Gartner Says Social Networks Are Attracting Too Much Traffic for Retailers to Ignore

Analysts Highlight Ten Things Retailers Should Know About Social Networks, and What to Do

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With the increased consumer traffic that social networks are generating on the internet, retailers must have a position on social networks, according to Gartner, Inc. Although social networks have tended to centre on younger demographic groups, they are expanding into wider groups that matter to a broader base of retailers such as career-based social networks, shopping-based social networks, and employee groups.

"Until recently, retailers considered social networks relevant only for the youth market, meaning that many have largely ignored them," said Hung LeHong, research vice president at Gartner. "However, as social networks expand to embrace ever-wider demographic groups, retailers need to ensure that they have a position on them."

Mr. LeHong said that these positions can range from creating their own social community to gather feedback, to creating a marketing presence on large social networks, or to simply observing how brands are discussed and perceived. Gartner has created a list of the top ten things retailers should know about social networks and what action to take.

1. There are Social Sites, and Then There are Social Platforms Social sites can include features such as discussion forums and consumer reviews. A social platform is a large public site that enables users to do the same things as on a social site, but also creates a platform that encourages and eases the development of applications, widgets and mashups. What a retailer is capable of doing on a social network will be determined by the platform's capabilities. Whether a retailer requires a social site, platform or both depends on where the target market resides and which social vehicles are required.

2. Social Network Sites Go Way Beyond MySpace and Facebook But Reconsolidation Has Started Gartner estimates that an individual is able to participate in one to three social networks in any meaningful way. Because there are only so many social networks to participate in, consumers are starting to shift to the large centres of gravity (for example, MySpace and Facebook in North America). Analysts believe that the social network market has not yet settled, so retailers should be cautious with their investments on any one social network.

3. Social Networks Are Rich in Word-of-Mouth Discussions About Retailers and Products Retailers should view social networks as a lead-generation channel just as they would search engines, review sites, and price comparison sites. Lead-generation vehicles range from banners, to search term bidding, to application programming interfaces (APIs) that enable social networks to access the retailers' consumers.

4. Social Graphs Make Word-of-Mouth Relationships Known and Usable Social graphs describe how friends are formally linked to each other on a social network. Word of mouth is effectively amplified by making social graphs usable by friends and business entities on a social network. To benefit from social graphs, Gartner says that retailers must first understand how each of the major social networks will allow them to leverage their graphs, then decide what to do with that access. For example, analysis of social graphs can be useful in discovering how consumer groups are linked together.

5. Viral Propagation is Boosted in Social Networking Viral marketing is the most obvious route to take with viral propagation but must be closely monitored and managed. Communication between friends about something as simple as a pricing or promotion mistake on a Web site can propagate very quickly in social networks. Similarly a strong criticism of a product or retailer can quickly attract a large critical mass. Negative press that is virally spread is difficult to capture and public relations teams need to be well-versed in social network channels.

6. Applications for Social Networks are Easier to Build The latest push in the social network world has been the focus on creating a platform that allows individuals and companies alike to build applications (sometimes called widgets) that are designed to run on the social network. Social platforms, especially Facebook, have been providing a platform and technical guidelines to make building these applications easier. Building an application is a way to more actively engage a target market, but the business outcomes of this engagement is still undetermined. Retailers should consider applications that have real shopping functions such as customer service, product selection guides and feedback mechanisms.

7. Social Networks Are a Huge Source of Consumer Data, but Retailers Cannot Easily Access It Already some people are regretting having made available so much information available on social networks and access to this information will decrease further over time. However, access to some of this data can be gained by building applications that require members to agree to share some of their data in exchange for using the application. As with store loyalty cards, consumers may be willing to give up a little privacy in exchange for a valued service or discount. Expect privacy issues to make access to consumer data even tighter during the next 24 months.

8. Communities, Groups and Networks Can Be Created By Anyone and Are Impossible to Control If a social network provides corporations too many capabilities in interacting with members (for example, advertising and selling), there is a risk that members will leave the network. Gartner advises retailers to build their social network presence on content produced by members and create applications that engage members in providing feedback in areas such as product design. The aim is to create a forum or application that will create value for other members while promoting the organisation's brand.

9. Social Networks Are Not Capable of Commerce - Yet Gartner advises retailers against becoming an early adopter of commerce capabilities on social networks. This lessens the chances of being part of a movement that may drive away social network participants because of the perceived commercialisation of the social network. It also allows organisations to better understand how commerce engines will work with social networks.

10. Social Networks Are Merging Into the Real-Time World - Coming to Your Mobile Phone For now this remains an emerging consumer practice, but the ability to access social networks from mobile phones is being promoted by the wireless carriers. Examples of how this could be used include offering a limited time, in-store-only promotion that could be broadcast to friends in hopes of driving more traffic to the physical store.

Additional information is available in the Gartner report "Top Ten Things Retailers Should Know About Social Networks and What to Do." The report is available on Gartner's Web site at
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