August 31, 2010, 4:14 PM

U.S. companies spend for social media tied to customer loyalty

But marketers still find it hard to track what online customers say about brands.

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A new study finds U.S. companies that use social media to deepen customer loyalty spend nearly twice as much on the marketing tactic as those that use it for other reasons.

The survey, released by loyalty-marketing industry publisher Colloquy and the Direct Marketing Association, found the average social media spend for marketers whose primary objective was customer loyalty was $88,000 last year, compared with $53,000 for those focusing on brand awareness and $30,000 for customer acquisition. Those three objectives were the top reasons marketers used social media, the report says.

The e-mail survey, conducted in late June and early July, asked 369 marketers in the products and services industries 17 questions about their marketing tactics. 50 respondents come from the products industry, which includes retailers.

Marketing budgets related to social media are growing, with loyalty initiatives growing the fastest in terms of dollars spent. The amount of marketers’ social media budget allocated to loyalty increased by 293% from 2009 to 2010, while brand awareness and customer acquisition budgets increased by 189% and 214%, respectively. Social media budgets for driving loyalty have experienced the most growth for the past three years, the report says.

“Savvy social media marketers recognize they must turn first to their best customers and apply the same principles inherent to loyalty, which are combining economic incentives with social capital,” says Colloquy managing partner Kelly Hlavinka.

New research from web measurement firm The Nielsen Co. cited by the study reports that consumers spend 43% more time on social media than they did a year ago. Social networking and blogs were the top social web activities followed by online games and e-mail, Nielsen says.

Still, the survey found that only 25% of respondents spend more than 2% of their annual marketing budgets on it.

One possible explanation for why social media budgets remain small is that many marketers can’t—or don’t—track it. 65% of the companies polled said they did not monitor what customers say about their brands online.

When it came to why companies use social media, the most common goal was to build brand awareness, noted by 28%. That was followed by increasing loyalty and engagement from existing customers at 24% and acquiring new customers with 19%.  The remaining respondents said word-of-mouth marketing, customer retention, driving retail traffic and other or don’t know.

Other findings include:

Facebook reigns as the leading social media tool with 78% of respondents using the site. That was followed by Twitter with 69% and LinkedIn with 56%.

• 86% of respondents from the products industry, which includes retailers, list Facebook as their top social media platform; 50% use YouTube.

• Size matters with social media. While companies with more than 100 employees are more likely to use Twitter, companies with less than 100 are significantly more likely to use LinkedIn.

• Customer acquisition is the primary business objective for 65% of respondents from small companies with less than 100 employees. For those with more than 100 employees, customer loyalty and brand awareness took the top spots.

• When asked to state the most important measure of social media success, 65% of all respondents said they don’t know. The next most common answer was engaging customers to respond and provide feedback.

• 17 out of 50 or 34% of respondents in the products industry have a customer growth and loyalty social media objective. Brand awareness was selected by 20% and customer acquisition by 16%.

• Smaller companies with tighter budgets are significantly more likely than large companies to say they spend almost 50% of their marketing budgets on social media.

As marketers delve further into social media, the report suggests developing a plan to test efforts each 90 days.  Requesting funds only to test for each 90-day period will show senior management a desire to learn rapidly and to involve them in a rational process of controlled funding and learning, the study says. That also will give marketers the freedom to act within each cycle without being second‐guessed at every turn. “Plan eight to 12 cycles over a two- to three-year period, set expectations and allow for testing ideas that emerge in earlier cycles,” the study says. “Scale up ideas that work and discard losers.”

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