What Kind of Online Customer Engagement Leads to Sales?

New Normal

What Kind of Online Customer Engagement Leads to Sales?

By jtodor on September 8th, 2009 | Posted in New Normal | 512 Comments »

It is generally agreed that only a small percentage of participants actively contribute in social media. At the June 2009 Online Community Unconference many community managers were seeking ways to increase the number of active contributors. Since the unconference, I have been pondering two questions. One, what strategies and tactics will get more customers actively involved in company sponsored social media initiatives? Second, what benefit will the company gain from increases the number of contributors?

Will More Contributors Lead to Sales?
More active contributors will make the site richer and more attractive which might increase the number of participants. It also would make the “customer conversation” more representative of the company’s customer base. Both of these warrant further discussion, which I intend to do in subsequent blog posts. In this post I want to raise another consideration:

Will increasing the percentage of contributors influence sales?

There is ample evidence indicating that people trust online content, even from anonymous sources and surveys support the premise that online content actually influences purchase decisions. Will an increase the percentage of active participants increase influence and sales?
A recent research study, Do Friends Influence Purchases in Social Networks? provides some provocative results. Most notably,

The most active participants are actually negatively influences by others in their network.

The study collected data from Cyworld, an online social networking site in Korea. “Cyworld users create mini-homepages to interact with their friends. These mini-homepages, which become a way of self-expression for members, are decorated with items (e.g. wallpaper, music), many of which are sold by Cyworld. Using 10 weeks of purchase and non-purchase data from 208 users, we build an individual level model of choice (buy-no buy) and quantity (how much money to spend).
The results showed there three distinct levels of participation. They also showed that each level of participation differed in the degree and nature of “social” influence.

48% of the sample were poorly connected within the community and showed limited interaction. Not surprisingly their purchase behavior was not influenced by others.
40% were moderately connected and exhibited moderate level of interaction with others. The purchase behavior of this group was positively influenced by what people in their network purchased and incorporated into their personal page. There was a 5% increase in sales due to influence which is a significant impact considering they make-up 40% of the sample.
The remaining 12% were the most highly connected and were the most active in viewing other pages. This group was negatively influenced by what others bought. That is, sales revenue dropped by 14% because of the “social influence” of seeing items on others pages.

It is important to point out that in this study active participation was measured in two ways: the degree to which others visited their pages and the intensity with which they scanned and interacted with other people in their network.

Certainly this type of activity or engagement is different from contributing content to a blog or forum. There are, however, several important considerations that could very well generalize to other types of social computing.

As the researchers point out, the behavior of the most active participants “is consistent with the typical fashion cycle wherein opinion leaders or the elite in the fashion industry tend to abandon one type of fashion and adopt the next in order to differentiate themselves from the masses. As other members around them imitate their purchases… …these high status members further differentiate themselves.”

This opinion leader behavior may be a personality characteristic of a small proportion of the population. It could be why, across social media vehicles, a small percentage make the lions share of contributions. They may be akin to Malcom Gladwell’s mavens and connectors, people who influence but are not influenced, at least positively. Encouraging more participation by this type of person would only be desirable if the site lacked a critical mass of opinion leaders.

The other two groups are another story. The 40% who were positively influenced were described by the researchers as people “trying to keep up with the Jones.” Getting more people to act in this way would obviously be a good thing for a company trying to increase the adoption rate of their product. The question is, “what would garner greater engagement from this group?”

Since the group that exhibited zero influence make up nearly half of the sample, it would make economic sense for a company to get them more engaged.

Now we get to the motives for engagement. The motive for the opinion leaders is fairly clear; they derive satisfaction by being recognized as trend setters. While keeping up with the Jones might explain part of the motive for the positively influenced group, that cannot be the entire story. If it were traditional advertising and celebrity endorsements would not be losing influence. On average, “social influence” increased sales to this group by 5%. What would it take to increase that to 10% or even 20%? They exhibit receptivity; the issue is winning greater mindshare.

The largest group could be described as indifferent or disengaged. Certainly, one could say they lack desire. However, the lack of desire is not the same as indifference or emotional disengagement. The first step is usually overcoming the mindshare barrier that contributed to the emotional disengagement.

If you would like to learn more about the distinction between winning mindshare and overcoming mindshare barriers download my paper, How to Get Your Customers Addicted.
If you would like to learn more about applying these principles to social media, I suggest you consider my Social Media Academy course, Building Customer Relationships and Advocacy with Social Media.