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Can Loyalty Programs Save Social Networks From Themselves?

Social-Media-Collage.jpgAfter Facebook released its earnings for the second time since going public, the ubiquitous issue of monetization reared its head. There are over 200 major Social Networking communities and sites with a substantial number of users, in fact there are over two dozen with 100 million plus users. No matter how attractive the user numbers are, at the end of the day, it is money and revenue generated that’s of interest to the shareholders. And monetization is the challenge social web sites generally face.

The most obvious and arguably crudest monetization practice by most of these online communities, is to sell advertising. Other examples include selling email and username, and other social data to various marketing firms.  Although more creative approaches have been  sought to deliver more relevant and meaningful ads in context of the user preferences – for example, utilizing various data mining and other such tools –  it hasn’t borne overwhelming results and consumers are actually turned off by the ads (or are at most – indifferent to them). Very rarely if ever does a consumer actually click on the advertising no matter how relevant or in-your-face the content and presentation may be.

The goal of any “social” site is to create a virtual community and environment conducive to developing relationships – either personal or professional – with likeminded individuals or organizations, and to make this relationship a constant and integral dimension of “online life”. The challenge Social networks face is driving this engagement, to be a perpetual extension of one’s social sphere of interaction – not just occasionally – but constantly. The majority of users regularly check their social networks for updates or other occasional interactions but these brief and focused activities often times do not drive community, these activities are about as engaging as checking your email once in a while. This brief interaction – more often via mobile – does not benefit the social networks – in generating valuable data to be sold to advertisers and marketers – nor does it facilitate ad revenue either.  Occasional or brief users will rarely bother visiting or clicking on the ads. The only way to increase engagement is to entice individuals to change their behavior through the use of a reward system such as loyalty programs within social networks.

How does this loyalty program work? By rewarding  activity on the social site such as  status updates, check-ins, photo uploads, profile updates, or any other social data – generating online behavior; points, ratings, rankings, badges, are awarded and visibly tracked. These points can be used to download apps or even purchase online gifts, messages, e-cards, etc. or these can then be redeemed at various Social Networks’ advertisers and partners.

Although similar kinds of programs have been initiated in the past by some dotcom legends, social networks have rarely seen this in the form of loyalty programs. The goal of such a program is not to develop an e-currency but to encourage sharing, engagement,  and to facilitate the collection of more detailed user information (more so than what is currently available) which can then be shared with marketers and advertisers. Providing incentives to users will drive engagement as well as create additional revenue streams and increase the partner possibilities. Think: a loyalty program run by an airline – and you’ll get the idea.

Its application in the real world would be through partnering with local businesses who will pay to leverage the network for the marketing information while passing on discounts (not providing “freebies”  so that there is no cost being passed back to the network) for their products and services. The social site’s user is getting “deals” as well as monetary incentives – to browse and share more information – and the marketers are able to target users more expeditiously and effectively based on that additional information they gather.

The future of these loyalty programs for social networks could be location and event based marketing, and potentially the move by the social site itself into the retail business, where points will actually buy merchandise at their own e-store or retail outlet.

Loyalty for Social networking sites may sound good conceptually but without the technology to support this, it would just be a pipe dream. Social networking sites have millions of users (each of these will generate hundreds of millions of transactions per minute). SAP CRM on HANA provides the processing power to actually calculate the accruals and redemptions that the hundreds of millions of transactions will generate.  SAP HANA with its powerful processing capabilities will facilitate the complex calculations needed as well as providing customer insight based on enterprise-wide data in real-time, paired with powerful predictive analytics, making this insight available at all customer touch points, and support all customer-critical business processes across and beyond the front office with the highest accuracy and speed.

A loyalty program incentivizes customers to stay connected to the social network and provide information which can be marketed for revenue. At the same time, loyalty programs provide an all-encompassing customer experience and create a mechanism where consumers are rewarded for their online activities, making a win-win situation for the community overall.

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