Businesses grapple with social networking

Companies are learning, through trial and error, the best way to engage with customers using social networking

It's clear that companies are increasingly using social networking to connect with customers--Facebook said brands on its site get 100 million "likes" per day--but it's also clear that they are having varying degrees of success.

In fact, their definitions of success vary, according to speakers on a panel during the Seattle Interactive Conference on Wednesday.

"We haven't seen a lot of 'R' in the ROI," said David Camp, head of marketing for AmazonWireless, referring to the return on investment his company is getting from social media. AmazonWireless is Amazon's site for selling cellphones and service.

But Kim Johnston, vice president of marketing at Parallels, said she sees good return, although not necessarily of the kind Camp was talking about. "'R' could be insight, not just money," she said. Parallels learns a lot from customers it interacts with using Facebook and Twitter, she said.

Companies are using social networking to tap into a feedback loop from customers, but doing so can be a tricky proposition, the experts said.

T-Mobile's product managers listen closely to what people are saying on social networking sites to inform product development, said Alex Samano, marketing director and general manager for Bobsled at T-Mobile. But he warned that not everyone who writes comments on social networking sites is representative of many customers. "You have to be cautious of what you're hearing," he said.

Still, social networking interactions with customers are useful, he said. Ten years ago companies would pay US$150,000 to get a focus group of customers together. "You don't have to do that anymore," Samano said.

The companies have had varying degrees of success in turning their social networking followers into sales. AmazonWireless, for example, doesn't find social networking tools to be particularly efficient in driving traffic that converts to sales on its site, Camp said.

T-Mobile, however, has had great success for some products converting social networking connections into sales. It launched Bobsled, a voice-over-IP product, initially for Facebook users and executed the launch by briefing only four high-profile technology media outlets. Those articles spurred 200 others, and T-Mobile began signing up Facebook users at a rate of 3,000 people per hour within the first hours, Samano said. He didn't discuss the impact of having to temporarily shut down the service less than a week later due to a potential conflict with Facebook.

Parallels, which offers virtualization software that lets Mac users run Windows applications, used social networking to turn a mistake into an opportunity that resulted in some of its best sales results for repeat customers. Last year it had planned a coordinated launch of a new version across retail stores, online merchants, resellers and catalog sales, Johnston said. But the product mysteriously turned up early on the shelf of a store. After a fan posted a photo online, customers began chattering about it on Twitter and Facebook.

The company decided to launch the product early just for existing customers and used social vehicles such as Twitter and its blog to tell customers about the early availability. The result was an upgrade rate that was more than five times better than for any previous upgrade launch, she said. In addition, at the official launch, the company had more new licensees than expected, due to the buzz, she said.

There are pitfalls to using social networking, though, and the executives had advice for companies just starting to use it. Companies should carefully handle negative comments online, they said. "There are few people who contribute content, but a lot who read it, so it's important you engage," Samano said. If a company ignores negative comments, that will attract more of them, he said.

Companies also shouldn't simply impose sanctions by deleting negative comments. "Never sanction," he advised. "That's the worst thing you can do. If you sanction, you'll turn one complaint into 50."

He's found that in the vast majority of cases, the moment that T-Mobile jumps in to try to correct a problem, many other people who are fans of the product will also chime in to try to help.

Parallels has a specific Twitter handle, @parallelscares, to which it directs people who are really "frustrated," Johnston said. Typically, once the person feels that the company is trying to help, the user relaxes and accepts the help. Plus, she said that often the customer returns to the public forum to publicly thank Parallels for the help.

Nancy Gohring covers mobile phones and cloud computing for The IDG News Service. Follow Nancy on Twitter at @idgnancy. Nancy's e-mail address is Nancy_Gohring@idg.com

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Tags Internet-based applications and servicesamazon.comtwittersocial networkinginternetT-Mobile USAFacebook

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