1. twitter
blog txt
Social Loyalty:
A New Way to Make Friends
and Influence Business

2. Social Loyalty: A New Way to Make
Friends and Influence Business
Meet Amy. She is 32 years old and works as a store manager for a local clothing retailer in Chi-
twitter
cago. Amy is active on Facebook, LinkedIn, Twitter and has her own music blog on Tumblr. She uses
these sites to keep up with family, friends, coworkers and fellow music fans. She also visits social
media review sites like Yelp, TripAdvisor and Mint.com to learn about new travel ideas, get help
managing her money, and offer her own opinions.
When Amy developed a presentation for her boss about a new clothing line, she tapped into her
fashion connections on LinkedIn for help. Before planning a vacation to Germany, she asked her Ger- This white paper explores
how companies can:
man friends on Facebook for advice. And when the latest U2 record came out, she wrote a scathing
• Leverage the power of
review on her blog about how it fails at trying to recapture their “Joshua Tree” sound, sharing it with
social groups and indi-
her music fan friends via Twitter, Facebook, and her blog. viduals online to build
Amy is an example of today’s typical social media user. While she is an individual online, she is social loyalty
also a member of numerous unstructured social groups. In some groups she is an influencer. In oth- • Develop interconnected
ers, she is looking to be influenced. People and businesses have the ability to interact with her to contacts and under-
standing with customers
build both personal and professional relationships.
The social media landscape is one of simultaneous individuals and groups. Companies that un- • Generate ROI and
bottom-line impact
derstand these nuances in the one-to-one, one-to-many, and many-to-one world can build engage-
ment and loyalty.
Amy’s Social Spheres of Influence and Experience
Amy is both an individual and a member of numerous groups online.
Facebook
Twitter
Linkedin
Tumblr
Amy
music
family blog fans
coworkers friends
Source: Peppers & Rogers Group
© 2011 Peppers & Rogers Group. All rights protected and reserved. 2

3. Human Nature on Steroids
txt
The collective intelligence of consumers interacting together can have astounding implications.
Human beings are naturally social – we want to be with other human beings, and the feeling that
others want to be with us is pleasing. We like to go to parties, and we enjoy telling stories, pass-
ing along rumors, playing games, keeping secrets, laughing, entertaining, and being entertained.
These actions make us “human.” They are human nature.
As important as our social nature is, however, within just the past few years technology has in-
jected it with steroids. We are being transformed into a dynamic and robust network of electronically
connected people in a worldwide, always-on festival of creating and sharing, collaborating, editing,
publishing, uploading, entertaining, critiquing, commenting, helping, learning, and having fun. Companies that can tap
This has immense implication for how we make technological progress, because progress owes much into this potential with
more to our social nature than to our knowledge or intelligence, per se. The conveniences we take for individual customers
as well as groups can
granted today, from frozen pizza to Wi-Fi, represent the accumulated improvements and innovations of
accelerate their own
many generations of human beings documenting and sharing their ideas with others over time. progress while building
The truth is, no matter how brilliant any single individual may be, acting alone he or she could not customer loyalty.
possibly make even the simplest tool or device in use today. Nearly every artifact around you that is
“manmade” can only be produced through the collective efforts of many, organized in a way that is far
too complex for any single person to understand fully.
Today’s technologies are injecting our social nature with steroids. One of the first and longest-term ef-
fects of this is likely to be a further acceleration in the rate of economic progress. Companies that can tap
into this potential with individual customers as well as groups can accelerate their own progress while
building customer loyalty. Another effect is the ability to build social loyalty in a different way.
Understanding a person’s online social activity provides companies the opportunity to make an emo-
tional connection with customers and prospects in this new, vibrant environment. By tapping into cus-
tomers’ passions, there is the potential to deepen engagement, build the brand and grow the business.
Companies can extend their loyalty strategy to meet the unique attributes of the social media world.
Social Engagement Drives Loyalty
Considerably
Peppers & Rogers Group conducted a study of 306 online shoppers in the fall of 2010 to ask them about their propensity
above average 19%
in our industry
to be socially loyal.
If your participation in a loyalty program When your family, friends, or colleagues buy a specific
rewarded you as an individual as well as brand, how much does it increase your likelihood to Considerably
above average 19%
Considerably
rewarded you as a part of a group (friends, buy the same brand?
in our industry
above average 19%
in our industry
family, co-workers), would you be more like-
ly to join? Not at all 8%
Small extent 47%
Yes 60% 40% No Moderate extent 38% Considerably
above average
in our industry
19%
Large extent 7%
If your participation in a loyalty program re- How often do you use Facebook? Do you own a
warded you as an individual as well as re- smartphone?
warded you as a part of a group, would you Hourly 3%
be more likely to recruit friends, family, and
Considerably
above average 19%
Daily 35%
in our industry
co-workers to join? Yes 68%
Weekly 21% No 32%
Monthly 17%
Yes 50% 50% No
Never 24%
© 2011 Peppers & Rogers Group. All rights protected and reserved. 3

4. Social Loyalty
Before devising a strategy to build social loyalty, the first step is to understand its definition. If traditional define it
customer loyalty is defined as customers’ emotional and rational attachment to an entity on a personal
Entourage
(1to1) level, then social loyalty leverages the “influencer” factor of social networks while becoming more A social sphere of fam-
relevant as customers reveal their interests and social behavior by engaging with their friends, family and ily, friends, co-workers
and other connections
colleagues; what we at Peppers & Rogers Group call their entourage. that a person interacts
Elements such as emotion and two-way dialogue definitely exist, but they are also the fundamental with online. Depending
on the situation, they
rules of traditional loyalty marketing. The unique factor of social loyalty is the way it allows consumers
can be influencers of an
to get together and label themselves with their distinct characteristics in a way that tells companies what individual, or influenced
they need and what their interests are. Those companies that can provide the correct environment to fa- by an individual.
cilitate interaction, smartly observe, and respond in a customized manner will reap the benefits. Influencers
The good news is that many of these networks already exist. Most consumers have already tagged > People with a large
number of friends, wall
friends, family, and colleagues on Facebook, Twitter, LinkedIn, etc. They “like” and “suggest” brands, posts, activity (share,
products, services, and events, they join “groups,” and they share details about where they are and where like, etc.) on Facebook
they’re going through Foursquare, Plancast, TripIt, and others. In other words, most consumers have al- > People most followed
and tweeting people
ready publicly segmented themselves. on Twitter, specifically
Influencers within the social media spectrum, as in the offline world, are of the highest value. They within niche categories
that appeal to your
are classified as most the active and “social” people in these networks – people with highest and most company
branched reach. When investing extra effort, resources, and money in a subset of customers, make sure > Well-connected people
they are influencers. More specifically, if you want to send a discount coupon to one of your customers who participate in
relevant groups on
who shopped from your website, see if he has a lot of friends and if he tweets often. LinkedIn
Leveraging these valuable customers is simply an extension of current segmentation strategy. Social > Mayors of Foursquare
loyalty will in a way enrich the customer data companies have on customers. In addition to customers’ locations important
to your industry or
value to the company and usage behavior, it will identify priority customers, where and how they use your company
products, and other useful nuggets consumers drop on social media. The cherry on top is that companies
will get to communicate with these groups/networks directly through the social media platforms, an ef-
ficient and quick way to create positive return rates.
sales
direct mail radio
Company
The Evolution of Social Loyalty
A
TV email
Interactions between companies and their customers has evolved from one-way communication to two-way dialog, and is now moving toward
interconnected phone
PR contacts and understanding.
sales
Stage 1: Company A pushes messages to the mass market Stage 3: Company A creates a learning relationship with individual
direct mail radio
customers, but also understands how they interact with other spheres
Company
A
of influence. Enlightened companies will interact with all of these groups
TV email
sales
within the context of the individual to encourage social loyalty.
ect
direct mail radio PR phone
Company
sales
direct mail A radio
TV
V Company em
email
A
TV email
PR phone
sales entourage
PR phone ect
direct mail radio
Stage 2: Company A creates a dialog with individual Company
customers to develop a learning relationship A
TV
V em
email
personal
sales PR phone experiences
ect
direct mail radio
Company
A
TV
V em
email
PR phone information
Source: Peppers & Rogers Group
© 2011 Peppers & Rogers Group. All rights protected and reserved. 4

5. Two Ways to Leverage Social Loyalty
No one has cracked the code of how best to build social loyalty online. But two strategies have emerged
as potentially beneficial.
1. Incorporate social segmentation
As previously mentioned, simply expanding a segmentation strategy to add social media insight can be
a first step. The idea is to segment customers based on social media engagement levels (influencers etc.)
and directly communicate with them. This approach still requires some analysis and segmentation, but
works as a one-to-one marketing activity to leverage a good customer’s sense of loyalty.
Forward-thinking companies are beginning to create a sub-dimension within these networks that func-
tions on an integrated platform to drive loyalty—collect information, segment users based on behavior,
needs, and demographics, and act accordingly. For example, retailer Urban Outfitters identifies recent pur-
chasers who are also on Facebook and considered influencers or connectors. The company encourages
these customers via opt-in email communications to like or recommend the product they just purchased, as
well as ask friends to “rate my outfit.” The goal is to get their friends to see their recommendations on Fa-
cebook and visit UrbanOutfitters.com. In addition, Urban Outfitters uses social media to win back dormant
customers with email campaigns and social media promotions based on insight gathered from those sites1.
Social Loyalty Program in Action
Understand how your customer base is engaged with social media, gain insight, and develop targeting opportunities.
Customer
Segmentation
Customer segmentation Social Integration
based on value, needs Social Audience • Extended
and behavior Segments customer base
Enriched customer • Improved customer
insight and target engagement
groups with integra-
• Accelerated social
tion of social media
media presence
information
Influencer Social Media • Accurate market
Groups positioning
Participator Social media user
profiles based on 2 • Match customers
to social behaviors • Leverage social
Spectator social network
volume and
for integration 3 media for marketing
of information activities
Neutral activity
• Develop target
groups
1 • Understand your customer base by segmenting
them based on different dimensions
• Identify social media groups within your customer base
Source: Peppers & Rogers Group
2. Create a full-fledged, integrated social loyalty program
This is where the true benefit of social loyalty can be seen, but it also involves the most complexity. Brands
can reward customers in traditional ways – visiting venues and making purchases – but they will also
reward customers for their engagement in social media and their interaction with other customers of a
brand, simultaneously as individuals and groups.
Social media platforms are evolving to be more customized, making this concept more possible to
execute. Facebook, for example, added a Groups feature in October 2010 so users can categorize their
friends and family. And in November 2010, the company launched “Friendship Pages” to show exactly
how specific friends interact. According to developer Wayne Kao, “they contain the public Wall posts and
comments between two friends, photos in which both are tagged, Events they RSVP’d for together and
more. You’ll be able to see a friendship page if you are friends with one of the people and have permission
Getting Social: Integrated Social Marketing. Presented at the MErkle CRM Executive Summit 2010, June 7-9, 2010
1
© 2011 Peppers & Rogers Group. All rights protected and reserved. 5

6. blog
to view both people’s profiles.” It is basically a visual representation of a one-to-one relationship online.
With segmentation happening naturally online, it opens up the potential for companies to take ad-
vantage of these valuable social connections. Let’s look at a hypothetical telecom example. Imagine a
mobile telecom provider launches a new loyalty program called “Telecom X Entourage.” Customers
subscribe through Facebook by clicking the “Facebook Connect” icon on the homepage and then en-
tering their customer ID to link to their account. Members can invite their friends via Facebook and start
clustering social networks within the system.
As for the data collection, “Facebook Connect” and “Sign-in With Twitter” programs allow the telecom
company to integrate its website with these platforms. Everything can happen within the environments
users already visit. Telecom X can track the friends customers invite to the program and whatever custom- With segmentation
er enters in his Facebook and Twitter profile. The company can encourage customers to visit its website happening naturally
as well to collect more data. online, it opens up the
New members can register as individuals or connect to a friend’s “Entourage.” After a few months, potential for companies
to take advantage of
when the company has enough data to analyze patterns and behaviors of these “entourages,” it offers
these valuable social
customized plans to Entourage members. Groups can select a price plan as an entourage, get a lump sum
connections.
of minutes to be shared within the entourage, etc. Individuals can also earn personal rewards based on
The Evolution of Social Loyalty
Below is a hypothetical example of a social loyalty program for a music-themed loyalty program. Rewards and pre-
miums are experienced individually but they are earned socially. Members move up in status for both the individual
and group levels as they hit individual value and behavior thresholds and expand their entourage.
Individual Group
From “Fan” to “Rock Star” From “Garage Band” to “World Tour”
Enrollment
Engagement
Advocacy
Experience
Source: Peppers & Rogers Group
their individual and group behavior, needs, and value. What’s more, the company can collect feedback
right away online, and use social media tools to build a one-to-one dialogue with them.
As mentioned earlier, the power of the group should not be ignored. Peppers & Rogers Group conducted
a study of 306 online shoppers in the fall of 2010. It found that 60 percent of respondents would be more like-
ly to join a loyalty program if their participation rewarded them as both individuals and part of a group.
Conclusion
The social media ecosystem continuously evolves to mimic real-world personal interactions. There is
opportunity for businesses to mix online and offline loyalty in their own unique ways. Companies that
understand these nuances in the one-to-one, one-to-many, and many-to-one world can build engage-
ment and social loyalty. It’s a changing world, and those with the courage to try something new can
reap rewards in the form of strong customer relationships in both the real and virtual worlds. n
© 2011 Peppers & Rogers Group. All rights protected and reserved. 6

7. the team
Can Elbeyli
Marc Ruggiano Don Peppers
Marji Chimes
Tom Schmalzl
Liz Glagowski
About the Team
This paper was written by a team of consultants, editors and marketers at Peppers & Rogers Group who
have a passion for social media and a deep understanding of customer loyalty strategy and execution
including Peppers & Rogers Group co-founder Don Peppers (twitter @dpeppers), Partner Marc Ruggia-
no, Consultant Can Elbeyli (twitter@CanElbeyli), Editor Elizabeth Glagowski (twitter@1to1mediaeditor)
and marketers Thomas Schmalzl and Marjorie Chimes (twitter @mchimes).
About Peppers & Rogers Group
Peppers & Rogers Group is dedicated to helping its clients improve business performance by shifting
focus from transactions to managing relationships. As products or services become commodities
and globalization picks up speed, customers have become more demanding and harder to satisfy.
They hold the keys to higher profit today and stronger enterprise value tomorrow. The same applies
to governments. Constituents hold the keys to public institutional trust today and higher competition
and quality of life tomorrow. We help clients achieve these goals by building the right relationships
with the right customers over the right channels.
We earn our keep by solving the business problems of our clients. By delivering a superior 1to1
Strategy, we remove the operational and organizational barriers that stand in the way of profitable
customer relationships. We show clients where to focus resources and efforts to improve the perfor-
mance of their marketing, sales and service initiatives. For more information, visit www.peppersan-
drogersgroup.com.
© 2011 Peppers & Rogers Group. All rights protected and reserved. 7