effort was a powerful, fun engagement tool that greatly increased online engagement metrics and in-store foot traffic attributed to Foursquare users," says Clay Cowan, Vice President of E-Commerce and Digital Marketing at Sports Authority. "It added an element of game mechanics that really resonated with people." But it also added a data-gathering dimension that helped the company gain insight into customers: "Its a powerful way to test different offers and directly measure the customer response through various metrics." And, as further evidence of how fast-paced the social media space is, 2010 was also the year of another locationbased success story: Groupon. A daily-deal website tied to local communities, Groupon began in late 2008, but took off last year as consumers sparked to the notion of getting a particular deal only if a certain number sign up for it taking to social media sites to encourage friends to get on the bandwagon. Recently, Groupon began to test loyalty offers, offering marketers yet another location-based opportunity to salivate over. Personalization and soft benefits that offer an emotional connection are also being added to loyalty marketer toolboxes using social media platformsas shown by KLM Surprise. "We have the increasing belief that small and deliberate and genuine investment is much better, says KLMs Martijn van der Zee. And a new type of soft benefitenhanced customer servicecan result from successful trialogue. For example, Best Buys Twelpforce has emerged as a strong leader in the customer-service space. Begun by a small team of internal Best Buy employees, Twelpforce has grown into a 2,200+-strong force of Best Buy Blue Shirts, Geek Squad Agents and corporate employees who volunteer their time to research and answer questions tweeted by Twitter followers. "Were demonstrating our effort to solve something for the customer and that we have their best interests in mind," says John Bernier, Best Buys Social Media "Steward," who runs Twelpforce. But by proving themselves every day on Twitter, the Twelpforce team also contributes to positive word-of-mouth and advocacy for the retailer, leading to trialogue. As Bernier says, "We work so that people will recommend us in the future or turn to someone at their dinner table and say, You should really trust Best Buy." The next social media-loyalty frontiers Social media spending may be up, as loyalty marketers recognize its current and potential value. However, measuring and evaluating the effect of social media on loyalty, as well as

integrating social media with the rest of a companys loyalty efforts, remain among the biggest hurdles to truly linking loyalty and social media. As noted before, when asked what core metrics had been put in place to measure the effectiveness of their social media strategies, most respondents to the COLLOQUY/DMA benchmarking study were unsure. Of the remaining third that did respond, 20% indicated that increased customer involvement and engagement with their brand was the number-one metric, yet few employed any kind of listening toolssuch as new software technologies like Radian6 or Google Analyticsto get a sense of customer-involvement trends. Effective metrics gauging social media spending and incremental profitable revenue growth were hard to come by. Up to this point, says Prof. Liu-Thompkins, it seems that companies will report satisfaction with their social media initiatives, yet most dont know whether their satisfaction is justified. "People say they are happy with their social media ventures, but if you ask them if they actually measure, a majority of them dont. They dont really know whats actually happening. I think thats going to be one of the most challenging things for the next couple of years as we see how companies are going to move toward that direction." That said, Prof Liu-Thompkins adds that measurement efforts, while still in their early stages, are the wave of the future because companies are simply demanding more specifcs regarding social media ROI. "Of course, there are technology challenges in terms of integrating social media measurement into a traditional CRM system to better manage customer relationships," says Liu-Thompkins. "But we are moving in that direction and its definitely a step forward toward active participation in measurement rather than just observation. A lot of companies are getting tough around that because social media is moving out of the experimental realm and because of competition for resources across different channels." At Citibank, Frank Eliason says that the companys focus on measurement throughout the organization was an important factor in his accepting his new position. "In my discussions with Michelle Peluso, our CMO, she made clear her perspective on social media as well as the types of measurements she wanted to concentrate onspecifically the Net Promoter Score" (a classic measurement of customers willing to recommend a product or service). Because social media helps amplify trends regarding recommendation likelihood, it plays a strong role in the Net Promoter Score, Eliason says. "We also use standard metrics such as how many people saw or engaged with a particular message, but my number-one concentration in everything we do is about the Net Promoter Score." Best Buys Twelpforce offers measurement opportunities, says Bernier: "We do a biannual survey of Twelpforce followers, asking whether they received the service they expected, whether they were satisfied, whether theyd recommend Best Buy, and of course where they ultimately bought a product from." Though sample sizes are low, Bernier says the company has been able to determine that up to 85% of people who interacted with Twelpforce either bought or planned to buy the product or service they asked about from Best Buy in the following 6-12 months. "To me, it reinforces the trust factor," he says. Another challenge in integrating lies in maintaining consistency of look and tone. Prof. Liu-Thompkins says that Starbucks is a great example of integration. "Theyve tried a lot of different things and their image is consistent across social media channels, including Facebook, Twitter and Foursquare, as well as their website and other channels."

Trekking toward trialogue Social media clearly offers transformational loyalty-marketing opportunities, but all of its unique benefits have hardly been tapped. And, as with any loyalty effort, gaining consumer trust, and providing a good value propositionand a superior product or serviceare essential. Loyalty game-changers in this space clearly must succeed in both understanding and creatively using social media, as well as in offering top loyalty leadership across their entire enterprise. Its those companies that bring disciplined decision-making, strong buy-in from the top, constant efforts at measurement and proof, and willingness to experiment that will win in linking social media and loyalty and move to the next stage of success in the social media space. Companies such as Best Buy, Starbucks, Coca-Cola, Zappos and Ford are regularly cited as among the handful of innovators that bring at least some, if not all, of the above factors into play. Hotel chain IHG is another example of a company that is truly holistic about its social media strategy. At COLLOQUYs 2010 Loyalty Summit in Phoenix, IHGs Nick Ayres cited essentials of social media successincluding the importance of being "brave" in the space; knowing where customers are talking in social media; focusing on gaining the insights necessary to achieve growth; and integrating social media communities with other tools within the organization. The bottom line, Ayres points out, is that social media offers the opportunity to see customers as more than just numbers. Through trialogue, social tools help bring customers to lifewhich helps loyalty marketers learn the right ways to reach their goal of building long-term relationships. "It adds a lens of real life to your customers," he says. "It allows you to really get a good sense of whats important to them, and to use that as input into what you do and the decisions you make day in and day out." Sharon M. Goldman is a COLLOQUY Contributing Editor.