The ForeSee Results Report on Social Media Marketing (U.S.

Edition)

Social Media Marketing: Do Retail Results Justify Investment?

February 3, 2011 by Larry Freed President and CEO of ForeSee Results

2011 ForeSee Results

2 The ForeSee Results Report on Social Media Marketing (U.S. Edition)

Recently I heard the following question posed at a trade show: if you had to choose (with the proverbial gun to your head), would you put money into a Facebook e-commerce site or a traditional e-commerce site? Its a bit of a false dichotomy; most of us can do both. Anyway, the answer depends on a lot of factors, including product line, company size, existing Facebook presence and more. Still the question is getting at something were all dealing with. Despite the exponential, widespread, and breathlesslydocumented rise in social media activity and usage, many of us dont have a great way to quantify the value of social media marketing to bottom-line business results. As part of our annual ForeSee Results E-Retail Satisfaction Index (U.S. Holiday Edition), we asked more than 10,000 online shoppers what most influenced their visit to a retail website. For three years now, weve asked about a full range of traffic and sales influencers, from intangibles like brand familiarity and word-of-mouth to more traditional marketing tools like advertising and promotional emails. We then used the scientific methodology of the American Customer Satisfaction Index (ACSI) to analyze which sources drove the best quality traffic. The sources that drive the greatest numbers of people are not always the same as the sources that drive people who are the most likely to purchase. As we all struggle to understand the impact of social networks and other online marketing initiatives on our brands, its helpful to have some hard data. Our data shows that in terms of pure volume, social media still trails traditional customer acquisition sources (like promotional emails) significantly. However, customers who come to a website because of a social media interaction (either with a friend or a company) are highly likely to purchase. Now, that could be because social media is influencing them to purchase, or it could be because the customers who are interacting with us on social sites are the ones who were more likely to purchase in the first place. The point is that the marketing mix for every company will vary, but understanding the patterns can help guide further research and investment.

Social Media Research Findings

FiNDiNG #1: Look for quantity and quality of traffic. Social Media: Only about 5% of online holiday shoppers report being primarily influenced to visit top retailer sites by social media, yet retailers continue to devote considerable attention to this channel based on the promise of potential big results. Meanwhile, 19% of website visitors came to the website primarily as a result of a promotional email and 8% visited as a result of search engine results, suggesting that we shouldnt give short shrift to tried-and-true online marketing tactics in favor of newer media.

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3 The ForeSee Results Report on Social Media Marketing (U.S. Edition)

MARKETING MIX: IS SOCIAL MEDIA WORTH THE COST?

Primary Inuence On Website Visit Familiarity with Brand Promotional Emails Search Engine Results TV, Newspaper, Radio or Magazine Ads Word-of-Mouth Recommendation Internet Advertising Private Sectr Websites 2009/2010 Interaction on Social Network Blogs or Discussion Forums Shopping Comparison Website Product Review Website
0%

% of Respondents (U.S.) 38% 19% 8% 8% 8% 7% 5% 3% 2% 2%

10% 20% 30% 40% 50%

Traditional marketing techniques still drive more trac.

In the preceding chart, interaction on social network includes getting a message or recommendation from a friend or family member (2%), an interaction or message from a company on a social network (2%), or watching a relevant YouTube video (1%). Internet advertising includes advertising on all websites, including social media sites. See the following chart for further breakdown and specificity.

However, looking only at the volume of traffic from any given source can be misleading; we also need to look at the quality of the traffic. In the following chart, we see all the traffic acquisition sources broken out individually and assigned scores on our methodologys 100-point scale for satisfaction, likelihood to buy online, and likelihood to buy offline.  Some of the most satisfied site visitors arrived at the site because of previous familiarity with a brand, promotional emails, word-of-mouth, product review websites, advertising on social networks, and instant messages from a friend or colleague.

 Consumers whose site visits were most influenced by advertising on social networks, messages directly from the company on social networks, or mobile phone text messages or alerts are highly likely to buy offline.  Site visitors who arrived because of product review websites or word-of-mouth recommendations are highly likely to buy online.

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4 The ForeSee Results Report on Social Media Marketing (U.S. Edition)

What most influenced your visit to the website? Familiarity with site/company/brand

% of Respondents 38% 8%

Satisfaction 80 75

Likelihood to Purchase Offline 71

Likelihood to Purchase Online 75 71 76

38% 78

MARKETING MIX: MARKETING IS SOCIAL MIX: MEDIA IS SOCIAL WORTH MEDIA THE COST? WORTH THE COST?75 Promotional e-mail(s) from the company 19% 79 71
Search engine results 65 70 71 73 66
Traditional marketing 73 techniques still drive 76 more trac. % of On Respondents (U.S.) % of Respondents (U.S.)72 Primary Inuence On Website Primary Visit Inuence Website Visit TV, radio, newspaper, or magazine advertising 8% 77

Word-of-mouth/recommendation from someone 8% Familiarity with Brand I know Familiarity with Brand Internet advertising
Promotional Emails

5%19% Promotional Emails

Internet blogs or discussion forums 3% Search Engine Results Search Engine 8% Results Link from a shopping comparison website 2% TV, Newspaper, Radio or TV, Magazine Newspaper, Ads Radio or Magazine Ads 8% Message/recommendation fromRecommendation a friend on a social network 2% Word-of-Mouth Word-of-Mouth Recommendation 8% Product review website

79 38% 77 19% 73 8% 76 8%

74 74 72 76 78 75 75 76 77
40%

77 8% Traditional marketing 2% 79 7%Advertising 7% Internet Advertising Internet techniques still Private Sectr Websites 2009/2010 Private Sectr Websites 2009/2010 5% Interaction on 5% Social Network Advertising on social Interaction networks on Social Network 2% drive more 79 trac. 3% 3% Blogs or Discussion Forums Blogs or Discussion Forums Message directly from the company on a social network 2% 78
2% Shopping Comparison Website Shopping Comparison Website Video I saw on YouTube 1% 2% Review Website Product Review WebsiteProduct Instant Message from a friend or colleague 1% 2% 2%
0% 30%

72

76 74 75 76 50% 30%

75 79 76 10%
40% 20%

Mobile phone text messages or alerts

0%

10%

1% 20%

75

50%

These scores represent average findings from recent visitors to the top 40 online retailers websites (by sales volume, as measured by Internet Retailer). Each retailer is likely to have a different picture of which acquisition sources drive the most traffic and which drive the best traffic. But if were only looking at what drives the most traffic, were missing key information that could serve as a huge competitive advantage, since success is often found at the margins. Were missing some opportunities for real volume. When I look at this chart, what I see is that promotional emails are delivering tremendous bang for the buck. Emails are driving a large proportion of people that are relatively high-quality traffic. Based solely on this data, I would be tempted to put my resources into really understanding what can be done to make promotional emails more effective.

The groups most likely to purchase offline come from some of the acquisition sources that drive the LEAST traffic: advertising on social networks, messages from the retailer on social networks, text messages or alerts, and instant messages from friends or colleagues.

Social media has yet to blow me away as a driver of website traffic, store traffic or sales. That doesnt mean we should ignore it; that means we should keep it in perspective as one of many tools at our disposal. Yes, the data shows that some of the people who are most likely to buy come to our sites because of social media. But that doesnt necessarily mean that it was participation in social media that made this group more likely to buy. It is likely that social media-influenced visitors are already some of the best, most loyal customers to begin with.

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FiNDiNG #2: Our customers want to hear from us! We asked people how they wanted to hear from retailers, and traditional channels win again. Only 10% of our customers dont want to hear from us; the other 90% have definite opinions on what channel they like best. Are you asking your customers how they want to hear from you? Once you know the answers, are you digging deeper to find out if you are effectively communicating through those preferred channels and driving the sales and loyalty you want?
How do you prefer to hear about sales and promotions?
Primary Inuence On Website Visit % of Respondents (U.S.) 38% 19% 8% 8% 8%

MARKETING MIX: IS SOCIAL MEDIA WORTH THE COST?

Promotional emails

% of Respondents 64% 21%

This companys website Emails Promotional Postal mail Search Engine Results
TV, Newspaper, Radio or Magazine Ads

Familiarity with Brand

25% 10%

Dont want communications Television

Traditional marketing 11% 7% Internet Advertising techniques still Private Sectr Websites 2009/2010 5%YouTube) drive more trac. 8% Interaction on Social Network Twitter, Social media websites (Facebook, 3% Blogs or Discussion Forums

Word-of-Mouth Recommendation

Mobile phone text messages or alerts Radio

Shopping Comparison Website Product Review Website
0%

2% 2%
10% 20% 30%

5% 3%

Other

40%

2%

50%

Though only 8% said social media was their preferred way to hear from us, more than half seem to be willing to connect with us in some way on social media. When we asked all of the survey respondents which social media site would be their first choice, 40% chose Facebook. Twitter, an industry darling in the last few years, especially for technical and product support, registered only 4%.

I think as retailers, we sometimes assume that since everyone is using social media these days, everyone wants to hear from us on Facebook. In fact, only 8% of all of our site visitors prefer to hear from us on social media. Most prefer emails, our websites, and even snail mail.

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6 The ForeSee Results Report on Social Media Marketing (U.S. Edition)

MARKETING MIX: IS SOCIAL MEDIA WORTH THE COST?

Primary Inuence On Website Visit % of Respondents (U.S.) Which social media website would be your first choice for receiving communications from this company? Familiarity with Brand

% of Respondents 38% 47% 40%

None

Promotional Emails Search Engine Results 8% 8% 8% 7% 5% 3% 2% 2%

0% 10%

19%

TV, Newspaper, Radio or Magazine Ads

Facebook

Twitter Word-of-Mouth Recommendation YouTube

Advertising A website Internet not listed here Private Sectr Websites 2009/2010 Interaction on Social Network

LinkedIn Shopping Comparison Website MySpace Product Review Website Flickr

Blogs or Discussion Forums

4% Traditional marketing 2% techniques still drive more trac. 2% 2% 2%

20% 30% 40%

1%

50%

FiNDiNG #3: Facebook still rules, but is not as big a factor as we might think. Yet. We already know Facebook is becoming the number one website in the world in terms of traffic; this research shows that it is also the social network preferenceby farof the shoppers at the Top 40 retail websites. Two-thirds (66%) of online shoppers are regularly visiting Facebook this year (compared to 56% last year), and only one-quarter of online shoppers report that they dont use any social websites (down from one-third of respondents last year). These numbers are growing so fast that while we dont see social media (and Facebook in particular) as a huge driver of sales and traffic yet, MARKETING MIX: IS SOCIAL MEDIA WORTH THE COST? it could soon be a game-changer.
Primary Inuence On Website Visit % of Respondents (U.S.) Which social media websites do you use regularly? 2010 2011 Familiarity with Brand
Facebook YouTube Twitter LinkedIn MySpace Flickr Yelp

Promotional Emails Search Engine Results TV, Newspaper, Radio or Magazine Ads Word-of-Mouth Recommendation Internet Advertising Private Sectr Websites 2009/2010 Interaction on Social Network Blogs or Discussion Forums Shopping Comparison Website 3% 2% 2%
0%

56%

19% 66%
23% 13%

38% 18% increase

8% 22% 8% 11% 8% 8%
15% 5% 2% 2%
10% 31% 20%

7% 5%

11% marketing Traditional techniques still 10% 33% decrease drive more trac. 5% 3% 3% 24% 30% 22%40% decrease 50%

Product Review Website A social website not listed here

I dont use social websites

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7 The ForeSee Results Report on Social Media Marketing (U.S. Edition)

Heres an interesting twist. Ask people how they rate Facebook itself, and they give it, on average, a 64, according to a report from the ACSI last July. Thats a terrible score; people are not very satisfied with Facebook itself. Ask people how they rate the top 40 retail websites, and they give them, on average, a 78. Ask people how they rate Top 40 retailers presence on Facebook, and it averages an 80! This is a bit confusing, but basically, people are more satisfied with retailers Facebook pages than they are with the retail websites themselves or with Facebook itself. This information could mean that while Facebook stumbles as a website, it provides retailers with a valuable customer touchpoint that can actually be very satisfying.
Customer Touchpoints Facebook.com Top 40 Retailers Presence on Facebook Top 40 Retail Websites
50 60 65 70 75

Satisfaction Score

64 80 78
80

Private Sectr Websites 2009/2010

FiNDiNG #4: Let the customers be your guide. This research represents aggregate findings for the Top 40 retailers. All of us should know how many of our own customers are influenced by promotional emails or advertising on Facebook or word-ofmouth recommendations, and furthermore, we should know which group is most likely to buy. We should also know how people want to hear from us and how well were doing when it comes to communicating through those channels. We need to ask ourselves if social media is worth the investment. If we discover that the answer is yes, we need to make the most of it by making sure that everything about our interactions on social media meets the needs and expectations of our customers. Otherwise, the effort is wasted, and could even be detrimental.

About the Author

As President and CEO of ForeSee Results, Larry Freed is an expert on customer satisfaction and authors dozens of research papers and reports on the subject every year. Larry speaks extensively on the topic at private and public sector industry events and has been quoted in numerous publications and media, including CNN, Wall Street Journal, Washington Post, New York Times, Investors Business Daily, Internet Retailer, Internet Retailing, Multichannel Merchant, DM News, Computerworld, Federal Computer Week and Government Executive, among many others.

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8 The ForeSee Results Report on Social Media Marketing (U.S. Edition)

About the Research Team

Rhonda Berg, Research Manager at ForeSee Results, led the research team that worked on the 2010 ForeSee Results E-Retail Satisfaction Index (U.S. Holiday Edition). Rhonda manages many research initiatives, such as the annual Top 100 and Top 40 Retail Satisfaction Indices (both U.S. and U.K.) and the quarterly E-Government Satisfaction and Transparency Indices. She also serves as an internal consultant regarding statistics, methodology, and survey design. Rhonda has been a research professional for 20 years in a number of industries and holds advanced degrees in business and sociology.

About the Research Methodology

The social media findings reported in this paper are based on a survey of almost 12,000 visitors to the Top 40 e-retail websites (determined according to sales revenue as reported by Internet Retailers 2010 Top 500 Guide). Survey responses were collected by FGI Researchs Smart Panel. The study measured satisfaction among shoppers who visited the site, regardless of whether they ultimately executed a purchase online, providing insight into the performance of retail websites as research and purchase channels. ForeSee Results used the methodology of the American Customer Satisfaction Index (ACSI), developed at the University of Michigan, to determine the scores. The ACSI is the national standard for customer satisfaction and has been proven to have a direct link with stock prices and other measures of financial performance.

About ForeSee Results

As the leader in customer satisfaction measurement, ForeSee Results captures and analyzes voice of customer data to help organizations increase loyalty, recommendations and marketing value. Using a patented, scientific methodology developed at the University of Michigan, ForeSee Results identifies improvements across all channels and touch points that drive customer satisfaction. With more than 58 million survey responses collected to date and benchmarks across dozens of industries, ForeSee Results offers unparalleled expertise in customer satisfaction measurement and management around the globe.

ForeSee Results, a privately held company, is located in Ann Arbor, Michigan and at www.ForeSeeResults.com. Connect with ForeSee Results at http://www.foreseeresults.com/blogs-community/

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