Merchants turn to social media to win friends and influence shoppers.
Mark Brohan , Research Director
Most online retailers agree social media marketing will be increasingly important in the future. For now, most are focused on using social media to build brand awareness and customer loyalty rather than as a sales tool, 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 most web merchants are only now ramping up their social media marketing spending.
The 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 31.0% 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 and eyeglasses, 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 got the word out about its brand and latest promotions via traditional online marketing such as e-mail and paid and natural search.
But an initial experiment to promote its new eyeglasses business on Facebook two years ago laid the groundwork for a social media marketing program that has become an important customer-acquisition tool, says Aaron Magness, the retailer's vice president of marketing.
Coastal Contacts, which in North America goes by Coastal.com, has used social media to identify about 1 million new customers, he 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 web site traffic measurement firm Kantar Media Compete.
In two years Coastal Contacts has grown its Facebook fan base from about 10,000 Facebook fans to more than 961,000. "[Social media] is becoming a big driver of new customer acquisition for us," Magness says.
Coastal Contacts credits a unique promotion to give away eyeglasses as the catalyst that taught the company to use social media as an effective marketing tool. Coastal Contacts used Facebook's Offers advertising tool to promote its First Pair Free program, which allowed a customer to select a free pair of frames from certain eyewear brands and styles. Offers enables retailers like Coastal Contacts to present deals to their Facebook fans in their news feeds, the section of Facebook that displays updates from a shopper's friends and companies they're fans of. Consumers claimed the deal with a single click, then redeemed the voucher at Coastal.com. While the glasses were free, the customer had to pay for shipping and handling and upgrades such as bifocals.
When Coastal Contacts ran its first Offers promotion, it attracted about 20,000 coupon redemptions and generated an incremental revenue increase, although the retailer declined to reveal specifics. A second Offers campaign produced even bigger results, including 860,000 consumers who clicked the offer on Coastal Contacts' Facebook page and 21,000 who redeemed the coupon.
In general, web merchants view 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.
But there are some online merchants that see social media as a way to drive sales. Even so, the Internet Retailer survey finds that the web sales merchants currently generate from social media channels are relatively small. For 64.1% of merchants, annual web sales from social media initiatives amounted to less than $100,000.
However, the sales that stem from social initiatives can be important because they come from a brand's most loyal and engaged customers, says Jonathan Kowit, Ice.com president and chief marketing officer. The online jeweler generated social commerce sales of about $1.2 million in 2012, or about 2.4% of its 2011 online sales of $51.05 million, according to Internet Retailer estimates in the Social Media 300. After several years of developing a following on Facebook, Ice.com now has more than 621,000 fans.
At any given time Ice.com may have as many as four promotions running on its Facebook page. For example, it may run offers that give consumers a chance to comment on a certain ring style and then purchase it, or limited-time percentage-off discounts.
Those deals aren't just about driving revenue, Kowit says. Purchases that stem from Ice.com's Facebook page help the online jeweler learn more about what's driving shopping behavior among its most loyal customers. "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."
Most online retailers maintain a 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. Although Grainger is a relative newcomer to social media, having been on Facebook less than a year, it already has four full-time employees working on social media initiatives and expects to add two more employees within a year, says Pavez Patel, senior director and head of online and digital marketing.
Growing its social media base quickly is important to Grainger as it looks to engage and build long-term relationships with next-generation MRO buyers, 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," he says.
Using social channels like LinkedIn, a network for businesspeople and professionals, helps Grainger reach consumers interested in specific topics, such as finding and hiring skilled workers. A recent forum on LinkedIn on the employment outlook for skilled tradesmen drew 133 participants.
But more important for Grainger, the forum helped the retailer identify MRO professionals with a particular interest in a topic important to them, Patel says.
Grainger offers a prime example of how many online retailers are viewing social media: an important way to engage their respective audiences, even if it is not yet a significant way to boost sales.