Retailers Use Social Networks To Reach All Ages and Demographics

By Amanda Ferrante, Assistant Editor

Social networking is on the rise across the age divide. Approximately 37 percent of U.S. adult Internet users and 70 percent of online teens engage in social networking every month, according to a research report by eMarketer.The same report revealed that social network advertising spending is expected to grow to $2.2 in 2008, up 81 percent from 2007. This presents a valuable opportunity for retailers to drive brand awareness and create buzz for their brands — and many retailers already have integrated social networking into their marketing and CRM strategies.

A New Era of Networking“Show me when the sales are, what you’re selling and pictures of what you’re selling. Those would be important things,” says Cory, a 17-year-old Myspace user from Chicago, Illinois. He took part in a study conducted by TRU (Teenage Research Unlimited) for a research report commissioned by Fox Interactive Media, Inc., Isobar, and CaratUSA. The report titled “Never Ending Friending: A Journey Into Social Networking,” sizes up the opportunity for marketers to use social networks as an additional advertising medium.

“I don’t want companies to advertise to me, I want them to be my friend,” says Rob, a 27-year-old Myspace user who also participated in the “Never Ending Friending” study. That’s just what some retailers are doing — taking a “friendly” approach and allowing consumers to combine their love of social networks with their shopping experience.

One in five young adults in the U.S. use social networking sites daily, according to a recent Forrester Research report. Like Cory and Rob, many of these social network users are consumers looking for the best deal but they are particular about the approach marketers take.

Interactive Approach
Sears is inviting shoppers to gather critiques of a potential purchase through its prom dress promotion on Sears.com. Using Facebook, users can share a photo of a model wearing the dress, along with a product description and message reading: “Look at this prom dress I found on Sears.com! Check it out and let me know what you think.”

The idea is for high-school girls to solicit feedback from their friends before making a purchase, says Tom Zanoni, group account director at WhittmanHart Interactive, the independent digital shop that crafted the Sears campaign. Agency research indicated that a prom dress is an important decision for girls, who believe it is important to get feedback from a circle of trusted peers before purchasing.

Sears is supplementing the option with an ad campaign on Facebook running through April, targeted to the site’s 2.4 million 15- to 17-year-old girls. The company also is using in-store displays and signage to promote its “Prom Premiere 2008.”

By Invitation Only
High-end brands can make waves in the social networking arena through more exclusive groups, such as aSmallWorld, a by-invitation-only network. Appealing to those consumers who want to be part of something that not everyone has access to, the “elite” social network, aSmallWorld, founded by investment banker Erik Wachtmeister, can be accessed by invitation only and stresses that it allows only “those who already have strong connections with one another.”

When Remy Martin was looking to drive sales of its luxury brand Louis XIII cognac — aged between 40 and 100 years and priced between $1,500 and $1,800 a bottle — it set its sights for aSmallWorld, which it considered to be a network that would attract a higher level of consumer compared to sites like Myspace and Facebook, which typically attract college-age or younger users.

More recently, Mercedes-Benz staked their claim in aSmallWorld to further expand its targeted, direct marketing to consumers. Mercedes-Benz is sponsoring the new ASW TV feature and will be the first brand partner to broadcast. This will make it possible for Mercedes-Benz and aSmallWorld to benefit from synergy effects with Mercedes-benz.tv, the Mercedes-Benz IPTV platform.

Reaching Teenagers and Beyond
For today’s youth, technology is no longer a luxury, but a part of life. The 12- to 17-year-olds in the U.S. spend 17 percent more time online than adults for personal use, and 155 percent more time instant messaging, according to the Forrester Research report, “Social Computing.” This creates opportunity for retailers to target shoppers where they’re easiest to reach.

With the social network scene growing, it’s not only teens who are surfing the Net. GetBack Media, a new social network targeted to people over age 35, launched recently stocked with age-appropriate music and TV content.

Social Networks are expanding by leaps and bounds — no longer limited to teens and tweens, but an open opportunity for retailers to reach a targeted audience and use the personal features to enhance CRM and brand awareness. “[Social Networks] offer another chance to gain visibility,” says Bob Phibbs of The Retail Doctor. “Much like multiple brick and mortar locations, people drive by and go, ‘Hey, they’re here, too.’ Assuming they have a good feeling towards the brand, it helps reinforce their good feeling.”

Web Growing As First Touchpoint for Shoppers Looking to Channel-Hop

Consumers are increasingly using the Web as a first touchpoint and want to channel-hop to complete their purchase, a recent survey conducted by Opinion Research Corp. on behalf of Sterling Commerce confirmed. In addition, the survey concluded that “high value” consumers have made cross-channel shopping a pre-requisite for committing their loyalty and share of wallet to a retailer.

The survey, which polled more than 1,000 adults in January 2008, found that nearly 2/3 of all respondents went online before making a purchase in the past three months. The percentage was even higher for “high value” consumer groups, such as those with household incomes above $75,000 (81%), college graduates (78%), and consumers between the ages of 25 and 34 (77%).

Consistent with other industry research, the top 3 cross-channel activities cited as the most important by respondents were:

Ø The ability to return merchandise to a store even it was purchased via a telephone or online (cited as important/very important by 81%)

Ø The ability to pick up merchandise at a store after ordering online (56% for all respondents/69% for 25-34 age group)

Ø The availability of gift registry information in the store, online and over the telephone (56% full survey/66% for 25-34)

“As this survey shows, consumers are demanding new levels of convenience only found when different shopping channels support each other seamlessly,” said Jim Bengier, global retail industry executive for Sterling Commerce, an AT&T Inc. subsidiary.

The survey also highlighted the expanding use of the web as the first touchpoint in the shopping experience, with 57% citing websites as a research tool, 24% indicating they used a coupon or rebate found online, and 18% checking an online gift registry as part of the purchase process.

The growing influence of the Web is also driving consumers to expect away-from-home access to online sites, as more than 1/3 of respondents were looking for access to an online kiosk (37%) while shopping to conduct product research, 36% wanted access to their online account to see items they had previously tagged, and 32% found it important for call center personnel to have a record of what they have been researching online.

Netflix & Blockbuster Square Off In The Ultimate BI Battleground

There have been a lot of case studies published on how business intelligence (BI) tools have helped the bottom line performance for retailers, but few have examined the impact on head-to-head competition between prime players.
The battle ground in the video rental market is shaping up to be a full scale throw-down between the top two players, with BI tools playing a central part in their strategy. The story line features price optimization, customer segmentation, and promotion management-- and how it ultimately plays out could serve a textbook reference for years to come.

THE COMBATANTS
Before you write off BI tools as a minor factor in this match, consider the background of the key players involved. Reed Hastings, CEO of Netflix, was a high-school math teacher, and has been a vocal proponent of customer intelligence since the company’s early days. Illustrating its passion for behavioral analysis technology, the company launched the Netflix Prize last year. The contest, which offered a $1 million prize for building the best technology to predict customer preferences, generated more than 12,000 entries.
Blockbuster CEO Jim Keyes is also considered somewhat of a data junkie. While he was racking up 36 consecutive quarters of same store sales during his tenure at 7-Eleven, he reportedly relied heavily on BI tools to drive product assortment decisions. One of Keyes' first moves after taking over at Blockbuster was to shake up the IT staff and bring in Keith Morrow as CIO. Morrow worked with Keyes at 7-Eleven and is considered to be one of the brighter minds in the retail space.

THE STRATEGY
To fully appreciate the complexity of the arena these two are competing in, you have to keep in mind that they are working with multi-tiered subscription pricing that has to factor in the fulfillment cost of serving the customer. The data layers get even thicker for Blockbuster when you add in the fact that Total Access members can return and substitute titles at store locations.
The battle between the two video rental titans has been shifting on a quarterly basis, with the edge apparently going to the company that better adjusts its pricing model based on consumption and customer behavior.
Building on its cross-channel Total Access marketing plan, Blockbuster appeared to be mounting a comeback in the battle by cutting into Netflix’s base of online subscribers. The company's online subscriber base reached 3.1 million by the end of September last year, but then the company abruptly announced that it was changing gears.
The company’s new management did some analysis and realized that those online customers they were spending big bucks to attract weren’t so profitable after all. After raising its prices on high volume subscription plans, Blockbuster lost about 500,000 subscribers and saw its stock price take a hit. However, Keyes made it clear that this was a calculated move, calling the price increase “a conscious effort to prune the tree, and in other words, we were willing to walk away from some of our subscribers, those at the far end of the usage scale who are not willing to pay a higher price for unlimited free exchanges,” adding “we were happy to see them move to the competition.”
Right around the same time Blockbuster was raising its prices for heavy users, Netflix was stepping up its customer acquisition strategy by launching a $4.99 subscription package. In July of last year, Netflix lowered the price on two of most popular subscription packages by $1. The change was expected to benefit the majority of Netflix’s customer database, which consists of more than seven million members, and hopefully stop them from jumping ship and moving over to Blockbuster.

Tis The Season For Tying Stores To Online Sales

By Debbie Hauss, Contributing Editor

It’s no secret that cross-channel retailing is an over-arching mandate in today’s retail industry. Traditional brick-and-mortar retailers are embracing the online channel as an increasingly important part of their businesses, and legacy catalog-based retailers are using their direct-to-consumer savvy to drive strong e-commerce sales. The web is no longer a standalone silo – it’s a primary driver toward continued and renewed retail success.

Following are five key ways to keep up with the competition during holiday 2007 and beyond:

1)Embrace the multi-channel mindset. This goes without saying in today’s marketplace but begs to be emphasized. Online (non-travel) retail sales are increasing at a faster rate than other channels, up 21% during the first three quarters of 2007 versus 2006, reaching approximately $84 billion, according to comScore.

2) Use customer activity data to make site changes often, even daily during the busiest seasons. REI has taken this concept to heart and practices it as the basic component of its go-forward strategy.

3) Offer free or promotional shipping deals and communicate them clearly to customers. Particularly during the holidays, but more and more with Internet shopping customers are looking for free shipping or promotional shipping deals. In a recent holiday survey of more than 1,500 consumers, the e-tailing group found that the number-one deterrent of online shopping is “high shipping charges.

4) Don’t forget the gift cards (and other gifting tools). Convenience is the top priority for today’s shoppers and gift cards address that need. Holiday gift card sales reached an all-time high last year, up to almost $25 million in 2006 from $18 million in 2005, according to the National Retail Federation (NRF), and almost 80% of customers polled in a study conducted with BIG Research said they planned to purchase at least one gift card during last year’s holiday season.

5) Be in stock! This is another point that goes without saying yet still needs to be reinforced in today’s cross-channel world. As social networking, including customer-generated product reviews, online chat and blogs, become more popular, more consumers will become familiar with the “hottest” products and will want to purchase them. Before you initiate these new strategies, be sure you will be able to meet customer demand, particularly during the holiday season.

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Sears E-Me Program Adds A Virtual
Twist To Back-to-School Shopping

Blending the often painful experience of shopping for school clothes with your parents with web 2.0 technology, Sears recently has taken Back-To-School shopping into the virtual word with the creation of their E-Me shopping experience targeted towards tweens.

The program, which is a partnership with myvirtualmodel.com and meez.com, allows tweens to create a unique E-Me, or avatar. Once constructed, the E-Me can be dressed in Sears apparel, such as The Cheetah Girls exclusive line, camo skorts, jeans, and hoodies, in addition to shoes. A personalized closet then allows the site visitor to save all of their creations from session to session without any exchange of information.

By simply printing the E-Me along with the closet and bringing it to a Sears store, parents will be able to easily find the clothing that their children want along with receiving a 10 percent discount on those given items at check-out.

In addition to making shopping easier, the site provides a virtual world through an E-Me Fashion Show, a rating capability, and multiple animated actions, such as eating pizza and surfing.

According to Paul Miller, Senior Vice President of Direct Commerce of Sears Holdings, “the Sears E-Me is all about making back-to-school shopping easier for mom and a lot more fun for kids.”

New Study Shows Pre-Shopping
Powers Brick & Mortar Spending

The combination of search engine marketing teamed with display ads is proving to be influential to the way consumers shop, according to a study from Yahoo and comScore entitled “From Clicks to Bricks: The Impact of Online Pre-Shopping on Consumer Shopping Behavior.”

The study was based on eight months of data from 175,000 comScore participants and five major retailers, which included JC Penney. One of its key findings was that campaigns which use both display ads and search marketing convert more online shoppers into buyers than those which use only one of those methods.

In addition, the study established that consumers exposed to online advertising tend to research or “pre-shop” online prior to purchase. These “pre-shoppers” spend an average of 41 percent more in-store when compared to consumers not exposed to online advertising, according to the report.

The integration of search and display campaigns has resulted in a deeper engagement for consumers exposed to those ads, leading to increased sales. Consumers who had seen a combination of search/display ads spent an average of 83% more than those who had not seen either type of ad, according to the report.

The study also found that consumers who had seen only search ads spent 26% more than those who had not seen any ads. This exposure to display ads lifted in-store sales an average of 11% over spending by buyers who had not seen ads.

In addition, among the consumers in the study group exposed to both search and display ads, 43% made in-store purchases, compared to 26% who only viewed search ads, and only 6% who had only seen display ads.

Other significant results from the study include that almost 90% of the incremental sales generated by online advertising take place in-store and consumers exposed to online advertising tend to spend an incremental six dollars in-store for every one dollar spent online.

Customization Trend Taking
Hold With Online Shoppers

By Jessica Humphrey, Assistant Editor

The trend towards offering personalized merchandise on e-commerce sites was given the star treatment in USA Today (http://www.usatoday.com/) on Tuesday, July 31st. The article covered the move among such high fashion brands as Steve Madden are joining athletic footwear brands in allowing consumers to design their own shoes or handbags.

In addition to covering the customization offerings at specific e-commerce sites, the USA Today piece also spotlighted Zafu.com, which will take a shopper’s measurements and steer them to a specific retailers selling jeans and bras with the best assortment for their dimensions.

The article also cited data from NPD Group, which found consumers will complete a purchase 72% of the time if they are involved in the design or fitting of a product, compared with the 23% average conversion rate for the rest of the fashion industry.

The e-commerce sites featured for the personalized offerings, included:
Spreadshirt.com
LandsEnd.com
FreddyandMa.com
SteveMadden.com
MyShape.com
Zafu.com
DressByDesign.com