In the last post, we talked about the importance of making the business case for your social media efforts to your boss. A fabulous discussion has emerged in the comments to that post on how to track sales via social media, so I will invite you to check it out.
But there are two ways that social media can benefit your business: By generating sales, or by lowering costs. I don’t think the latter gets enough attention, so in this post I wanted to highlight some ways that companies can lower costs via social media, with some examples of companies that are doing just that.
Ways to lower business costs via Social Media
1 – Lowering recruitment costs or employee turnover. Anyone that’s had to fill any type of position can tell you that a lot of legwork is required to screen potential candidates to finally find the suitable person to fill a position. There’s a big time investment, but if your company has a well established presence on social media sites, you can leverage those networks to find your next employee! Either by targeting people you interact with naturally, or asking your networks on these sites to help you get the word out. I believe I remember seeing @Ambercadabraclaim that all the hires she has made at Radian 6 have been people she connected with and knew from Twitter. The cost savings here is obvious.
As far as lowering employee turnover, I found this interesting case study on the results from Best Buy’s socnet for employees, Blue Shirt Nation. As of last year, roughly 25,000 of the company’s 160,000 or so employees were members of Blue Shirt Nation. Turnover among those members was 8-12%, much lower than the 50% turnover among Best Buy’s ‘most youthful’ employees. The article doesn’t attach a dollar figure to the savings, but it’s obvious that the site’s members are more likely to stay with the company, and this again, saves on recruiting costs. BTW, here’s an interview I did with Best Buy’s Gary Koelling, who helped start Blue Shirt Nation.
2 – Lowering Customer Service Costs. This is a great way for companies to lower customer service costs, by helping customers directly via social media! What’s the cost of a customer service call overseas, versus the cost of helping a customer via Twitter? Also, as you begin to use social media to provide customer service, customers begin to help each other out by pointing you out to anyone that has problems. Remember how active @comcastcares was on Twitter? How many of us saw a customer complaining about Comcast, and then told them to reach out to Frank? I know I did several times.
Here’s a few examples of companies that are using social media to lower customer service costs:
InfusionSoft: The company provides web-based marketing automation software to small businesses. The company decided to create a community site to help customers better use the software, but InfusionSoft saw that the majority of the customers had customer service issues. So the company shifted gears a bit, and used the site to help customers with their problems. The company reports that in 2 years time it’s gone from having one customer service agent for every 55 customers (with a 77% customer satisfaction rating), to as of early this year having 1 agent for every 172 customers, and a 87% satisfaction rating.
Cisco: The company needed a way to better organize product information/expert sources for Account Managers so they could handle issues for customers. The company created the Specialist Optimization and Results (SOAR) initiative, which brings the company’s vast knowledge base together in one location that can be easily accessed by Account Managers. It includes access to ‘virtual experts’, discussion forums, and marketing materials. The results the company has seen from this initiative include:
- Every 100 specialists can now do the work of 120, saving the company $5 million a year.
- Travel expense for Cisco product specialists are down by as much as 60 percent in teams using SOAR tools, and specialists report saving 17 hours a week on average, and boosting their productivity by 22%.
Pitney Bowes: PB also utilizes company-backed forum to provide customer service (noting a trend here?). One interesting aspect is that the staff constantly monitors the forum for customer issues, but will wait a minimum of 24 hours before responding. They do this for two reasons: First, to give them time to properly research the problem and give the customer a better answer. And second, to give their fellow customers time to help out the other customer and offer advice. Obviously, you need a strong community in place to make the latter feasible.
Results? The company estimates that every 5 visits to a specific question on the forum, or every 25 visits to a general post averts a customer service call, and that Pitney Bowes has averted a total of 30,000 calls to their customer service centers. At a cost of $10 per call, that means a total savings of $300,000. Thanks to Mike Hardy from Pitney Bowes for clarifying that in the comments. He added this: “While we don’t generally share hard numbers about our performance, I can say that we met all of our first year’s expenses, including startup, within 6 weeks of launching our forum.”
3 – Lowering marketing and product design costs via social media. Oh this area has a TON of potential for companies, and is often under-utilized. If you can use social media as a way to connect with your customers, then the more FEEDBACK you can collect from them and integrate into your marketing and product design efforts. This will make both more efficient, thus lowering costs.
An example of a company that did just that is Lenovo. When the company IBM PC computing division, they immediately got all of the major departments on the same page and connected. Marketing, sales, service, etc. They created forums and blogs to address customer issues and help them, but in deciding what content to create, they paid close attention to what customers were already saying about the products. They closely monitored blogs and 3rd-party sites and forums. They talked to their call centers to see what the common issues were. By listening to customer feedback, it was not only helping them improve existing processes, but it also helped them address FUTURE problems that customers might have with products. Thus providing a customer service savings as well.
Results? According to the Forrester case study: ”This alignment lead to a 20% decrease in laptop service call volumes, an increase in customer service agent productivity, a shortened product problem-resolution cycle and an increase their Net Promoter Scores. The net-net is.. a reduction in customer service support costs and an increase in sales!”
4 – Lowering restocking fees and increasing sales via customer reviews and ratings. This is another VERY effective tactic that makes the customer more likely to buy, and feel better about the product once they receive it. It’s also a move that some companies are scared to make because they don’t like the idea of giving customers the ability to give a ‘bad’ rating to the products they sell ON their site. They need to get over this fear, as the ratings are invaluable to other customers as a research tool, and actually leads to more sales.
An example of a company that boosted sales and lowered restocking costs via customer ratings and reviews is Petco. Bazaarvoice worked with Petco to not only add ratings capabilities to its site, but they also created a ‘Top Rated’ product category and let visitors organize their search results via ratings.
Results? According to Bazaarvoice:
- The Top Rated Products category had a 49% higher conversion rate compared to the same products within their respective site categories.
- Within the Top Rated Products category, customers spend 63% more compared to all browsers who progressed beyond the homepage.
- “Sort by Rating” has driven 41% higher sales per unique visit and is now the #1 default sorting technique on PETCO.com.
- Overall, PETCO products with ratings and reviews have lower return rates (other case studies have shown that PETCO products with Ratings & Reviews have a 20% lower return rate than those without).
I can’t remember the source, but a study was done that found that when a product has at least one NEGATIVE product review, then the overall results are more trusted by customers. More food for thought for any companies that don’t want to add ratings to their sites for fear of negative feedback.
5 – Lowering advertising and PR costs by using social media. Let’s assume you have a company blog that’s popular within your industry. A byproduct of that popularity will likely be increased coverage by media that covers your industry and space. The amount of that free publicity could be enough to justify cutting back on some of your advertising expenditures.
For example, in the book Groundswell, GM claims that its Fastlane blog generated $240,000 worth of free publicity for the company by having the blog featured by the press. This isn’t blog coverage, which GM estimated as being worth an additional $37,000 to the company in the first year the blog was published.
Those are some ideas to get you started, and if you have other case studies were company have cut costs by utilizing social media tools, please share in the comments!
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