Thursday, January 08, 2009

Social Networks and Customer Conversion Strategy

How are social networks used in marketing?

There's been a lot of discussion about the performance of advertising on social networks. Most of it suggests that 'it doesn't work very well' since revenue per user per month pales in comparison to other content-rich sites like cable companies, newspapers, etc.

Rather than focus on the question of how to improve advertising performance a different question arises: How can we utilize social networks in a complete contact strategy and sales funnel? Is there a better place for this ubiquitous information?

Consider a typical lead-generation scenario: For every 100 leads sales or conversions are often measured in the single digit range. A 3% conversion rate means that the acquisition cost of a $50 lead is north of $1,500.

For high-consideration products there are often several steps between lead and close: "Yes, I'm interested." and "Yes, I'll do it." Both of these depend on the development of a relationship of trust via a contact strategy.

So rather than ask a myriad of questions on a form in hope of getting useful information an alternative would be to understand the customer better by learning what makes them tick - they'll be happy to tell you. In fact the profiles people post on social networks offer a wealth of information in order to build rapport.

This approach requires three steps:
1. Develop guidelines and training on how to use social networks in sales and marketing
2. Develop a process and information architecture for leveraging social network profiles
3. Develop a feedback process to ensure that customers are comfortable with building relationships this way.

Building a stronger, more personal relationship would directly impact the Cost Per Acquisition; much more so than reducing the Cost Per Lead.

For an example of the issues involved see the discussion about social networks in the admissions process at selective colleges and universities here. Not all categories have such an imbalance between supply and demand (only so many cheeks can fit in the seats). In much more competitive categories where there are no capacity constraints the opportunities are greater.

Disclosure: I've worked with various Kaplan divisions but not the Test-Prep group that sponsored the research cited above.

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