12/05/12

Socially acceptable

Merchants turn to social media to win friends and influence shoppers

Mark Brohan , Research Director

Social media marketing will be increasingly important in the future, most online retailers agree. But for now, web merchants view social media more as a medium to build up brand awareness and customer loyalty than as a way to drive immediate sales, according to Internet Retailer’s latest survey.

The survey of 175 companies that sell online—85 web-only merchants, 40 consumer brand manufacturers, 34 retail chains and 16 catalog companies—finds that a growing number of web merchants are convinced of the importance of engaging consumers on online social networks. Of the retailers responding to the survey, 95.9% say social media marketing is important to the future of their Internet business, including 53.2% that label it very important.

Today 90.7% of the responding merchants have a Facebook page, and 75% are active on Twitter and 54.1% on Pinterest—a barely 3-year-old site where consumers share products and photos they encounter online. 51.2% post videos on YouTube, while 39% use Google+ (Google Inc.’s social network) and 14.5% Instagram, a photo-sharing social network owned by Facebook Inc.

But most web merchants are only now ramping up their spending on social media marketing. The Internet Retailer survey finds that 87.1% of responding retailers will spend $100,000 or less on their social media programs this year, including 59.4% who will spend less than $10,000. But going forward 64.1% of retailers say they will increase their social media marketing budget. Their goals are varied, with 31% aiming primarily to attract more customers, 29.8% to build customer loyalty and 29.2% to drive sales.

Coastal Contacts Inc., a web-only retailer of contact lenses, eyeglasses and certain related merchandise with annual sales of about $177 million, is typical of the growing number of retailers looking to reach more consumers on social networks.

Prior to using any form of social media, Coastal Contacts relied on more traditional forms of marketing, including e-mail, affiliates, and paid and natural search to get the word out about its brand and latest promotions.

But an initial experiment to promote its new eyeglasses business on Facebook just two years ago has morphed into a social media marketing program that’s becoming an increasingly important customer acquisition tool for Coastal Contacts, says vice president of marketing Aaron Magness.

Costal Contacts, which in North America goes by Coastal.com, has used social media to identify about 1 million new customers, Magness says. What’s more, the traffic that Coastal.com receives from social media sites such as Facebook now totals about 104,027 monthly unique visitors, or about 25% of the e-retailer’s total web site traffic, according to Compete Inc.

Two years ago Coastal Contacts only had about 10,000 Facebook fans, but that’s grown to 860,000 today. “Social media represents just a great way to engage more people and add an extra element to our marketing strategy,” Magness says. “It’s becoming a big driver of new customer acquisition for us.”

Coastal Contacts credits a unique promotion to give away free eyeglasses as the catalyst that taught the company how to use social media as an effective marketing tool. Coastal Contacts used Facebook Offers to promote its First Pair Free program, which gives customers free frames selected from certain eyewear brands and styles and standard lenses. The glasses advertised in the First Pair Free are created at no expense to the customer redeeming the coupon but the customer must pay for shipping and handling and for any specific upgrades such as lens coatings, progressive lenses, bifocals, tints and other options.

When Coastal Contacts ran its first Facebook Offers coupon, the promotion was an immediate hit with its Facebook Fans and resulted in about 20,000 coupon redemptions and a nice increase in incremental revenue from shipping and handling fees and upgraded orders, although the retailer declined to reveal specifics. A second Facebook Offers campaign generated even bigger results including 860,000 consumers that clicked on the offer on Coastal Contacts’ Facebook page and 21,000 that redeemed the coupon. “We have become Facebook’s largest vision care brand,” Magness says. “Facebook has allowed us to respond to customer questions on our pages instantly any time of day or night.”

In general, web merchants see their involvement with social media as a way to increase customer loyalty and service, better understand customer behavior and deliver timely offers that shoppers can also pass along to family and friends. Online merchants also see social media and social commerce as a way to drive sales with a very engaged group of customers.

The Internet Retailer survey finds that the web sales merchants currently generate from social media channels is relatively small. For 89.8% of merchants, annual web sales from social media initiatives amounted to $500,000, and less than $100,000 for 64.1%. Overall 78.4% of merchants responding to the Internet Retailer survey say 5% or less of their total annual web sales now come from social media outlets such as Facebook, including 31.6% who say it’s less than 1%.

At online jeweler Ice.com, which will post Internet Retailer-estimated social commerce sales of about $1.2 million in 2012, or about 2.4% of its 2011 online sales of $51.05 million, the company views revenue from Facebook and other social media outlets as sales that are coming from its most loyal and engaged customers, says president and chief marketing officer Jonathan Kowit. After several years of developing a following on Facebook, Ice.com now has a base of about 600,000 fans.

At any given time Ice.com may have as many as four promotions running on its Facebook page. Examples include offers that give consumers a chance to comment on a certain style of ring and then purchase it, or a limited-time offer that lets a shopper mix and match her favorite gem with different styles and colors of gems and purchase her favorite at 20% off.

But those promotions aren’t just about driving revenue, Kowit says. More important, purchases generated from Ice.com’s Facebook page help the online jeweler learn more about what’s driving shopping behavior among its most loyal customers. “We are still very early on in understanding social commerce because people don’t go to our Facebook page just to shop,” Kowit says. “They come to our Facebook page to immerse themselves in what they like and don’t like about jewelry, and the purchases they make give us insight into what they find engaging about our customer experience and what’s not.”

The Internet Retailer survey found that 71.6% of merchants view Facebook as the social media outlet that’s the most effective for generating online sales compared with 13.6% for Twitter and 8.6% for Pinterest. A total of 74.2% of retailers currently advertise on social networks or plan to within the next year.

Most online retailers maintain only a very small full-time staff dedicated to social media marketing and commerce, with 49.4% of merchants having only one full-time employee concentrating on social media.

But there are exceptions, such as W.W. Grainger Inc., a business-to-business distributor of industrial supplies and spare parts, a category known as maintenance, repair and operations, or MRO. Grainger, whose annual e-commerce sales exceed $2 billion, is a relative newcomer to social media and has been on Facebook less than a year. But Grainger already has four full-time employees working on social media initiatives and expects to increase the number of dedicated social media analysts and designers to six within a year, says senior director and head of online/digital marketing Pavez Patel.

Growing its social media base quickly is strategically important to Grainger as it looks to engage and build long-term relationships with next-generation MRO buyers, Patel says. “Many of the current executives who make MRO purchasing decisions and our current buyers will begin to retire in the years ahead,” Patel says. “We are using social media to engage younger buyers making their way up the organization in the channels they use to engage each other, and that’s on Facebook and LinkedIn.”

Using social channels like LinkedIn, a network for businesspeople and professionals, also helps Grainger reach individuals interested in very specific business-to-business topics, such as finding and hiring skilled workers and workplace safety. A recent forum on LinkedIn on the employment outlook for skilled tradesmen drew 133 participants.

But more important for Grainger, the experience helped Grainger use social media to identify MRO professionals with a particular interest in a topic important to them, Patel says. “Grainger wants to shift the public’s perception of the skilled trades and wants to take the conversation from ‘jobs’ to ‘careers,’” Patel says. “LinkedIn was chosen as a medium for this discussion since it is a channel targeted to the discussion of careers, workforce development and networking.”

That’s an example of how many online retailers are viewing social media: an important way to engage important audiences, even if not yet an important way to boost sales.

Topics:

Aaron Magness, Coastal, Facebook, Grainger, Ice.com, Internet Retailer survey, Jonathan Kowit, Pavez Patel, Pinterest, social commerce, social media, Twitter

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