In a recent report Gartner, a research firm, identified at least 100m websites and social media services, used by more than 600m people worldwide.
These consumers “are influencing each other’s behavior and buying activities, all outside the traditional reach of enterprise activities”, says the paper.
Over the past few years, the number of consumers using blogs, online discussion groups and social media sites has exploded.
Facebook alone claims 550m users worldwide. At the start of this year, Twitter, another popular social media site, claimed 75m.
The sheer scale and scope of online services dwarfs even the largest businesses’ own databases. Tesco, the retail group that did much to blaze a trail for analysis of customer data, has 13m active members of its Clubcard loyalty scheme in the UK.
Companies such as Tesco have successfully used information from their own databases to improve sales. But the opportunity to mine the wider internet for strategic information, as well as information on competitors, is that much greater.
“You can use these networks to get some extremely insightful and rapid information from consumers,” says Gary Curtis, co-head of Accenture Technology Consulting. Social media and websites also give companies the chance to look for business insights among much larger groups of consumers than they could access through conventional market research, he suggests.
Companies ranging from grocers to consumer electronics manufacturers and airlines and hotel groups are already using sophisticated tools to research what customers are saying about their brands online.
“Especially in consumer products, it is becoming very important to engage with communities of interest, as that will have an impact on the decisions a company will make,” says Chris Steel, head of the North American IT practice at PA Consulting. “[Social media and the web] is not something organisations can afford to ignore.”
By monitoring trends on sites such as Twitter, as well as comments on popular blogs, companies are using software to carry out “sentiment analysis” around their brands. This, for example, can give managers an early warning of a customer service issue, or even that a competitor has come to market with a more attractive offering.
These tactical insights are valuable to businesses, because they can often provide quicker feedback than conventional data sources, such as customer service records or point of sale systems. By the time a business notices a fall-off in sales from its back office systems, the customer has already moved on.
Scanning the internet and social media gives businesses a way to pre-empt problems, as well as to generate more positive feedback, for example by directing dissatisfied customers towards a service site, or by promoting special offers. But this is largely a tactical response to day-to-day problems, rather than an attempt to influence strategic direction.
“Strategy is the hard part,” says Jeff Mann, research vice-president for collaboration and social software at Gartner. “But there are examples. What you are looking for are the weak signals. You are looking for things going on that may be more important in a couple of years time.”
Car companies, suggests Mr Mann, are starting to use the internet and social media to look at factors such as consumer attitudes towards green technology.
Given the relatively long development cycles for automotive technologies, manufacturers want to gauge the views of today’s college students, as these will be their core customers in 10 or 15 years’ time.
In groceries, retailers and producers of vegetarian ingredients might scan recipe sites for new vegetarian dish ideas, in order to predict demand. Conventional business analytics tools cannot provide that depth of insight.
“One of the biggest advantages [of social networks] is input from people you don’t know about yet,” adds Mr Mann. “Software such as ERP – enterprise resource planning – is really good rear-view mirror stuff. It gives you an idea of what the customer base is thinking of, but there are a lot more people who are not customers.”
Gaining access to this group should give businesses ideas that go beyond their current products or services. “Social media contains deliberately chaotic sources of information,” says Andy Mulholland, chief technology officer at Capgemini, an IT consultancy. “Social media give genuinely chaotic results, but that also opens up genuinely new ideas.”
Often, the reaction to new ideas can be highly polarised on internet sites or social media services, but Mr Mulholland does not believe that should deter businesses. “You need to distinguish between people who say they don’t like your product, but have not tried it, and those who have a reason for their dislike.”
Sifting through data for weak signals or subtle sentiments is not an easy task.
Although there is a growing market for tools that monitor social media, these typically look for key words or particular phrases associated with consumer sentiment. Turning that type of information into strategic insights still requires a large amount of skilled, human analysis.
Companies should also consider the context of information they find, especially in social media sites.
Although, as Mr Curtis points out, businesses that do use social media often find customer feedback is less negative than they feared, by no means all websites are representative of public opinion.
“No successful business will bet the house on the first piece of analysis [from these sources],” agrees John Bastone, who is responsible for social media tools at SAS Institute, a software vendor. “The right way to do this is to test, and learn.”
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