Putting social media to work

Despite the proliferation of corporate Facebook pages and Twitter accounts during the last couple of years, most businesses still effectively remain on the side lines. The gap between the early adopters and those waiting to take the plunge has actually widened. While the average billion-dollar company spends $750,000 a year on social media, according to Bain & Company analysis, some early adopters such as Dell, Wal-Mart, Starbucks, JetBlue and American Express invest significantly more. In some instances, the investment is tens of millions of dollars. Who is right-the early adopters or the companies still waiting it out?

Our research shows that several early adopters have captured real economic value from their investments. But the social media scene is so turbulent and frothy that many others have poured good money after bad in their attempts to engage customers. The leaders typically employ the same tried-and-true business principles-refined through traditional marketing, service and operations- applied in new ways. While they often experiment and sometimes fail, they don't allow themselves to fall into the trap of thinking that somehow "everything has changed" in this new world.

As part of a broader customer engagement strategy, social media can be an effective and cost-efficient marketing, sales, service, insight and retention tool. Our recent survey of more than 3,000 consumers helped to identify what makes social media effective. We found that customers who engage with companies over social media spend 20 per cent to 40 per cent more money with those companies than other customers. They also demonstrate a deeper emotional commitment to the companies, granting them an average 33 points higher Net Promoter® score (NPS®), a common measure of customer loyalty.