The Other Social Network

LinkedIn LogoHave you checked out LinkedIn lately? If you thought the world’s largest professional network was little more than a place to post your resume, you owe yourself another visit. LinkedIn is set to eclipse the 100 million member mark sometime this spring, and it is quickly becoming the social network of choice for B2B professionals.

LinkedIn gets none of the buzz of Facebook, and no one’s going to make a movie about it. Its format is austere, it has few third-party applications and it doesn’t support chat, photo libraries or videos. What it does have is lots of members who talk about serious professional issues, and some of its groups are becoming massive in scale. For business pros in industries like communications, manufacturing, retailing, financial services and even construction, LinkedIn groups are becoming vertical social networks in their own right.

This is the ideal B2B environment. There’s very little waste because members are there to seek professional opportunities, ask and answer questions and network with their peers. Spamming isn’t a problem, particularly in the moderated groups, and there’s none of the frat boy histrionics that you find on Facebook. It’s not surprising that in research conducted by B2B magazine last spring, marketers picked LinkedIn as their social network of choice by a substantial margin over Facebook.

LinkedIn has evolved far beyond its roots as a professional networking service. It hosts active groups for finance managers, telecom professionals, people in the construction industry, real estate pros, HR managers, pharmaceutical workers and film professionals. And those are just the ones with more than 40,000 members. If you’re in the hospitality industry, there are nearly 1,000 members in The Hospitality Forum. These pain management boynton beach doctors have some of the best medical staff available. Stephanie Sammons posted some great tips on Social Media Examiner early this year about  how to make the most of LinkedIn groups.

And they’re busy. Someone asked the Sales Best Practices group a couple of months ago “What is YOUR Best Sales Advice — 20 words or less.” It has 532 responses. A recent discussion in the Cloud Computing, VMware, Virtualization and Enterprise 2.0 Group about whether IT organizations will start discarding their assets has more than 460 responses. Some LinkedIn members answer 300 or more questions every week.

It’s not about the numbers, though. In fact, many LinkedIn groups are kept intentionally small by administrators who want to maintain member quality. Just try to get into CIO Forum. Unless you’re an IT manager, you probably can’t. Facebook is about mass, but LinkedIn is about focus, which is one reason it rocks for B2B.

Here are a few ways B2B companies can leverage LinkedIn for prospecting and promotion:

"Swarm" is LinkedIn's version of a tag cloudAsk and Answer. Many of the questions posed within groups and in LinkedIn’s busy Answers section concern requests for expertise. You can subscribe to questions in your domain using an RSS reader, which ensures that you will never miss one that matters to you. If the technical gurus in your organization are intimidated by the prospect of blogging, urge them to instead answer five questions per week. As they grow their profile in the community, people will start seeking them out for business. That’s the reason Vico Software expects its sales reps to become active in construction-related groups in each of their territories. They’ll find out first about new construction opportunities in the forums.

Choose Open Groups. LinkedIn recently gave group owners the option of making their content public so that all activity from that point on would be visible to search engines. This is a good way to make your groups more visible. Also, if you plan to post regularly to groups in your field or industry, consider choosing open groups so that you get the additional Google love.

Promote in Groups. Cross-post new entries from the company blog or new presentations on SlideShare to appropriate groups of which you’re a member. Summarize your content and ask a question. Use a unique URL so you can track activity. You’ll often be surprised at the volume of response.

Use Company Profiles for Prospecting. LinkedIn has a unique approach to company profiles. They’re organized by the people who work there. Salespeople who are having trouble finding the right contacts in an organization can use these profiles as a virtual back door. LinkedIn shows you who works at the company and whether you have direct or indirect ways of contacting them. You might be able to do the same thing on Facebook, but it’s a lot more difficult.

Find People. One of LinkedIn’s great strengths is the choices it gives you for selecting members. You can filter by title, geography, group membership, company size and even years of experience. Some members reveal remarkably detailed public profiles of themselves. You can use this information to prepare for a meeting, find skills or identify prospects within a region. When I need to recruit speakers for a panel in Atlanta, for example, the first place I go is my LinkedIn contact list because I can so quickly identify prospects in the area.

Use LinkedIn Signal. One of LinkedIn’s little-known gems is Signal, a real-time search engine that’s listed as “Updates” on the search menu. Use it to monitor what people are saying about any topic. You can also filter by connection, date, company and industry. A search for “Chicago Marketing Jobs” returns 20 opportunities posted in the last 72 hours. You can also get updates on people and groups that interest you.

LinkedIn has recently revealed some visually cool and potentially very useful stuff coming out of its labs. Swarm is a different take on tag clouds that builds on recent company and title searches, jobs posted, blog entries and shared articles. InMaps lets you visualize your connection network. It’s still early-stage but shows promise.

What’s your favorite LinkedIn feature? Do you have a success story to share? Post it here.

CareOne Cashes In On Community

CareOne Debt Relief Services contends with a business climate that few of us (thankfully) have to face: Its industry has a terrible reputation.

That industry is debt relief, a field that many people associate with fast talking pitchmen on late-night infomercials. But there’s nothing underhanded about CareOne, a nine-year-old company with 700 employees and a philosophy that “There’s no reason to be ashamed of being in debt,” according to Social Media Director Nichole Kelly (right).
Do you know that people who are in debt have higher probability that they end up in drug or alcohol addiction? And if this is you or you know someone who have alcohol addiction then I recommend to check out this website and their alcohol addiction program.

A busy online community has been a remarkably effective engine of growth. By enabling customers to freely exchange experiences, CareOne helps shatter suspicions that dissuade people in debt from seeking professional help. In fact, the conversion rate of prospects who have signed in to the CareOne Community is a remarkable seven times higher than that of non-members.

That claim, which is one of several ROI metrics cited in a summary of the company’s social media successes, sounded so extreme that I gave Kelly a chance to qualify the numbers when I spoke to her recently.

She would do no such thing. CareOne actually takes a disciplined approach to figuring ROI, she said, using control groups and thousand of data points. Not only do community members convert at dramatically higher rates, but the boost in sign-ups is only one of several business benefits CareOne has realized from its customer community. But more on that in a minute.

Happy Accident

CareOne Debt Relief ServicesThe 1.4 million member community was actually an accident. It was created five years ago as a way for CareOne employees to share advice about their own debt issues. A few outsiders stumbled upon the site and joined the conversation. It turned out that they were a prime source of prospects.
Debt is a touchy subject. Most people don’t like to admit to financial problems, but they crave solutions, often desperately. CareOne discovered that customers who engaged online were far more likely to seek professional help than cold-called candidates. “It’s real customers telling each other that the program works,” Kelly said.

CareOne’s approach is a good example of soft-sell marketing. The site features numerous articles, worksheets and video tutorials about debt reduction. A recently launched video series called Financially Fit TV interviews personal finance experts. About 30% of visitors who register and tap into the free advice never become customers and “That’s fine,” Kelly said. “If they can get out of debt on their own, we’re happy to help.”

But more than 60% of members aren’t customers, making them a lucrative prospect base. Word-of-mouth recommendations help drive inbound inquiries, and the presence of so much helpful information in the community lowers the barrier to conversion. It’s clear to casual visitors that CareOne is no fly-by-night operation.

Not that managing a community is easy. The number of active participants – or those who regularly contribute content – is in the sub-1% range. That’s not surprising for a topic that few people like to discuss publicly. However, lurkers invest a healthy five to 10 minutes per session and return frequently, indicating that the audience is engaged.

CareOne has invested time and money to encourage the minority who interact. Its busy Ask the Expert forums have certified credit counselors responding to inquiries. The experts are compensated for their time. A full-time four-person social media team manages the community and other social media programs, responding to questions, correcting misstatements and encouraging lurkers to come forth.

Active members are promoted and applauded. As in most online communities, a very small percentage of members contribute most of the content, but those people can become heroes to their peers. One popular blog, My Journey out of Debt, is written entirely by customers.

The Insight Dividend

In addition to the remarkable conversion rates for community members, CareOne has realized other benefits. For example, last year it detected a shift among its upper-income customers away from debt management concerns and toward debt settlement plans and adjusted its resource commitments accordingly.

Recently, “We noticed that a lot of our customers were one car breakdown or one illness away from bankruptcy,” Kelly said. “That changed the content we were delivering. We reduced our focus on frugality and began creating more content about dealing with life events.”

One of the more impressive aspects of the whole effort is the company’s focus on ROI metrics. Kelly ticks off her favorites: cost per conversion, cost per acquisition, customer value, customer profitability and retention rate. Nothing about hits, followers or comments. Those aren’t financial metrics.

CareOne is focusing on the right stuff. The section headlined “CareOne + Social Media: The Measurement” on the successes page devotes substantial attention to five challenges of measuring social media ROI. In all cases, it focuses on bottom-line drivers. Speaking of drivers, if you are looking for a car of your own, then check out these Used Cars.

Customer communities aren’t for everyone, and in the age of Facebook and LinkedIn, you actually need a compelling reason to start your own. The ability to build detailed audience profiles, customize services for individuals and maintain a level of confidentiality were good reasons for CareOne to choose the path it did. The company clearly cares about bottom-line return, and by being able to track individual visitors through their various interactions with the company, it has shown some impressive results.


Jason Falls posted a profile of CareOne Community on Social Media Explorer at almost the same moment this post went live. He has a good deal of background on how the community came about and more extensive ROI data than I do.

You can also find a case study on Social Fresh.

Tribes Rule the Hyper-Social Organization

Hyper-Social Organization CoverI’ve been looking forward to reading The Hyper-Social Organization since I first heard François Gossieaux and Ed Moran discuss the findings of their “Tribalization of Business” research at a conference two years ago. I wasn’t disappointed. In this groundbreaking book, the authors expand upon ideas laid down in their early research that are both simple to grasp and momentous in their implications.

The assumption in The Hyper Social Organization is that human beings are basically social animals and that our behavior is fundamentally tribal. Given the opportunity, we seek help from others when making important decisions and willingly assist other members of our tribe. The popularity of social networks and collaborative projects like Wikipedia attests to these instincts.

In a business context, however, tribes have barely been a factor. Our ability to tap into networks of like-minded people has been limited by space and time. The whole relationship between institutions and their constituents is hard-wired around the assumption that people on the consuming end of the transaction are mostly in the dark. This is been a huge advantage to suppliers. Basically, he who shouted the loudest had the edge. That isn’t true any more, though.

Rules Have Changed

In the last five years, the supplier-customer relationship has begun to change fundamentally because of the Internet. Customers today can easily find each other for advice, and that’s exactly what they’re doing. The resulting changes in market dynamics, the authors argue persuasively, will disrupt business at every level. The Hyper-Social Organization is a look ahead at how those disruptions may play out.

Some markets have already seen this shift occur. A friend of mine who manages an auto dealership tells me that many customers today come into the showroom better informed about the vehicle they want to buy than his own salespeople are. As the Internet has created smarter car buyers, auto dealers have had to overhaul their businesses. Most make little margin on new vehicle sales anymore and must take most of their profit from service.

The same dynamic will play out across many more industries, the authors suggest. In markets in which peer information is easily obtained, the vendor becomes nothing more than one more voice in the crowd, and probably not a very important one at that. As companies cede control of the megaphone, they will have to re-examine their entire value proposition and change many of the ways they work.

For example, marketers will no longer be able to push empty messages because they will simply be ignored. The only hope for marketing is to become a valued source of advice. That doesn’t mean publishing more promotional white papers. It means listening to the market and helping customers make wiser decisions, even if that means recommending someone else’s product.

Similarly, sales must evolve into more of a consultation and systems integration role. Ultimately, the authors suggest, sales representatives must be encouraged and actually rewarded for suggesting lower-cost or even competitive products if that advice is in the best interests of the customer. Behavior that is anything less than helpful will be ignored or, even worse, punished in a public forum.

Marketing and sales organizations will both need to adapt to the end of the traditional funnel. Customers will no longer enter the company’s orbit at the early awareness stage; they may not make their first contact until they’re ready to buy. This means marketing materials must be overhauled to address customers who enter the funnel fully informed with information from other sources.

There are implications for the workforce as well. Gossieaux and Moran assert that successful companies will be those that empower their employees to make decisions on behalf of the customer regardless of their formal role in the organization. Among the many examples they cite is JetBlue, which shuns a rule book in favor of five core values — safety, caring, integrity, fun and passion — that each employee is expected to live by. Employees are never punished for making decisions as long as they adhere to those core principles.

Adopting an External Focus

Embracing an outwardly focused, socially active organization will require tolerance for a certain amount of “messiness.” This is inevitable and even desirable as organizations learn to quickly test, assess, fix and discard ideas based upon customer feedback. The good news is that customers can be remarkably tolerant of mistakes as long as businesses seek their input and are transparent and earnest about their motives.

In the end, the rise of social media “is likely to present companies with a critical question that is bound to keep executives busy for the next few years: What business are we in?” These kinds of life-or-death choices will be propelled by the ease with which operations can now be outsourced half a world away. Any line of business that does not provide the opportunity for clear competitive differentiation should be discarded, the authors say. Many companies will find that their only source of sustainable advantage is in customer service, systems integration and innovation. Businesses must effectively become integrators because otherwise their customers will do the integration themselves.

If this sounds like a lot of bad news, it is, but there’s also a silver lining in The Hyper Social Organization. Gossieaux and Moran believe that organizations that embrace the concept of hyper-sociality and involve external constituents at every level can reap enormous benefits. Crowdsourced product development is far cheaper than hiring legions of engineers. Customers who arrive via word-of-mouth recommendation are twice as loyal as those who respond to an ad. In fact, external constituents can take on much of the work that paid employees now do if they are courted appropriately.

Not that this is going to be easy. Twenty years ago, a lot of big computer companies made their money selling hardware. As market forces turned  that business into a commodity, they were forced to shed often very large businesses in order to remain viable. It was an agonizing process, but the companies that survived it are more diversified and better prepared for the future. Many didn’t survive, though, and if the scenario that Gossieaux and Moran portray comes to pass, a lot of other organizations are in for the same experience.

Millennials: Coming Soon to a Cubicle Near You

This weekend I’ll pack my daughter off to college, so as a little celebration, I took her and a friend to a Six Flags amusement park this week. As we drove west on the Massachusetts Turnpike, I took the opportunity to eavesdrop on the conversation in the back seat, affording me one of my too-rare glimpses into the world of Millennials.

During the 75-minute drive, I listened to the girls talk excitedly about the people they would soon meet in person for the first time. They already knew many of them, of course. Thanks to Facebook, they had been building connections with future classmates since the late spring. When today’s students arrive on campus, they already know dozens of others.

My daughter, Alice, had already “spoken” to her future roommate several times. I use the term figuratively because Alice hates to talk on the telephone, as do most of her friends. By “speak”, she means text messages, instant messaging sessions, wall posts and maybe a few webcam interactions. For today’s teens, interaction with friends is multi-channel and multimedia.

Media Everywhere

I actually shouldn’t say Alice hates talking on the phone. She just can’t fathom doing nothing but talking. Her favorite context for conversation these days is a massively multi-player game, where friends can slay dragons and battle wizards while chatting about the same things their parents talked about: music, school and romance.

Much has changed there as well. Thanks to MySpace pages and BitTorrent, Millennials have constant and immediate access to the latest music and video. They like the top artists, of course, but along with Lady Gaga (left) they favor an assortment of bands I’ve never heard of that cater to eclectic tastes. When I was their age, I learned of new artists from cassette tapes passed back and forth between friends. Today, a link in an instant message does the same thing, and Apple’s Genius and Pandora make the process programmatic.

Relationships? Well, after listening to two teenagers talk for an hour, it dawned on me that there were people they felt very strongly about whom they had actually never met. One of Alice’s best friends lives in Texas. Their relationship was already well established last year long before they met each other for the first time.

It’s not unusual to hear terms like “boyfriend” and “girlfriend” applied to virtual relationships. Nor is it surprising to hear of relationships ending in novel ways. Two years ago, I listened in as a group of Alice’s classmates spoke of a friend who had just ended a romance. Everyone in the group knew the news except the guy who had been dumped. He hadn’t read the message yet.

Sound strange? A survey of teens this year by textPlus found that 30% percent said they’ve broken up with someone or been dumped via text message. Call it passive aggressive or wimpy or whatever you want; it’s the way things are.

Coming To Your Town

And so they head off to college, and in four years they will enter a workplace that understands little about their values and systems. They will encounter managers who believe that Facebook is a productivity drain and who would rather  employees spend an hour in traffic jams each day than get work done from home.

They will have their first brush with cover-your-ass thinking and will sit in meetings that waste hours of time so that everyone in the room can be “in the loop.”

They will encounter rigid, top-down hierarchies in which risk is avoided and decisions are unchallenged. They will find mid-level managers who hoard information out of fear that sharing will threaten their job security.

They will wonder how anything gets done in environments like these and they will gravitate toward those companies that discard tradition. They’re young, confident and coming to your town. Are you ready?

How to Calculate Social Marketing ROI

This is a draft of chapter 10 of Social Marketing to the Business Customer by Paul Gillin and Eric Schwartzman. This chapter focuses on how to calculate ROI of social media and Internet marketing programs in general. I’m particularly interested in your feedback on this chapter because it presents some new ideas I’ve been playing with about how to calculate the ROI of almost anything. My biggest concern is that these ideas are overly simplistic. They do assume that a company has a rich set of historical data to work with, which is often not the case.


Please ignore the typos and grammar flaws that invariably appear at this stage.

We’ve told you about a few companies that have achieved a notable return on investment (ROI) from their social marketing initiatives. They include Indium Corp., whose blog-driven search strategy yielded a six-fold increase in leads in just one quarter, and Clickable, whose Gurus drove a 400% one-year growth in billings.

These numbers are impressive, but in our experience, they’re more the exception than the rule. In conversations with hundreds of marketers over the last few years, we’ve observed that few of them closely track the ROI of their social marketing programs. In fact, many of the most successful marketers aren’t that concerned with ROI at all. Rather, they invest in social marketing because they believe that the benefits – customer engagement, market awareness, continuous feedback and professional development – are good for

any company, regardless of the financial impact. They measure like crazy, but they rarely translate the benefits of engagement into hard dollar figures.

Most of these early adopters work for companies with adaptive, change-oriented management. That’s good if you can get it, but the reality is that most top executives are still wary about social marketing. ROI is typically the number one or two most cited concern we hear from the people who work for these companies.

B2B Social Media Metrics

We’re conflicted about the whole ROI debate. On the one hand, we believe that businesses should make decisions based on sound reasoning rather than vague promises or impulse. ROI analysis enforces rigor that leads to better decisions. On the other hand, we believe ROI objections are often used to avoid decisions that executives don’t want to make for other reasons, such as fear of losing control. Few people want to admit that they’re afraid, so they fall back on convenient stalling tactics, of which ROI is a primary one.

The reality is that businesses make decisions without applying hard ROI criteria all the time.  Much of the money that B2B marketers have poured into direct mail campaigns, trade show exhibitions and trade print advertising for the last 50 years has questionable returns. The only reason we make these investments is that these practices are established and businesses are accustomed to them. “ROI calculations don’t work well for social media and they don’t work well for marketing in general,” says Benjamin Ellis, a UK-based serial entrepreneur who now specializes in social marketing.

What’s the return on landscaping, an expensive conference room table or free bagels on Fridays? It may be possible to calculate a payback through extensive customer perception or employee satisfaction analysis, but why bother? We know these investments make people feel better.  If your employees feel better, they do a better job and your customers feel better.

EMC Corp. has been known to charter jets to fly technicians across country in the middle of the night to take care of a customer whose computers are down. Do you suppose the storage giant conducts an ROI analysis before making that decision? Of course not. EMC is a premium-priced provider whose philosophy is to always go the extra mile to take care of the customer. In the aggregate, the company may be able to justify its practices in the form of higher customer satisfaction and repeat sales, but we doubt the support manager who charters the midnight express is required to justify the added expense in advance.

That said, we understand the ROI justification is a hurdle many marketers must clear to get their social programs off the ground. We believe that many social marketing programs can be justified, but the process requires discipline and careful documentation. After all, the Internet is the most measurable medium ever invented. If you can isolate variables, establish correlations and apply a little creativity, it’s remarkable what you can do. In this chapter, we’ll suggest some approaches.

Defining ROI

A lot of marketers would probably like to be in Susan Popper’s shoes. The VP of marketing communications at SAP was recently asked by B-to-B magazine how she is measuring ROI on marketing efforts. Her response: “When [our target audiences comes] to our site, they watch the videos and they are engaging with the content on the site. Our impression-to-visit ratio (as measured by click-through rates) doubled this year versus last year.” That’s an impressive result, but it isn’t a return. In order to compute return, you need to think in financial terms.

According to Wikipedia, ROI is “the ratio of money gained or lost (whether realized or unrealized) on an investment relative to the amount of money invested.” There are two important variables in this equation: Return and Investment. There’s also a third vital term: Money.

Return is payoff as measured in revenue generated or costs avoided. There are other ways to measure return (for example, improvement in customer satisfaction scores), but unless those outputs can be measured financially, they really don’t qualify as considerations in ROI. We believe many of these intangibles actually can be translated into financial terms, and we’ll cover that later in this chapter.

But for now, let’s look at a couple of basic examples. A simple one is an ROI analysis of the impact of hiring a new sales representative. Let’s say the new rep carries a fully loaded cost of $100,000 and delivers $2 million in incremental annual sales revenue at a 10% net profit. In that case, the first-year ROI of hiring the salesperson is 100%, expressed as profit divided by investment:

Cost of sales rep

$100,000

Revenue generated by rep

$2,000,000

Profit margin

10%

Net profit

$200,000

ROI ((net profit – cost)/cost)

100%


We can apply the same type of analysis to cost avoidance. That’s what Pitney Bowes did when a 2007 Postal Service rate increase prompted 430,000 calls from customers. The mailing service provider launched an online forum to deflect some of the most common questions and tracked 40,000 visits in six weeks. Pitney Bowes was able to correlate savings in call center costs and estimate that the forum more than paid for its first-year costs in just a short time.

Let’s say we implement a customer self-service portal as a way to reduce support costs. We assume that the portal will require half of one full-time equivalent (FTE) employee to administer, that the fully loaded cost of that employee is $70,000 and that the portal will enable the company to eliminate one support position at a fully loaded cost of $70,000. Let’s further assume that efficiencies will enable us to reduce administrative support costs to one-quarter of an FTE the second year and 10% the third year. At the same time, the value generated by the community will enable us to cut an additional one-half customer support position each year.

Here’s what the analysis would look like:

Year

Item

Annual

Cumulative

1

Administrative costs

$           35,000

$                    35,000

Savings

$           70,000

$                    70,000

ROI

100%

100%

2

Administrative costs

$           17,500

$                    52,500

Savings

$          105,000

$                  175,000

ROI

500%

233%

3

Administrative costs

$             7,000

$                    59,500

Savings

$          140,000

$                  315,000

ROI

1900%

429%


The portal looks like a good investment, yielding a positive first-year ROI and blowout value in the third year. The cumulative value is also very strong. Even if our annual savings estimates are off by 50%, we’d still get nearly a 10-fold return on operating costs in year three.

These are two simple examples, but they both require confident forecasting based upon accurate historical data. For many companies, that’s far from simple. In the case of the sales rep, we must be able to predict with reasonable certainty that the person can generate $2 million in incremental business in year one. There are a lot of factors underlying that assumption. For example, we assume predictable growth in the overall market and in our growth rate relative to the market. We must be confident that there is $2 million in new business out there to find. In niche B2B markets with a small number of potential customers, that assumption may be optimistic. And then there are unforeseen circumstances: The bankruptcy of a major competitor could move that revenue goal higher, while the emergence of new competition might force us to trim our forecasts.

There are also nuances of calculating net present value, inflation, opportunity cost, return on capital and other fine points of finance that we won’t try to cover here for the sake of simplicity. ROI calculations are rarely a precise science to begin with.

History and Correlation

Good ROI analysis almost always requires accurate historical information, which few companies have, in our experience. Capturing and analyzing historical data requires time and discipline. It’s easy to cast aside analytical tasks when everyone is focused on generating revenue. However, you can’t forecast the future without understanding the past. Historical data also sets a baseline for measuring change. That change can then be measured and compared to actions that may have caused it. If you can correlate action to impact, then you can calculate ROI.

In the example below, lead activity appears to correlate positively with traffic to a company blog. The positive correlation is indicated by the change from baseline, which appears to correspond with the upward movement in blog traffic. Even then, a definitive correlation can’t be established until other factors are eliminated from consideration, such as a promotion or a new advertising campaign.

Positive Correlation of B2B Blog and SalesIdentifying correlations can be a time-consuming process, requiring new variables to be introduced independently of each other so that change can be isolated. However, you don’t necessarily have to test only one variable at a time. With split testing, you can try two different experiments, each targeting a different segment of your customer base.

Suppose you license e-mail marketing services to customers on a subscription basis. For the last three years, your renewal rate has been about 40% annually, so you can reasonably expect that trend to continue. This gives you a baseline from which to test new tactics.

You’re going to try out two new incentives this year to increase renewal rates. One provides a 10% discount on the annual fee to each customer that renews more than one month ahead of deadline. The other provides access to six customer-only educational webcasts during next 12 months for all customers who renew, regardless of timing. Each eligible customer gets one incentive or the other. This should give you a sound indication of ROI because you can compare your results to historical data.

It turns out that both programs are equally successful in boosting renewal rates, but the webcast promotion has a better ROI. That’s because 40% of the renewing customers who were offered the discount renewed before the one-month deadline, which incurred a higher discount obligation. Not only was the webcast promotion more cost-effective, but it carried a predictable cost of about $1,500 per webcast, compared to the variable cost of the discount. The webcast is probably the smarter incentive to offer.

Historic

With 10% discount

With webcast

Expiring customers

100

100

100

Average subscription cost

$             5,000

$                      5,000

$           5,000

Renewal rate

40%

60%

60%

Profit margin

20%

20%

20%

Profit from renewing customers

$           40,000

$                    60,000

$          60,000

Incremental profit from incentive

N/A

$                    20,000

$          20,000

Cost of incentive

N/A

$                    12,000

$           9,000

ROI

N/A

67%

122%


This example presupposes that the company has good data about past renewals, but many companies lack the systems to capture complete data in the first place. A good CRM system is essential. Many excellent solutions are now available on a software-as-a-service basis today, including Salesforce.com, RightNow Technologies and NetSuite. You can find a complete directory at Saas-showplace.com. But choosing the tool isn’t nearly as important as knowing how to put it to work.

Effective CRM requires discipline to capture every customer contact from initial website visit through sale and continuing with ongoing support. That means involving more than just the sales force in the process. To calculate the ROI on social marketing, you need to understand every dimension of the customer relationship, beginning with the action that creates the first contact. It’s not enough to begin tracking when the lead is generated. Marketing should have the systems in place to identify the action that created the lead, whether that’s a search query, e-mail link, customer referral or some other event. Most CRM systems are good at tracking customer activity after leads come in. The difficult job for marketing is figuring out the sequence of events that brought them there.

We can’t emphasize this enough: Being able to predict the future means knowing a lot about the past. If you can’t establish effective baseline expectations, then your forecasts are little more than educated guesses. In order to do ROI right, you need to track every customer contact, not just interactions with the sales force.

Metrics

Web analytics today deliver unprecedented insight about online interactions. The basic features of the free Google Analytics service match the capabilities of products that cost thousands of dollars just a few years ago. Premium services like Webtrends build in sophisticated behavioral and sentiment analysis and can track offsite activity such as a prospect’s comments on Twitter or use of a mobile application. They can even trigger customized e-mails or tweets when a person’s behavior matches certain predefined patterns.

With all this rich data now available, it’s remarkable how many marketers still use the basic metrics of traffic and unique visitors to measure success. We’re not big fans of these measurements; it’s easy to generate spikes of valueless traffic by posting celebrity photos or top-10 lists, for example. In Chapter XX, we listed some common metrics you can use and how they relate to different business goals. We think richer measures such as referring keywords, top content, bounce rate, average time spent on site, pages-per-visit and content analysis yield more actionable insight that will only get better.

The best way to select relevant metrics is to work backwards. Start with sales trends, match them to Web activity and look for the metrics that correlate most closely. Those are the metrics that are most meaningful to you. For example, if an increase in session time spent on site appears to correlate with registrations for a webcast, then that indicates that webcasts resonate with the audience.

You also shouldn’t confine metrics to those which can be measured online. One of the most popular indications of customer satisfaction is the Net Promoter Score (NPS), introduced in 2003 by Fred Reichheld of Bain & Co. Obtaining an NPS requires asking customers a single question on a 0-to-10 rating scale: “How likely is it that you would recommend our company to a friend or colleague?” This simple tactic has been adopted by big B2B companies like General Electric and American Express as a key performance indicator.

You can also choose to monitor classic metrics that have nothing to do with the Internet. These include press mentions, speaking invitations and performance on customer satisfaction surveys.  Metrics also vary by objective. For example, the success of a blog set up to generate leads may be measured by inquiries, time spent on site and to repeat visitors, while one targeted at search optimization may be evaluated based on keyword rankings and inbound links.

For ROI purposes, though, the choice of metrics is less important than your ability to correlate behavior to results. In other words, if certain page views are more valuable than others, then an increase in traffic and session time could be a good starting metric for evaluating ROI. Just be aware that they are imperfect indicators of visitor engagement.

One thing you absolutely need to know, however, is how people reach your site. Unique URLs are a way to measure that. We’re astonished at how many e-mails we still get from brand-name companies that don’t make use of this simple tactic, which enables a marketer to specify a web address that is unique to the e-mail, tweet, wall post or any other message.  Unique URLs use a simple server redirect function to identify the source of an incoming click. They look like this: http://mycompany.23.com/public/?q=ulink&fn=Link&ssid=5155.  Everything after the word “public/” is a unique code that tells where the visitor came from.

Unique URLs enable your analytics software to track inbound traffic from each source separately so you can determine the ROI of each channel. Without unique URLs, visits are simply classified as “direct traffic,” meaning that the source could be a forwarded e-mail, bookmark or an address typed into the browser.

A simple example of how you might use this information is to measure traffic to a landing page and analyze the number of visitors who fill out a registration form according to the referring source. This would show you, for example, that registration rates are twice as high from a newsletter as from a tweet. The value of those registrants divided by the cost of the newsletter is an ROI metric. Unique URLs are also valuable to split testing; you can try out two different invitation messages in the same email and use a different URL for each to measure response to each message.

PUTTING IT ALL TOGETHER

Let’s apply all the factors we’ve described above to two B2B social marketing scenarios. First, we’ll compare the ROI of webcasts to white papers. Start with historical data. What is the conversion rate of webcast viewers versus people who download a white paper? What is the lifetime value of an average customer? Compare the outputs and divide by costs to assess ROI:

Formula for Calculating B2B Social Media ROI

 

 

Let’s assume the following:

·       The average lifetime value of a customer is $50,000 at a 10% profit margin.

·       The average cost of delivering a webcast to 100 registered viewers is $3,000; viewers convert at a 2% rate;

·       The average cost of delivering a white paper to 500 registrants is $10,000; registrants convert at a 1% rate.

Our ROI analysis looks like this:

 

 

Webcast

White paper

Audience size

100

500

Conversion rate

2%

1%

Lifetime profitability

$           10,000

$                    25,000

Cost of acquisition

$             3,000

$                    10,000

ROI

233%

150%


The webcast ROI is superior, but not by much. Armed with this data, we might choose to promote the webcast more aggressively to leverage its stronger ROI. However, another option would be to focus on improving the white paper’s conversion rate. In fact, doubling the rate would drive ROI to 400%, making this a potentially higher return action.

Let’s look at one more example in which we use a blog for lead generation. We know that performance will be slow during the first few quarters until search engine traffic kicks in. Based upon the experience of others, we believe that lead growth will improve steadily as traffic builds. We expect to be at 50 leads per month by the end of the first year and 160 per month by the end of the second. Our historical data tells us that a lead is worth $100. We further estimate our editorial costs at $2,000 per quarter during the first year, doubling to $4,000 during the second. Here’s our analysis of quarterly and cumulative ROI.

 

Leads

Lead value

Cost

Quarterly ROI

Cumulative ROI

Y1Q1

10

$          1,000

$     2,000

-50%

-50%

Y1Q2

25

$          2,500

$     2,000

25%

-13%

Y1Q3

35

$          3,500

$     2,000

75%

17%

Y1Q4

50

$          5,000

$     2,000

150%

50%

Y2Q1

75

$          7,500

$     4,000

88%

63%

Y2Q2

100

$        10,000

$     4,000

150%

84%

Y2Q3

130

$        13,000

$     4,000

225%

113%

Y2Q4

160

$        16,000

$     4,000

300%

144%

This gives us a firm foundation to make the case for investing in the blog. If leads aren’t coming in as quickly as we had estimated, we can adjust costs downward to improve ROI by setting up content-sharing arrangements.

Measuring Intangibles

The trickiest aspect of ROI analysis is accounting for intangibles. These include factors like customer satisfaction, customer loyalty, brand reputation and market influence. Many social marketing projects are justified for these reasons but the outputs are never measured, either because it’s not worth the effort or because the measurements aren’t in place.

In fact, all of these outputs can be measured and have been for years using some of the following tests:

Value

Measurement

Customer satisfaction

Customer surveys; renewal rates; referrals; incremental business; testimonials; Net Promoter Score

Customer loyalty

Renewal rates; incremental business, response rates, event attendance; testimonials; Net Promoter Score

Customer engagement

Newsletter subscriptions; online community activity; response rates; event attendance; testimonials; feedback volume

Reputation

Market share research; awareness research; media citations; analyst research

Market influence

Market share research; lift studies; media/social media citations; speaking invitations; analyst research

Leadership

Attitudinal research; growth rate; media citations; copycat competitors


However, research statistics aren’t sufficient. You have to find a way to translate these measurements into dollars and cents. That’s where creativity comes in handy. Many of the metrics on the right can be mapped to business outcomes, but only if historical data is available to correlate to those changes.

For example, you can calculate the business value of customer loyalty by comparing the revenue derived from customers at different longevity levels, such as five-plus years, three to five years and less than three years. Then look at the support and sales costs allocated to these same customers. You’ll probably find that long-term customers are cheaper to support and have lower sales costs than newer customers. Comparing the ratio of revenue to expense for each longevity segment should give you an idea of where to invest.

What is the business value of reputation? There’s a lot of research to indicate that B2B customers weigh this factor heavily when making buying decisions. A simple telephone survey can identify who these customers are. You can then see where they rank in order of value to your business. If they are near the top (and we believe they will be) then that is compelling evidence that investment in reputation pays off. You can compare the average profitability of these customers versus those who don’t value reputation as highly and see which has more investment upside.

You can even quantify, to some degree, factors that are almost impossible to measure. For example, suppose that a publicity campaign results in five million impressions in mainstream media. By conducting pre- and post-campaign “lift” studies, you can measure changes in awareness. Then drag out the record books to compare previous increases in awareness to corresponding changes in the business, such as lead quality and conversion times. You can quantify the value of those outputs to calculate ROI.

Once again, these analyses require accurate historical data. If you can’t segment your customers according to criteria like these, the justification process is far more difficult. That doesn’t mean it’s impossible, though. Analyst estimates, industry averages and ratios derived from analyzing your competitors and those in other industries may yield similar insights.

How does this all relate to social marketing? We believe it’s critical. The ROI objection is the roadblock you’re most likely to encounter in selling a social marketing initiative. You need to speak the language of your inquisitors. Social marketing has also introduced new cost variables into the business. For example, press tours used to be a standard tactic for increasing market awareness, but today a blog may do the same thing at a much lower cost. In order to understand the true value of these new tools, you need to have a baseline for comparing them to past practices. Get your Excel skills in order, because you’re going to have some explaining to do.


Sidebar –  Valuing Twitter Followers

When marketers get up on stage to describe their social marketing successes these days, they invariably refer to follower and fan totals. On Twitter, follower counts have become a sort of merit badge, despite the fact that anyone can quickly run up that number by simply auto-following everyone who follows them. There are even paid services that inflate follower totals.

What is the true value of a Twitter follower? There is no industry standard to calculate that number, but if you have the right metrics in place, you can do that for your own organization. Here’s how:

Look at the total number of clicks to your site from Twitter in any given month and divide that by the number of tweets you posted. This gives you the average visits per tweet. Once you have this number in hand, you can look at the behavior of visitors who arrive from Twitter and compare it to those who find you from other sources. Look at page views per visit, time spent on site and visitor paths to identify what percentage of Twitter visitors become leads or customers. Using your standard qualifying metrics, you should be able to determine the average value of a Twitter visitor.

For example, if 1,000 visitors arrived from Twitter in a given month as a result of 20 tweets, that yields an average of 50 visits per tweet. If you know that 5% of Twitter visitors register for a download or newsletter, and that the value of an average registrant is $50, then you can calculate that Twitter delivers $2,500 in business value, or an average of $125/tweet. If you have 5,000 followers, then you can also calculate that an average follower is worth 2.5 cents.

This formula is overly simplistic, of course. Not all Twitter followers are created equal. If you want to dive deeper into the mechanics of influence, services like TweetReach.com and Twinfluence.com can calculate the total reach of your followers or tweets according to so-called “second-order followers,” or those who follow the people who follow you. These metrics can also be used to estimate the value of retweets by certain popular members.

This same approach may also be applied to finding the value of Facebook fans, LinkedIn connections, SlideShare followers and the like.

End sidebar




The Changing Rules of B2B Marketing

Here is a draft of the first chapter of Social Marketing to the Business Customer by Paul Gillin and Eric Schwartzman. This chapter focuses on drawing the major distinctions between business-to-business (B2B) and business-to-consumer (B2C) markets and where social marketing has particular value to B2B companies. Your feedback is welcome. Please ignore the typos and grammar flaws that inevitably appear at this stage.

Friends know Scott Hanson as an affable native Texan with a penchant for computers, cars and poker. But to thousands of technology professionals around the world, Hanson is a celebrity. By day, he and three other technologists at Dell Computer manage the Dell TechCenter, an online community that helps enterprise IT professionals unravel the thorniest problems that occur when trying to integrate technology from multiple vendors.

Dell conceived of the community in 2007 as a way to enhance loyalty among its largest customers. Members share advice and ask questions of Hanson and the other engineers, who dispense it for free. The community is open and fully searchable, although only registered members can submit articles and comments. In 2008, about 100 people visited the site every day. By early 2010, that number was over 5,000.

Hansen and colleagues Jeff Sullivan, Kong Yang and Dennis Smith are celebrities of sorts in the community of enterprise customers, who frequently seek them out for meetings at trade shows and during visits to the company’s executive briefing center. Their celebrity is paid off handsomely for Dell: Hanson won’t provide specifics, but Dell has estimated that the Tech Center is indirectly responsible for many millions of dollars in sales each year.

That’s despite the fact that Dell Tech Center isn’t charged with selling anything. The site is free of advertising and the member list may never be used for promotions. “The last thing IT people want when they come to a technical resource is an ad asking them to buy a laptop,” Hanson says.

Those sales are generated by the affinity that the staff has developed with these key corporate customers. It’s a camaraderie that is nurtured by personal contact. In the early days of Twitter, the Dell TechCenter staff had set up a common Twitter account as a secondary channel of communication. But it turned out that customers wanted to speak to people, not brands. The Twitter initiative really gained traction when Hanson became @DellServerGeek and Sullivan became @SANPenguin. Suddenly the discussion became more personal and the people behind Dell TechCenter more real to their constituents.

Welcome to the new world of B2B communications. Dell TechCenter and other initiatives like it are microcosms of the changes that are sweeping across corporate America as a consequence of the rapid growth of social media tools like blogs, communities and user-generated multimedia.

Companies like Dell, which does 80% of its sales volume with corporate customers, are ideally positioned to take advantage of these new channels. In fact, B2B companies were among the earliest adopters of social media. Technology leaders like Microsoft, IBM and Cisco had hundreds or thousands of employees blogging as early as 2005 and those same companies are now expanding their footprint into social networks like Facebook, YouTube and, overwhelmingly, Twitter.

Microsoft used a video program called Channel 9 to show its human side to a market that saw it as a closed and secretive company. B2B technology companies have also been among the most creative users of social channels to reach the highly skilled people they need to hire in competitive labor markets. Recruiters have found that social channels are far more effective in identifying prospective employees than recruitment advertising sources and that prospects came into the hiring cycle with a better understanding and more enthusiasm about the company they were hoping to work for.

Yet B2B applications of social media get remarkably little attention. Perhaps that’s because their focused communities of buyers pale in size to the millions who flock to Facebook Official Pages for Coca-Cola and Nike is. Perhaps it’s because glitzy video contests and games don’t resonate with the time-challenged professional audience. It doesn’t really matter. Few B2B companies seek the consumer spotlight and their audiences, which may spend millions of dollars with them, are more interested in substance than in style. Fortunately, B2B social media is all about substance. Continue reading

The Appeal of B2B Social Networks

B2B Social NetworksFollowing is an excerpt from Social Marketing to the Business Customer, which is due to be published in January, 2011 by John B. Wiley & Sons:

Online communities are a bit of a paradox. They are both the oldest form of social media and also the newest. Forums and discussion groups date back to the late 1960s and have been a staple of customer support operations at technology companies for 30 years. Internet newsgroups, CompuServe, The Well and other early communities had membership in the hundreds of thousands a decade before anyone had heard of a Web browser.

Those early online outposts looked little like the Facebooks and LinkedIns of today, though. The modern features that have made social networks the fastest-growing consumer phenomenon in history have created all kinds of new use scenarios, including some compelling B2B examples. Communities are the convention centers of social media. They are flexible gathering halls that can fill a wide variety of purposes ranging from product development to lead generation. The key is to get members to want to participate.

Friends and Fame

The great innovation in online communities came in 1998, when Classmates.com introduced the concept of personal profiles and friends. Those metaphors are now a staple of every social network and provide a powerful incentive for participation. Profiles are a member’s personal homepage. Everything the member contributes, from establishing contacts with others to joining groups to posting status updates, is captured in the profile. The more active the member is, the higher his visibility and the greater the value of the network to his personal success.

Friends are a virtual version of their real-world equivalent. When people create friend relationships, they exchange information that is not visible to others and they form persistent connections based upon trust. That’s actually how it works in real life, too. At their simplest level, friends connections are an efficient way to stay in touch. Members can always learn each other’s current address or job situation by searching within the network. In B2B communities, personal profiles are a way to register areas of expertise that others may find useful. Activity

is also a validation point. It’s one thing for someone to say he is an expert in direct marketing, but it’s more powerful when he can to prove it by solving the problems of other direct marketers. That proof is stored in the person’s profile.

Online friendships also translate fluidly into real-world connections. “Community isn’t just about discussing products but about getting to know each other and making friendships,” says Nicholas Tolstoshev, a Spiceworks community manager. Online friends in B2B communities frequently arrange meet ups at trade shows and events. Successful community managers we spoke to invariably augmented their online worlds with physical events to meet and thank their most active members.

Prior to the introduction of personal profiles, it was difficult for participants in online networks to build visibility. Recent experience has shown that visibility is the single most powerful driver of participation. Many communities use a recognition system that ties a member’s status to contributions. A few, like SAP, celebrate their most active members at physical events.

Spiceworks awards points to members who post well-regarded answers to other members’ questions. Valued members of the community are invited to participate in conference calls with Spiceworks developers. Their contributions are rewarded with low-cost swag like T-shirts but more importantly with inside information. Community managers also publish occasional interviews with featured members, highlighting their contributions and career accomplishments. “Online status drives a huge amount of activity without our sending money out the door,” says Tolstoshev.

FohBoh.com, a social network for food service professionals, highlights new contributions by its members on its home page and invites others to congratulate them on their celebrity. TopCoder, a contract software developer that hosts programming competitions and licenses the best solutions to commercial customers, applies an elaborate algorithm to the code submitted by its members to compute the quality of their work. Leader boards are maintained for the major competitions and quality ratings are reflected back to individual profiles. Top coders win money and also visibility that leads to jobs and lucrative contracts.

The most prolific contributor to LinkedIn’s “Answers” forum is Dave Maskin, a New York-based event marketing specialist who has answered an incredible 25,000 questions. Maskin refers to himself as “Mr. Lead Generator,” indicating that the value he provides to the community is good for his business.

Weinberger Wisdom

David WeinbergerMy definition of a good speech is one in which the speaker tells you something you already know in a way that you’ve never considered before. That’s why David Weinberger is one of my favorite speakers.

Here are my notes from David’s presentation this morning to the Mass. Tech Leadership Council’s Social Media Summit. These are adapted from my tweets from the event, but hopefully are self-explanatory. They’ve been cleaned up and expanded for clarity:

  • The Web has always been social. The only difference with Web 2.0 is that it’s easier to build a presence.
  • The page-centered Web paradigm has yielded to a people-centered one.
  • Apple is about art. Google is about scale. We don’t know yet what Facebook is about. That’s unsettling, because Facebook is to the social Web what Google is to the Web.
  • Media is frequently mis-characterized as publishing. The definition of media is that which  mediates between parties. Media isn’t content.
  • We are the media. We recommend knowledge to each other. New media transforms as it moves, unlike traditional fixed media like TV. Telegraphs are a fixed medium for sending messages. The Internet sends messages but it isn’t fixed. It changes every second.
  • We take on properties of our media and our behavior comes to reflect the media we use. For example: The phone is intermittent, interuptive communications driven by a reason to make a call. The Web is rolling sets of instantaneous, always changing fragmented networks. These networks may be transient or last a lifetime. This is a completely different model than traditional media.
  • Network sociality is more like a party than a phone call. Telephones are interruptive; the Internet is distractive. People interact with the medium differently.
  • In the days of broadcast, markets were abstractions created by advertising. Now they are real and social.
  • Transparency is now an imperative. For example, on Wikipedia you can always find out why an item of information is there. The entire process is open. More businesses will operate like this.
  • We are getting comfortable with fallibility. The most popular stuff on YouTube is about humans screwing up. This doesn’t embarrass us as much as it used to. This acceptance of our own weaknesses will change the way organizations operate.
  • People don’t buy drills or holes. They buy a nice place to hang towels to impress their relatives. Abstract to the level of basic human needs in order to understand behavior. This also works in marketing, BTW.
  • There are four types of transparency critical to Social Media: sources, self, humanity, interest.
  • Newspapers traditionally provided a curated mix of content reflecting a professionally derived combination of what we wanted to know and what we needed to know. News about Sudan is an “eat your broccoli” story. We don’t like it, but we need to know it. It’s not clear where we will get that kind of information in the future.
  • The social media generation now expects important information to find them. That’s a dangerous attitude.
  • Diversity is important but uncomfortable. Without shared interests, it’s hard to converse. When you have a truly diverse group, you get smalltalk because people don’t have a common platform for conversation. Nevertheless, diversity is important. We must fight the tendency to stick with people like us. Diversity requires conscious discomfort. We want to interact with like-minded people.
  • Media is increasingly an echo chamber in which we choose to listen to people who share our views. Echo chambers are bad for democracy and culture, but marketers like them because they say what marketers want to hear. Echo chambers aren’t necessarily bad, but if that’s the only place you ever talk, you’ll never hear other points of view.

The Power of B2B Communities

Here are the first 1,100 words of the chapter on B2B social communities from my forthcoming book, co-authored with Eric Schwartzman, entitled Social Marketing to the Business Customer. The rest of the chapter will go into the various kinds of social communities and how to use them, with examples from the HR, food service, medical and construction industries. I’d appreciate any feedback on this opening passage, in particular:

Is this information useful to you?

Does it set the stage for a deeper discussion of social communities?

Is it appropriate to a B2B setting?

All comments are appreciated!

Spiceworks does a very good job of managing B2B communities. It has to; they’re critical to its business.

Spiceworks is a technology company that acts like a media company. Its namesake product is a sophisticated systems management suite for small and medium businesses (SMB) that it gives away for free. The SMB market is coveted by technology firms, and many of them pay Spiceworks for the chance to interact with the audience of over one million IT professionals for activities ranging from market research to product design.

Spiceworks sells advertising space on the software console its members use to monitor their networks. IT pros swap tips and tricks, review products and upload video tutorials. As the community grows, so does the value of the resource to all involved. Members have posted more than 15,000 product reviews and created hundreds of discussion groups. Their technical questions are now routinely answered within minutes.

Spiceworks builds the community into every facet of its operations, even asking members to vote on proposed new features. More than 400 people recently formed a buyer’s group to get better deals on backup software.

The Spiceworks community spreads beyond the website. As of this writing, nearly 20 user groups called “SpiceCorps” have sprung up around the North America and are spreading internationally. An annual user conference attracts thousands. Conversations long ago expanded beyond troubleshooting and now encompass product reviews, career advice and swap meets for software utilities. There’s even a long-running thread called “What Is the Funniest Thing A User Has Asked You?” It started in October, 2008 and had attracted more than 700 contributions 18 months later.

Essential Utility

Spiceworks represents the best of what B2B communities can accomplish. The social network is so essential to the company’s business that user generated content overflows onto the corporate homepage. Spiceworks staffers have a vested interest in optimizing member engagement because the company profits from it. In the process, it has learned much about what makes communities work.

It has learned, for example, that personal prestige is a huge motivator for community participation and that members will give generously of their time with no promise of reward other than helping a peer. It has also learned about the “1:9:90” rule: the vast majority of its content is generated by about 1% of its members, with another 9% kicking in occasional additions. Nine in 10 visitors contribute nothing but that’s OK. They get value from the submissions of the active few.

Online communities are a bit of a paradox. They are both the oldest form of social media and also the newest. Forums and discussion groups date back to the late 1960s and have been a staple of customer support for technology companies for 30 years. Internet newsgroups, CompuServe, The Well and other early communities had membership in the hundreds of thousands a decade before anyone had heard of a web browser.

Those early outposts looked little like the Facebooks and LinkedIns of today, though. The modern features that have made social networks the fastest-growing consumer phenomenon in history have created all kinds of new use scenarios, including some compelling B2B examples. Communities are the convention centers of social media. They are flexible gathering halls that can fill a wide variety of purposes ranging from product development to lead generation. The key is to get members to want to participate.

B2B Value

Discussion was the first “killer app” of B2B communities. Forums are particularly useful in B2B scenarios because they enable customers to solve often pressing problems quickly. Text-based discussion performs well in search results and active communities can save considerable customer support costs. In their 2008 book Groundswell, Charlene Li and Josh Bernoff cite the example of one unpaid Dell Computer customer who saves the company an estimated $1 million per year by answering technical questions that would otherwise require Dell resources. The most prolific contributor to LinkedIn’s “Answers” forum is Dave Maskin, a New York-based event marketing specialist who has answered an incredible 25,000 questions. Maskin refers to himself as “Mr. Lead Generator,” indicating that generosity is part of his business strategy.

The great innovation in online communities came in 1998, when Classmates.com introduced the concept of personal profiles and friends. Those metaphors are now a staple of every social network and provide a powerful incentive for participation. Profiles are a member’s personal homepage. Everything the member contributes, from establishing contacts with others to joining groups to posting status updates, is captured in the profile. The more active the member, the higher his visibility and the greater his perceived value to the community as a whole.

Friends are an online version of their real-world equivalent. When people create friend relationships, they exchange information that is not visible to others and they form persistent connections based upon trust. That’s actually how it works in real life, too. At their simplest level, friends connections are an efficient way to stay in touch. Members can always learn each other’s current address or job situation by searching within the network. In B2B communities, personal profiles are a way to register areas of expertise that others may find useful. Activities are a validation point. It’s one thing for someone to say he is an expert in direct marketing. It’s a more powerful message if he can to prove it by answering questions from other direct marketers. That proof is evident in the person’s profile.

Friends connections don’t necessarily have a professional component. “Community isn’t just about discussing products but about getting to know each other and making friendships,” says Nicholas Tolstoshev, a Spiceworks community manager. Online friends frequently become real ones when they arrange meet ups at trade shows and events.

Prior to the introduction of personal profiles, it was difficult for participants in online networks to build visibility. Recent experience has now demonstrated that visibility is the most powerful driver of participation. Most of the successful community organizers we spoke to use a recognition system that ties status ability to contributions. A few, like SAP, celebrate their most active members at physical events.

Spiceworks awards points to members who post well-regarded answers to other members’ questions. Valued members of the community are invited to participate in conference calls with Spiceworks developers. Their contributions are rewarded with low-cost swag like T-shirts. Community managers also publish occasional interviews with featured members, highlighting their contributions and career accomplishments. “Online status drives a huge amount of activity without our sending money out the door,” says Tolstoshev.

FohBoh.com, a social network for food service professionals, highlights new contributions by its members on its home page and invites others to congratulate them on their celebrity. TopCoder, a contract software developer that hosts programming competitions and licenses the best submissions to commercial customers, applies an elaborate algorithm to the code submitted by its members to compute the quality of their work. Leader boards are maintained for the major competitions and quality ratings are reflected back to individual profiles. Top coders win money and also visibility that leads to jobs and lucrative contracts.

What Makes B-to-B Communities Unique

Eric Schwartzman and I are deep into the research for our forthcoming book on business-to-business social media and lately we’ve been learning what makes communities tick. Online gathering places for business professionals actually predate the commercial Internet by more than a decade, having established themselves as an effective form of peer support back in the days of Compuserve and Usenet. With the addition of profiling, friending and other features of modern social networks, there are more opportunities than ever to use communities to bind customers closer to your company.

Communities have a lot of value outside of support. They can be used to test new product ideas, generate feedback, spread a message and enlist new customers. I’ve recently spoken to people who administer such successful b-to-b social networks as Spiceworks, element 14, AuntMinnie, the SAP Developer Network and others to learn what works with business professionals. In the process, I’ve learned to understand the difference between consumer and business communities. Here are some highlights.

B-to-b customers are motivated by professional, rather than personal interests. This may seem obvious, but when you think about it, there are big implications for the way you approach a community. The essence of many consumer social networks is playfulness, chitchat and commentary on popular topics in the news. Much of this content doesn’t play well in a b-to-b environment. While some community administrators report that political and even sports topics spur conversation, by and large the membership has problems to solve and little time to waste. Keep the navigation simple and the gimmickry to a minimum. I’ve always liked LinkedIn’s look and feel because it reflects its utility so well. LinkedIn’s look is almost aggressively boring, but the message is that it’s a place to get work done, not to mess around.

Engagement is difficult. The term “engagement” has become almost cliché in its role as the Holy Grail of social media marketing. Facebook is an engagement machine. The company claims the average user spends more than 55 minutes per day on the site. That’s great for Facebook, but most businesses would fire an employee who did that.

Business professionals are focused on solving problems, and that makes their social network behavior quite different from consumers’. In its “Social Technographics of Business Buyers” study published about a year ago, Forrester Research observed that “buyers will participate socially when they need to solve problems or evaluate progress; otherwise they are off running their companies.” In other words, a network that has a high “time spent on site” number may be attracting the wrong people (or may just be difficult to navigate). When building a b-to-b community, accept the fact that a lot of people may register once and never come back. Factors such as search engine performance and unique visitor growth may be more important than time spent reading because they indicate that your community is providing content that other people are discovering and finding valuable.

It’s all about the job. Back in my tech publishing days, I used to joke that when a CIO approached us offering to author an article, it almost invariably meant he was looking for a job. That observation was later validated by prominent business magazine (I think it was Fortune) that suggested that the acronym CIO actually stood for “Career Is Over.” I would later learn that CIOs were in almost constant job search mode. They were in visible and pressurized situations and frequently took the fall when things went wrong.

Today, a lot more people are in that boat. Layoffs are everyday occurrences and unforgiving markets have made job security a joke. Forget allegiance to one’s employer. Business professionals today are constantly on the lookout for opportunities to network, showcase their stuff and be ready when the ax falls. Keep this in mind and give people ample opportunity to connect with each other. Which is one of the reasons you should…

Enable people to build personal brands. Nearly every successful professional social network I’ve encountered has some kind of a points system or other tool for elevating the status of individual members. In extreme cases, such as that of TopCoder, the most innovative and productive members of the community can win cash prizes. However, it’s remarkable how much people will contribute to the collective simply for the visibility. As Tabrez Syed, director of products at the 800,000-member Spiceworks community said, “It’s amazing how much people are willing to give back.”

Part of this is human nature, I suppose, but there’s a practical element as well. Visible contributors gain status that leads to jobs and consulting assignments. A few years ago, it was almost impossible to build one’s reputation this way, but social networks have created a way to build status based solely on a person’s contributions. SAP, which has one of the most impressive communities programs I’ve seen, recognizes its most valuable members at annual conferences. These people are rock stars, which has all kinds of benefits to them.

In the coming weeks, I’ll be talking to owners of successful communities aimed at doctors, human resources professionals and food service managers. I’m sure there’ll be more to report.