A Big Payoff from Online Company Communities

strategy + business magazine:

Membership engages customers, who spend more across the board.

Title: Social Dollars: The Economic Impact of Customer Participation in a Firm-Sponsored Online Community

Authors: Puneet Manchanda, Grant Packard, and Adithya Pattabhiramaiah (all University of Michigan)

Publisher: Ross School of Business Working Paper

Date Published: January 2012

Image via CrunchBase

Studies show that consumers are spending more of their leisure time online, and U.S. marketers are flocking to third-party social networks such as Facebook and Twitter to reach them. But companies as diverse as Amazon, Buy.com, Disney, IKEA, Kraft Foods, Lego, and Procter & Gamble are also making major investments to build their own consumer-centered online communities. According to a 2011 survey, nearly half of the top 100 global brands host some kind of network.

... This paper, among the first to tackle the question empirically, tracked the effect of consumer membership in one company-sponsored online network on the amount of money members spent on the firm’s products. Although based only on a single case study, the results appear to be a significant affirmation of the economic value of these networks: The authors found that revenue from members increased by an average of 19 percent after they joined, a result of closer ties with other customers and more engagement with the company.

The revenue increase, called “social dollars” in the paper, represents spending that is over and above the members’ purchase history with the firm — and it similarly exceeds the spending of a control group of comparable consumers who did not join the network.

This increase in income is “economically significant for the firm as it more than covers the fixed cost of setting up the community as well as the variable cost of operating it,” the authors write. The increase is neither a novelty nor a cannibalizing threat to a company’s retail stores, they add. Rather, they say, the jump in social dollars “persist[s] over time, arise[s] in both online and offline channels, and affect[s] all product categories sold by the firm.”

The authors based their analysis on data obtained from a large North American retailer of entertainment and information-related media, such as books, movies, and music. The firm is the largest retailer in its market in terms of sales and operates in both retail store and online environments; about 10 percent of its total revenues came from Internet purchases in 2009.

The company’s online community is similar to Facebook’s — members can manage a profile page that allows them to post personal and product-related messages, convey a sense of their personality and interests, and display their status in the community. There are private and public discussion boards so users can establish friendly ties, start up special interest groups (for example, the “Vampire Movie Lovers Club”), and publish Top 10 lists or product reviews. ...

After controlling for several factors, the authors found that the quantity and quality of friendly relationships with other customers was key. Customers who had many friendly relationships, or who befriended more important or prominent customers, were likely to spend more on the firm’s products. Those who displayed more products on their profile page also tended to rack up purchases.

It doesn’t require many participants to earn a return on the investment of establishing an online community, the authors found. Based on the projected volume of social dollars taken in, and the costs and firm-level margins available in public financial statements, the authors’ conservative estimate is that the firm broke even on its investment when 33,000 of its existing customers signed up.

“Given that the firm acquired 260,000 members within the first fifteen months after community launch, this was clearly a very profitable investment for the firm,” the authors write, “especially as this number is comprised of a mix of both current and newly-acquired customers.”

Aside from the direct economic benefits of setting up the community, the firm has much to gain in other ways. For example, the data paints a clear picture of each customer’s preferences and behavior, the authors write, which is “an informational boon for customer relationship management and other life-cycle based marketing strategies.”

By monitoring which products are becoming more popular and identifying who is discussing them, marketers can optimize their promotional strategies. And the firm also disclosed to the authors that the massive amount of user-generated content produced via the community strongly improves the company’s position in major online search engines.

A segment of a social network (Photo credit: Wikipedia)

“While it is likely that hosting customer communities on third-party websites such as Facebook provides reach to a broader audience,” the authors conclude, “this strategy does not offer the same level of access and control over customer interaction management and data offered by a firm-sponsored social network, nor is the third-party community interaction data commonly available to the firm in a manner that can be easily linked to customer-level purchase behavior.”

Bottom Line:
Consumers who join a company’s online community spend significantly more on the firm’s products than they did prior to signing up or in comparison with similar customers who are not part of the network. The findings indicate that online communities more than justify the investment to create and maintain them, and provide a unique way for companies to connect with customers and monitor their purchases and behavior.

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How to Become Ubiquitous

Image via Wikipedia

Harvard Business Review
8:04 AM Thursday July 14, 2011
by Dorie Clark | Comments ( 22)
This post is part of the HBR Insight Center Marketing That Works.

… I steeled myself for the onslaught: replying to the hundreds of emails that had built up while I'd been on a luxurious 12-day vacation to Spain. Like many professionals, I have a complicated relationship with holiday — coveting the idea of relaxation, while dreading the idea of being out of touch. …

The trip had been incredible — the best of Barcelona, Madrid, and Marbella — but I returned feeling guilty and slightly panicked. … And that's when I spotted Mimi, one of the most connected players in town. She smiled and walked over to my table. "How's it going?" she said. "You're everywhere."

In that moment, I realized you don't have to be present in order to be ubiquitous.

Ubiquity, of course, is a major marketing goal. You want to be top of mind for your customers, so they're calling you (not your competitors) … .  Here are four strategies to consider:

1. Schedule your social media presence. … Every few months, I'll lock myself away for an afternoon and come up with a few hundred nuggets to post on Twitter. You can schedule them weeks or months in advance via services like Hootsuite or Tweet Deck. … Similarly, you can use Wordpress or other services to schedule upcoming blog posts.
2. Respond quickly when it matters. … If you have a corporate assistant, ask him or her to monitor your email and call you if anything urgent arises. If you're a solo practitioner, shell out for a virtual assistant through a service like Elance. …
3. Enlist messengers. Perhaps the best way to seem like you're everywhere is to get other people talking about you. … Specifically ask for referrals (which "forces" people to talk about you), cultivate reporters, attend networking events, and create a robust portfolio of content, from blog posts to white papers. …
4. Go somewhere cool. Sometimes, inevitably, you'll miss something important because you're away. … You may never make [your suitors] happy — but you can at least intrigue them. "I'm on vacation" is a fairly boring, lazy-sounding excuse. But — "I apologize for the delay in getting back to you; I just got back from Puerto Rico"… is a fascinating conversation starter. So consider this your permission to go somewhere fabulous and make the best of it.

What are your strategies for becoming ubiquitous? And how do you ensure the people who matter are talking about you?

Dorie Clark

Dorie Clark is a strategy consultant who has worked with clients including Google, Yale University, and the National Park Service. She is the author of the forthcoming What's Next?: The Art of Reinventing Your Personal Brand (Harvard Business Review Press, 2012).

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A new way to measure word-of-mouth marketing

Assessing its impact as well as its volume will help companies take better advantage of buzz.

McKinsey Quarterly
APRIL 2010 • Jacques Bughin, Jonathan Doogan, and Ole Jørgen Vetvik

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Consumers have always valued opinions expressed directly to them. … As consumers overwhelmed by product choices tune out the ever-growing barrage of traditional marketing, word of mouth cuts through the noise quickly and effectively.
Indeed, word of mouth¹ is the primary factor behind 20 to 50 percent of all purchasing decisions. … And its influence will probably grow: the digital revolution has amplified and accelerated its reach to the point where word of mouth is no longer an act of intimate, one-on-one communication. …
As online communities increase in size, number, and character, marketers have come to recognize word of mouth’s growing importance. But measuring and managing it is far from easy. … Understanding how and why messages work allows marketers to craft a coordinated, consistent response that reaches the right people with the right content in the right setting. …

A consumer-driven world

… As consumers have become overloaded, they have become increasingly skeptical about traditional company-driven advertising and marketing and increasingly prefer to make purchasing decisions largely independent of what companies tell them about products.
This tectonic power shift toward consumers reflects the way people now make purchasing decisions.² Once consumers make a decision to buy a product, they start with an initial consideration set of brands formed through product experience, recommendations, or awareness-building marketing. … [Consumers] gather product information from a variety of sources and decide which brand to purchase. Their post-sales experience then informs their next purchasing decision. While word of mouth has different degrees of influence on consumers at each stage of this journey (Exhibit 1), it’s the only factor that ranks among the three biggest consumer influencers at every step.

Exhibit 1: Word of mouth is influential throughout the consumer decision journey.
It’s also the most disruptive factor. Word of mouth can prompt a consumer to consider a brand or product in a way that incremental advertising spending simply cannot. … In the mobile-phone market, for example, we have observed that the pass-on rates for key positive and negative messages can increase a company’s market share by as much as 10 percent or reduce it by 20 percent over a two-year period, all other things being equal. This effect alone makes a case for more systematically investigating and managing word of mouth.

Understanding word of mouth

While word of mouth is undeniably complex and has a multitude of potential origins and motivations, we have identified three forms of word of mouth that marketers should understand: experiential, consequential, and intentional.

Experiential

Experiential word of mouth is the most common and powerful form, typically accounting for 50 to 80 percent of word-of-mouth activity in any given product category. It results from a consumer’s direct experience with a product or service, largely when that experience deviates from what’s expected. …

Consequential

… The most common is what we call consequential word of mouth, which occurs when consumers directly exposed to traditional marketing campaigns pass on messages about them or brands they publicize. …Marketers need to consider both the direct and the pass-on effects of word of mouth when determining the message and media mix that maximizes the return on their investments.

Intentional

A less common form of word of mouth is intentional—for example, when marketers use celebrity endorsements to trigger positive buzz for product launches. …
What marketers need for all three forms of word of mouth is a way to understand and measure its impact and financial ramifications, both good and bad.

Word-of-mouth equity

A starting point has been to count the number of recommendations and dissuasions for a given product. There’s an appealing power and simplicity to this approach, but also a challenge: it’s difficult for marketers to account for variability in the power of different kinds of word-of-mouth messages. … In fact, our research shows that a high-impact recommendation—from a trusted friend conveying a relevant message, for example—is up to 50 times more likely to trigger a purchase than is a low-impact recommendation.
To assess the impact of these different kinds of recommendations, we developed a way to calculate what we call word-of-mouth equity. … By looking at the impact—as well as the volume—of these messages, this metric lets a marketer accurately test their effect on sales and market share for brands, individual campaigns, and companies as a whole (Exhibit 2). That impact—in other words, the ability of any one word-of-mouth recommendation or dissuasion to change behavior—reflects what is said, who says it, and where it is said. It also varies by product category.

Exhibit 2: By looking at impact as well as volume, marketers can measure the effects of word-of-mouth messages more accurately.

Image via WikipediaWhat’s said is the primary driver of word-of-mouth impact. Across most product categories, we found that the content of a message must address important product or service features if it is to influence consumer decisions. In the mobile-phone category, for example, design is more important than battery life. … Marketers tend to build campaigns around emotional positioning, yet we found that consumers actually tend to talk—and generate buzz—about functional messages.

The second critical driver is the identity of the person who sends a message: the word-of-mouth receiver must trust the sender and believe that he or she really knows the product or service in question. … About 8 to 10 percent of consumers are what we call influentials, whose common factor is trust and competence. Influentials typically generate three times more word-of-mouth messages than noninfluentials do, and each message has four times more impact on a recipient’s purchasing decision. About 1 percent of these people are digital influentials—most notably, bloggers—with disproportionate power.
Finally, the environment where word of mouth circulates is crucial to the power of messages. Typically, messages passed within tight, trusted networks have less reach but greater impact than those circulated through dispersed communities—in part, because there’s usually a high correlation between people whose opinions we trust and the members of networks we most value. …
Word-of-mouth equity empowers companies by allowing them to understand word of mouth’s relative impact on brand and product performance. … When Apple’s iPhone was launched in Germany, … its share of word-of-mouth volume in the mobile-phone category—or how many consumers were talking about it—was about 10 percent, or a third less than that of the market leader. Yet the iPhone had launched in other countries, and the buzz accompanying those messages in Germany was about five times more powerful than average. This meant the iPhone’s word-of-mouth equity score was 30 percent higher than that of the market leader, with three times more influentials recommending the iPhone over leading handsets. As a result, sales directly attributable to the positive word of mouth surrounding the iPhone outstripped those attributable to Apple’s paid marketing sixfold. …

Harnessing word of mouth

The rewards of pursuing excellence in word-of-mouth marketing are huge, and it can deliver a sustainable and significant competitive edge few other marketing approaches can match. … [The] incremental gain from outperforming competitors with superior television ads, … is relatively small. That’s because all companies actively manage their traditional marketing activities and all have similar knowledge. With so few companies actively managing word of mouth—the most powerful form of marketing—the potential upside is exponentially greater.
The starting point for managing word of mouth is understanding which dimensions of word-of-mouth equity are most important to a product category: the who, the what, or the where. In skincare, for example, it’s the what; in retail banks, the who. Word-of-mouth-equity analysis can detail the precise nature of a category’s influentials and pinpoint the highest-impact messages, contexts, and networks. …
… Harnessing experiential word of mouth is fundamentally about providing customers with the opportunity to share positive experiences and making the story relatable and relevant to the audience. … [Consumers] are more likely to talk about a product early in its life cycle, which is why product launches or enhancements are so crucial to generating positive word of mouth. Buzz also can be sustained after launch: …
… To create positive word of mouth that actually has impact, the customer experience must not only deviate significantly from expectations but also deviate on the dimensions that matter to the customer and that he or she is likely to talk about. For instance, while battery life is a crucial driver of satisfaction for mobile-handset consumers, they talk about it less than other product features, such as design and usability. …
Managing consequential word of mouth involves using the insights provided by word-of-mouth equity to maximize the return on marketing activities. …. In fact, McKinsey research shows that marketing-induced consumer-to-consumer word of mouth generates more than twice the sales of paid advertising in categories as diverse as skincare and mobile phones.
Two things supercharge the creation of positive consequential word of mouth: interactivity and creativity. … One example of a company successfully harnessing this power is the UK confectioner Cadbury, whose “Glass and a Half Full” advertising campaign used creative, thoughtful, and integrated online and traditional marketing to spur consumer interaction and sales.
The campaign began with a television commercial featuring a gorilla playing drums to an iconic Phil Collins song. … The concept so engaged consumers that they were willing to go online, view the commercial, and create amateur versions of their own, triggering a torrent of YouTube imitations. Within three months of the advertisement’s appearance, the video had been viewed more than six million times online, year-on-year sales of Cadbury’s Dairy Milk chocolate had increased by more than 9 percent, and the brand’s positive perception among consumers had improved by about 20 percent.
Intentional word-of-mouth campaigns revolve around identifying influentials who become brand and product advocates. … [Ambitious] marketers can use word-of-mouth equity insights to shift from consequential to intentional campaigning.

Image via WikipediaThe type of campaign that companies choose to adopt depends on the degree to which marketers can find and target influentials. … Mobile carriers have granular customer data that can precisely locate influentials who know the category, talk to many people, and provide them with trusted opinions. That means messages can be directed at specific individuals who are most likely to spread positive word of mouth through their social networks. As a message spreads, this approach generates an exponential word-of-mouth impact, similar to the ripple effect when a pebble is dropped in a pond.

Companies unable to target influentials precisely must take a different approach. While Red Bull, for example, can’t send text messages to specific consumers, it has successfully deployed science to orchestrate effective intentional word-of-mouth campaigns. After identifying influentials among its different target segments, the energy-drink company ensures that celebrities and other opinion makers seed the right messages among consumers, often through events. While it can’t be sure who will attend, Red Bull knows that those who do will be the kinds of consumers it seeks—and that the positive messages they will relay across their own social networks can generate a superior return for its marketing investment.
Marketers have always been aware of the effect of word of mouth, and there is clearly an art to effective word-of-mouth campaigning. Yet the science behind word-of-mouth equity helps reveal how to hone and deploy that art: it shows which messages consumers are likely to pass on and the impact of those messages, allowing marketers to estimate the tangible effect word of mouth has on brand equity and sales. These insights are essential for companies that want to harness the potential of word of mouth and to realize higher returns on their marketing investments.

About the Authors

Jacques Bughin is a director in McKinsey’s Brussels office, Jonathan Doogan is an associate principal in the London office, and Ole Jørgen Vetvik is a principal in the Oslo office.

Notes

¹ The term word of mouth, as used in this article, means consumer-to-consumer communication with no economic incentives. The sender may, however, reap social gratification or rewards.
² See David Court, Dave Elzinga, Susan Mulder, and Ole Jørgen Vetvik, “The consumer decision journey,” mckinseyquarterly.com, June 2009.

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Unlocking the elusive potential of social networks

To realize the marketing potential of virtual activities, you have to make them truly useful for consumers.

McKinsey Quarterly

JUNE 2010 • Michael Zeisser

There is much hype about social networks and their potential impact on marketing, so many companies are diligently establishing presences on Facebook, Twitter, and other platforms. Yet the true value of social networks remains unclear, and while common wisdom suggests that they should be tremendous enablers and amplifiers of word of mouth, few consumer companies have unlocked this potential. At Liberty Interactive, which comprises many specialty e-commerce companies, we wrestle daily with the question of how to realize the promise of social networks.

… When you think of word of mouth as media, it becomes a form of content, and businesses can apply tried-and-true content-management practices and metrics to it. In addition, word of mouth generated by social networks is a form of marketing that must be earned—unlike traditional advertising, which can be purchased. We therefore concluded that we could succeed only by being genuinely useful to the individuals who initiate or sustain virtual world-of-mouth conversations.

So what does it mean to be useful in a world of virtual conversations enabled by social networks? … We have … learned a few lessons that can be encapsulated in two primary insights. First, a powerful way for a brand to be useful in the virtual world is to confer social importance on its users. Second, “virtual items” are critical to stimulating social interactions that may in turn generate word of mouth.

The power of importance

An effective way for a brand to be useful in the context of social networks is to make people who originate a word-of-mouth conversation seem important within their own social environment. Recognition by peers is a powerful motivator, and brands that allow users to gain it deliver real perceived value. When users publicize that recognition, it translates into word of mouth. Companies can confer this kind of importance—for example, by issuing achievement “badges” that users can post to their Facebook profiles or by deploying leader boards or achievement scores of all types. As Web sites evolve to become increasingly dynamic experiences that let people interact in real time, the value to core users of being recognized for their prominence in a community will only increase.

We’ve also learned never to underestimate the value consumers place on opportunities to brag online about their achievements. That’s made significantly easier through the clever integration of a Web site with Facebook and Twitter. We see this phenomenon daily—for example, on the forums of our Bodybuilding.com site. When members boast of reaching their target weight or other goals with help from Bodybuilding.com workouts, we receive authentic and credible word-of-mouth endorsements at almost no cost. In fact, if recent behavioral research is accurate, these experiences can create “contagions” in which the behavior of users is mirrored by their networks of friends, amplifying the word-of-mouth effect and reflecting well on the underlying brands.

The allure of virtual items

It’s our strong intuition that virtual items play an important role in facilitating virtual word of mouth. … While the notion of virtual goods—nonphysical objects used in online communities and games—still puzzles many executives, it’s quite apparent that consumers love them. People acquire or compete for virtual items obsessively on Foursquare, Zynga, and many other sites. …

So why do consumers pay real money for online objects that don’t actually exist? Their motives reinforce our notion that users seek online importance: they purchase virtual goods primarily for self-expression (such as virtual houses or virtual gifts) and for recognition (such as virtual badges for becoming, say, the “mayor” of a bar on Foursquare). … Brands should actively experiment with ways to use virtual goods as catalysts of word-of-mouth media.

Virtual gifting is becoming an important consumer activity among Facebook members. Today, much of this activity is free, but Facebook is introducing a virtual-currency “credit” system that will allow sellers to get real dollars for their gifts and other items. In the context of a social network, it is not a stretch to conceive of virtual gifts as important objects, especially as their availability can be strictly limited. …

We’ve also found that basic laws of consumer behavior still apply: consumers love a bargain, and companies should take full advantage of social networks as powerful notification tools. Users can be alerted to sales or to the expiration of a promotion, but companies must be mindful that these feeds and tweets are designed as catalysts to generate virtual word-of-mouth media. They are not social-media junk mail, but legitimate content objects—actual pieces of media that we want the initial recipients to distribute to their friends.

One final recommendation: no gimmicks. Forget dancing monkeys, artificial contests, or stupid tricks; they add no value and waste people’s time. A commitment to being useful in social-media activities means a commitment to creating only high-quality interactions. Again, regarding word of mouth as a media product makes it easier to define what quality means for your particular activities. There are clearly many ways for brands to make themselves useful to consumers, so managing virtual word of mouth goes well beyond maintaining a Facebook page or a Twitter account. Exactly how far remains to be seen, and companies should apply an experimental mind-set, while being careful not to overinvest.

Word-of-mouth marketing through social networks could emerge as an important tool in the marketer’s arsenal. That will depend on whether marketers can tame the fundamentally unpredictable and serendipitous nature of word of mouth without losing what makes it so valuable in the first place—its authenticity.

About the Author

Michael Zeisser, an alumnus of Mckinsey’s New York office, is a senior vice president at Liberty Media.

Point-and-click productivity

Research finds Web 2.0 social media are infiltrating the workplace, can add to employee effectiveness

Employee Benefit News
By Lydell C. Bridgeford
June 15, 2009
…Social media pundits argue that more employers need to make employees' interest in Web 2.0 tools work for them by investing in technology that allows workers to engage in social media conversations.
Social networks, blogs, microblogs (Twitter), text messaging, wikis and gaming technology all have the potential to improve workers' productivity and the marketing of benefits programs. And, keeping in mind that cost is a particular concern for employers right now, observers also point out that employees do not have to be tech-savvy to use social media tools, and the technology does not eat away at the IT budget.
Research confirms that workers are using social media tools at home to access information that they desire. Therefore, employers should be able to leverage those tools in their communication strategies, says Ken Groh, vice president of Human Capital at Aon Consulting.
Social media footprint
Aon recently studied how workers used Web 2.0 media at home and at work. Researchers surveyed more than 8,000 employers in the private and public sectors.
Aon analysts find that, despite employers' belief that Web 2.0 media may detract from productivity, workers — both millennials (born 1980 and later) and nonmillennials — are leveraging the technology to perform their jobs.
For example, 65% of nonmillennials and 72% of millennials report using their company's intranet for their job duties, while 25% of nonmillennials and 38% of millennials utilize text messaging for work purposes.
In addition, 46% of nonmillennials and 48% of millennials use instant messaging as part of their job assignments, while 13% of nonmillennials and 20% of millennials belong to job-related social networks. About 8% of nonmillennials and 13% of millennials use blogs in a work-related context. …
"Web 2.0 is still a relatively unknown quantity for many companies," says Michael Rudnick, senior technology consultant at Watson Wyatt. "However, the move toward Web 2.0 is an inevitable shift."
Watson Wyatt finds that companies are using a variety of Web 2.0 technologies, such as social networking (23%), podcasts (19%), blogs (21%) or wikis (15%) to communicate internally with their employees. …
An information-centered society
Web 2.0 social media offers great opportunity to tap into new markets, reach new customers and create a more seamless working environment — if employees are given the tools and training to use them effectively, says Dr. Jennifer Bott, a marketing and management associate professor at Ball State University. "The technology will become a critical partner in achieving success in the leaner marketplace," she adds.
Bott and her team find that some employers are willing to pay higher salaries to new hires skilled in Web. 2.0 technologies.
About 67% of companies are inclined to add a 1% to 4% increase to salaries for applicants who possess those skills. Of the 229 employers polled, 23% are willing to ante up 5% to 8% more.
"[B]usinesses place a high value on employees who are comfortable in working with communication technologies that are rapidly changing," says Bott, a co-author of the study, "Emerging Media: Prevalence and Impact in the Workplace."
Overall, the survey reveals that 93% of employers believe it is somewhat or very important for employees to have knowledge about e-mail software, mobile computing, podcasts, digital audio or media players, mobile communication devices, instant messaging and interactive Web pages and blogs.
Training, monitoring is essential
The social media spectrum creates a workplace where employees have access to a constant stream of timely information about the company's benefits programs and business objectives. They can also provide instant feedback about those programs and objectives. …
As the use of new digital and media devices begins to dominate the workplace, companies have found it necessary to implement policies to control e-mail use (adapted by 89% of respondents) and Internet surfing (79%), while 67% said they monitor privacy abuse, and 60% expressed concerns about security, according to the survey by Ball State University.
Despite the demand for employees with social media skills, 77% of those polled provide little or no media training to current employees. …
"One of the pitfalls in rolling out social media tools in the workplace is that employers will just drop it on employees and expect them to use it," says Groh.
Companies will need to help workers to understand, first of all, how to use the technology and how to apply it within the context of their job duties, Groh explains.
For example, "if you roll out instant messaging, people will pretty much learn how to use it on their own, but will they understand how to use the full power of the technology?"

---

Associate Editor Kathleen Koster contributed to this report.

3 Technologies to Help You Take Advantage of the Economic Recovery

Business.Gov

08-17-2009 04:38 PM

By smallbiztrends

Twenty-seven economists polled by the Wall Street Journal said that the Great Recession is over*. …

I don't know whether these economists are right or wrong.

But I do know this: ALL recessions eventually end. At some point I assure you there will be an end ... and customer demand will pick up. …

When the recovery happens, you want to be ready to jump on opportunities. If the recession's been tough on your business, consider the recovery a time for a reboot. With that in mind, here are 3 tools that can help your small business sell more and do so profitably, as the recovery takes hold:

1) CRM Software

CRM stands for "customer relationship management." … The real question is, what does customer relationship management add to your bottom line? How important is it?

Let me drive the point home in dollars and cents. It's a lot cheaper to retain existing customers and sell more to them, than it is to go out and find new customers. According to Brent Leary, Principal of CRM Essentials*: "Even in good economic conditions it can be 10 times more expensive to bring on new customers as it is to keep the ones we have. Small businesses are turning to CRM applications to help extend relationships with current customers, while increasing opportunities to connect with prospects more efficiently."…

One of the key metrics I urge you to start tracking if you don't already, is "customer acquisition cost." Know what it costs you to get a new customer. When you start tracking that metric, you will begin to appreciate the dollars-and-cents value of CRM.

2) Email Marketing Solution

Email marketing is a fantastic way to market to existing customers - at one-fifth or less of the cost of direct mail (snail mail). …

There are many email marketing software solutions on the market today that automate the entire process -- from signup, through managing your list database, to designing and sending bulk emails. A key advantage of using an email marketing software solution is that it saves a lot of time and labor, versus sending out emails on your own, managing your subscriber list manually through a spreadsheet, etc. …

However, I caution you not to assume that email marketing is right for every situation. Paper direct mail still is a far better way to get NEW customers. … Prospecting for new customers is one situation when email marketing has not replaced paper direct mail - here are some other situations*.

3) Website Analytics

It's easy to fall into the trap of thinking that putting up a website is a one-time event. …

Websites are living breathing organisms. In fact, today you can think of your Web presence as an ecosystem. You have a presence in microcommunities (i.e., other websites, including social media sites) and those presences work together with your website. And then there are the search engines, which index your website's pages for various keywords, and bring potential customers to your virtual door when they search for those keywords. It's all dynamic and constantly changing and evolving.

It is crucial to know about your website traffic, if you want your website to help get sales. Because if you don't know what's happening on your website, how can you know what to improve?

Install a good analytics package. Google Analytics is free and is a solution that many small businesses start with. Examine the data it generates, regularly. It's a goldmine!

(1) It tells you where your traffic is coming from. You will see which sites or search engines are sending visitors; which keywords or search terms people used to get there; the links they clicked on. This can tell if you need to develop more inbound links, or do a better job with content for more relevant search terms, and so on.

(2) It tells you information about your visitors. You'll learn which countries they come from; which days and times they like to visit; which browsers they use; even what screen resolution they have. This tells you who you are appealing to, and provides design considerations for your website.

(3) It tells you what's working in your website - and what isn't. You will see how long people stay, which pages they abandon, or whether they are converting to paying customers from particular online ads but not others. This will help you improve your website, your graphics and content, and your online ad campaigns. Sometimes a small change (moving a graphic from one spot to another, or a change in wording) makes a big improvement.

In conclusion, the above 3 tools are not the only ones, but they are worth their weight in gold. They will not only help you sell more, but do so cost effectively and efficiently.

*This hyperlink goes to a non-governmental web site.

What Do Prospects Find When They Google You?

Proper online marketing is an essential business tool that advisors can no longer do without.

• By JANE WOLLMAN RUSOFF

Published in the 5/1/2009 Issue of Research Magazine.

…Pointed question: What do prospects discover when they google you?

If the results amount to anything short of a strong Web presence, you should begin crafting one right away. …

Internet marketing starts with a professional, effective website. …

Beyond the basic site, your plan of action might focus, too, on a host of ever-evolving high tech tools, such as a blog, audio podcasts, video clips, social-networking (Facebook, Twitter, etc.), paid advertising on others’ sites and more.

Online marketing is no hula hoop fad: The medium is here to stay — and growing more sophisticated with every new cyberspace advancement.

“If done right, websites are part of the sales process,” says Jay Nagdeman, president of Suasion Resources, specializing exclusively in financial services marketing for 27 years. …

A website is “an essential element in everybody’s marketing toolkit,” says Nagdeman. And a prospect’s initial visit to one is the first stop in creating the all-important … relationship.

“You’re building confidence by moving the user step by step. If you don’t motivate people to move on to the next level in the process — to contact your firm — your website hasn’t done its job,” says Nagdeman, author of the just released “The Professional’s Guide to Financial Services Marketing” (April 2009, John Wiley & Sons). …

Social Networking

In the Internet’s first phase, financial services sites, featuring calculators and the like, were among the first to be interactive. … Nowadays, though, that sort of interactivity is “almost passé,” says William Rice, president of the Web Marketing Association, in Simsbury, Conn. To really wow people today, he says, you need to provide much more sophisticated interactivity — a new phase referred to as Web 2.0, which is distinguished by user-created content. Examples include blogging, Facebook, YouTube, LinkedIn and Twitter…

What’s neat is that most of these newer online services can be interconnected. For instance, your business profile on LinkedIn can be tagged back to your website. There, you might have a link to your blog, where you can elaborate on the brief tweets you post on Twitter. If you’re involved in community activities or enjoy strategic partnerships, you can cross-link with those sites too.

“Web 2.0 services position you as a savvy business person,” says Marie Swift, president of Impact Communications, in Leawood, Kansas. “It’s also a way to be novel and to have reason for people to want to interact with you and start a dialogue.”

But, cautions Swift, “don’t spend all your time blogging and tweeting. Do it quickly and consistently, then get out there and meet people because nothing is going to replace face-time.”

The Way of the Web

… As Swift puts it, [a business owner’s] website “should be perceived as a ‘virtual lobby” or waiting room,” … “That first impression is very important.”

But communicating with prospects on the Web is different from communicating in print media; and, says Nagdeman, “virtual selling has its own conventions, behaviors and pitfalls.”

Since most visitors merely scan text rather than read it word for word, online content must be broken up into small chunks and written in short, snappy bites. The idea is to let visitors progressively drill down to find the more detailed information they may be seeking.

“The secret to having the website accomplish something for you is to make it personal and interactive,” says Nagdeman, based in Roseland, N.J. “It’s not enough to simply post your standard sales pitch and brochure… Make [the site] engaging and easy for people to navigate so it becomes a very fluid instrument for research.”

A Low-Cost Investment

Online marketing is a surprisingly cost-efficient way to connect with clients and prospects. …

“The biggest negative is to have a generic website,” Nagdeman says. “There are so many cookie-cutter sites out there that…all look the same. They aren’t customized in communicating who the firms are, what they do and why somebody should be a client.”…

Andrew Schlossberg, chief marketing officer of Invesco AIM, cautions, however, that “if an advisor’s website isn’t targeted, topical and timely, with compelling content, it can have all the bells and whistles — Twitter, podcasts [etc.] — but it’s probably going to be irrelevant.”

Search-Engine Success

To drive visitors to your site, ideally it should emerge high in search engine results when a prospect types in, for example, “financial advisors” and your locale. The process called search engine optimization (SEO) can help affect that.

“Websites have to be coded and worked so they will give you high organic rankings in a search,” Nagdeman notes.

It’s not a simple matter, though. Each engine has its own variables that determine which results turn up at the top. Moreover, the variables are always changing. And though you may show up high in Google results, that may not be the case in a Yahoo search.

To help search engines recognize your site, make sure your Web address and keywords appear on other credible sites that use the same keywords (e.g., “IRA rollover”). Such words should be in your headlines and subheads and repeated throughout the site. Services like www.ineedhits.com can be employed to help raise a site’s prominence.

For improved visibility, you might try search engine marketing (SEM) — mainly paid advertising, such as pay-per-click campaigns, on others’ websites. With Google AdSense, you can target prospects in a specific zip code for as little as 15 cents per click, depending on your total campaign.

“SEM makes people aware that you’re in the community doing positive things and that you might be somebody for them to talk with,” Nagdeman says….

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Web Do’s

A website should differentiate you from other advisors by spotlighting your unique value proposition. “You’re able to get a competitive advantage by engaging visitors in a personal, memorable way,” says Jay Nagdeman, president of Suasion Resources, whose new consulting division, Online Financial Marketing, helps advisors and planners implement virtual selling.

In setting up a website:

- Determine whom you want to attract.

- Integrate with your broader marketing strategy.

- Support brand identity.

- Emphasize your services’ benefits.

- Compose text in short, punchy bites.

- Control navigation by using headlines and bold-face fonts.

- Stress professional experience in bios; mention outside interests.

- Include photos, like advisor headshots.

- Make sure “content, colors, flow, tone are synched up,” says Andrew Schlossberg, chief marketing officer of Invesco AIM. “If they aren’t, your site will end up being more of a detriment than an advantage.”

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Web Don’ts

- Have your, um, nephew create the site. “Unless he’s a pro, it could look hokey. That will reflect poorly on your brand and detract from the sales process,” says Michael White, Raymond James Financial’s director of marketing and corporate communications.

- Use too much Adobe Flash to look cool. Search engines often can’t read and find all the information.

- Choose a hard-to-read font. Save pizzazz for graphics and pictures.

- Try to retrofit your print brochure to the Web.

- Keep a sloppy site.

- Build a site, and then leaving it alone. (Update content; check for broken links.)

- Biggest problem with a website? “Not having one,” says William Rice, president of the Web Marketing Association.

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Freelance writer Jane Wollman Rusoff is a Los Angeles-based contributing editor of Research and is the founder of Family Star Productions.