Retail TouchPoints: Retailers Invest In Social Networks Despite Limited ROI

May 19, 2011

Through a special arrangement, presented here for discussion
is a summary of a current article from the Retail TouchPoints website.

are banking more on the qualitative advantages of a social media presence,
versus a quantitative ROI, according to The State Of Retailing Online 2011:
Marketing, Social, and Mobile report conducted by Forrester Research for "On
average, retailers report that only a small single-digit percent of sales can
be attributed to social media at this juncture," the report stated. "Close
to two-thirds (62 percent and 61 percent, respectively) of retailers surveyed
also note that the ROI associated with social is unclear and that the primary
ROI is around listening."

Results from Facebook investments, for example,
rank below investments in paid search, email and affiliate marketing. The most
popular social network also does not retain customers or attract new customers,
survey respondents noted. Only six percent said Facebook improves the lifetime
value of existing customers and one percent use it for customer acquisition.
Brand building (40 percent) and listening to customers (37 percent) currently
are the top two benefits of Facebook spending, according to the report.

retailers are increasing their social network investments. Approximately 72
percent of retailers surveyed said they will increase spending on social networks
in 2011, although SEO/natural search (75 percent) remains the top area receiving
an increase in marketing spend.

Sixteen percent of retailers reported an increase
in wireless/mobile marketing for 2011, although the number may be under-represented
because 61 percent of retailers are increasing their investment in paid search,
which also includes mobile. The tablet industry is helping to push mobile investments
up, with retailers reporting that 21 percent of all mobile traffic is coming
from tablets, even though the iPad was launched just one year prior to the

Generally, retailers are only in the initial stages of a refined mobile
strategy. Only 29 percent of retailers who have a strategy currently are working
to refine it, and another 28 percent are just implementing a mobile strategy
and/or starting to work on it.

The top goals for mobile are improving customer
satisfaction (64 percent) and developing brand loyalty (64 percent). Just over
57 percent are hoping to improve customer acquisition with mobile and 55 percent
are planning to improve customer retention.

"The data indicates that significant investments in social and mobile
tactics will be in place this year," added Sucharita Mulpuru, vice president,
principal analyst, Forrester Research. "Retail executives should have
modest expectations for the benefits of social commerce. With regard to mobile,
retailers should be working to increasingly integrate features and functionality
into the physical store experience. While consumers may not be extensively
exploring product information yet, basic store information, transparent pricing,
and easy checkout capabilities are likely to be the most pressing opportunities
for most sites in the near term."

Discussion Questions: Where should retailers be focusing their investments in social media and mobile commerce in the near term? What should be the top goals for improving social as well as mobile customer experiences?

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13 Comments on "Retail TouchPoints: Retailers Invest In Social Networks Despite Limited ROI"

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Max Goldberg
11 years 1 month ago

The top goal for retailers should be to dialogue with consumers. That’s what social media does best. Beyond that, it’s all promotional tactics, and retailers need to determine which tactics best fit their brand promise and budgets.

Anne Howe
11 years 1 month ago

Regarding social media spend and ROI:

Brand building (40%) and listening to customers (37%) currently are the top two benefits of Facebook spending, (for retailers) according to the report.

If I am the retailer CMO, I want these two more than you know. I want this because it allows me to understand how to differentiate from my biggest competitors. I want shoppers to help me build solutions for them that will improve all the other ROI metrics over the long term. I want shoppers to help define what the brand does for them and amplify it to others on their own terms, which are authentic and believable to others. If I give up on my branding and my shoppers, what do I have? Nothing worth fighting for.

Dan Frechtling
11 years 1 month ago

The survey indicates retailers are remarkably patient. Social and mobile spend is more experimentation than investment so far for a few reasons.

•Retailers want to buy options. Consumers increasingly spend time on social and mobile activity, especially in-store. Social media like Facebook and mobile tactics like location-based marketing represent new low-cost marketing and ability to measure response.

*Social and mobile impact established online marketing. Mobile represents more search queries, and social guides more search algorithms. SMS and wall posts replace email. A digital plan is incomplete without them.

*Social and mobile are commerce platforms, not just marketing channels. They differ from earlier online ads. Storefronts pop up on Facebook, flash sales and group buying attract both high and low end retail segments, and mobile optimized sites enable faster transactions.

As dollars shift from traditional marketing to digital, watch for more social and mobile experiments as retailers determine where the ROI is.

Tony Orlando
11 years 1 month ago

I am not very involved in the social media–as of yet–but I have been e-mailing my flyers for almost 8 years now, and it has helped quite a bit. I do catering proposals online, and also send internet alerts for great in and out deals, plus respond to customer questions, and take meat orders online.

I guess this is social media, and it works if we respond quickly and accurately. I always follow up a catering job with a personal phone call, or an e-mail if the customer prefers, and it keeps me informed as to how we are doing.

Any form of additional promoting online is good, if you put the effort in to make it work.

Ryan Mathews
11 years 1 month ago

Let’s deconstruct the phrase “social media” and I think the answer becomes clear.

Social implies the creation, sustaining and nurturing of a community.

Media speaks to communication and communication platforms.

That’s what social media can do for retailers–create and sustain a community through active and respectful communication.

That effort may or may not result in creation of sales but it goes a long way toward the creation of a sustainable customer base and that presumably will eventually result in sales.

Paul R. Schottmiller
Paul R. Schottmiller
11 years 1 month ago

Defining the ROI strictly by “social” and “mobile” is not the best strategy for determining investments. The game is multichannel or “omnichannel” with the customer at the center.

Investments to build capabilities and initiatives need to reflect today’s broader, more integrated customer reality.

Amy Kasza
Amy Kasza
11 years 1 month ago
Well done–at last we have a distinction between “qualitative” and “quantitative” ROI for social media. Seldom can you tie revenue generation directly to social media exposure any more than you can attribute a sale directly to a print ad or radio spot. (Coupons are the vehicle of choice for those who insist on a direct correlation between advertising and sales.) The Forrester findings support two very important points: social media is a marketing (brand building) *and* a customer service (listening) function. Roll that up and you discover that social media combines one-on-one and mass communications into one vehicle. Marketers know that advertising is a subset of marketing. “Marketing” in its broadest sense involves building relationships and creating engagement with a company, brand, or product. Coincidentally, social media is all about building relationships. And relationships are nothing to sneeze at. They are so important that one well-known marketer (@TedRubin) coined the term “ROR – Return on Relationship.” The desire for numerical ROI is natural for the retail industry. But try as we might, we aren’t going… Read more »
Camille P. Schuster, Ph.D.
11 years 1 month ago

As far as I can tell many companies are developing a Facebook strategy because their competitors are. Companies really need to be creating a social media strategy, determining which social media is used by their most valuable consumers, and then experimenting with different approaches to determine what strategies are most successful. Going on Facebook just to be there, to have a presence, or to keep up with competitors is not a good strategy.

alexander keenan
alexander keenan
11 years 1 month ago

CRM also had a low ROI until some retailers learned how to make it work. It is likely that Social Networks are now in a similar phase. It is also likely that two ROIs will be required. First ROI will be on the customer side offering value to customer and the second will be on organization side with ROI based on organizational strategy.

John Boccuzzi, Jr.
John Boccuzzi, Jr.
11 years 1 month ago

Social media should not be treated as advertising, but a stronger, open and more personal communication/conversation with consumers. Your message needs to be clear, important (not to you, but the customer) and timely. If you are not thinking about this when creating your social media platform, spend your energy doing something else. Whole Foods shares “How To” YouTube videos, recipes and open ended questions on their facebook page. It’s no wonder they have over 650,000 likes.

For example, 20 hours ago Whole Foods asked this simple question to kick off a conversation with consumers “What does Healthy eating mean to you?” Over 700 people liked this comment and responded. As you read through the responses it is clear Whole Foods is learning a tremendous amount about not only what consumers want, but as important what they don’t want. In the past this research might have cost a small fortune. Today, thanks to social media it costs a fraction of that.

John Karolefski
11 years 1 month ago

Retailers should use social networking to engage shoppers and create an ongoing dialogue with them. The more shoppers are involved with he local store, the better. Retailers need the staff to mine the dialogue to take away actionable insights.

Herb Sorensen, Ph.D.
11 years 1 month ago
“qualitative advantages of a social media presence, versus a quantitative ROI” This is just too rich. A half dozen years a media company representing one of the top ten retailers in the US came to me to discuss metrics for their initiatives, and were so excited that they could now see a direct impact of their media in the T-logs of the retailer. Two or three years later they were still excited as they explained how the retailer had determined that the principle value of their in-store media program was “brand building.” And a year or so after that they were in bankruptcy. I’m pretty sure that “brand building” is a reasonable surrogate of “qualitative advantages.” It’s another way of saying we have NO substantive evidence that it is worthwhile. Personally, I am all in favor of some support for some blue-sky research, and happen to believe that both social media and mobile will be effective SOMEDAY. Meanwhile, it is likely that hundreds of millions will go down the drain with “mud on the wall”… Read more »
Phil Rubin
Phil Rubin
11 years 1 month ago
It says a lot that retailers are increasingly investing in social for a number of reasons, not the least of which is that retailers are investing categorically in customer marketing at an increasing rate. The investment speaks to the increasing challenge to better understand, listen to and be relevant to customers. Customers are engaged socially with each other and among the topics they discuss are retail brands and goods they are purchasing. Retailers are data-challenged and the more they can understand the better. Social helps, even if it is in a qualitative way. Over time it will have increasing quantitative value. Next, the investment speaks to retailers increasingly attempting to create differentiation and brand distinction. This is a contrast to years past when everyone wanted to carry the same merchandise and grow by adding stores rather than marketing. Finally, the investment illustrates that retailers are starting to take a longer-term view of marketing. We see this as reflective and consistent with the broader commitment to CRM and the recognition that CRM and customer loyalty are… Read more »

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