Are you reaching your Best Customers through social media?

And can you get feedback that you can act on?

Fast Company, in their March edition, profiled the restaurant chain Houlihan’s, who took a unique data-driven approach to identifying and leveraging the input from Best Customers using social media, “Social Network Rockets Houlihan Restaurant’ Profits.” The results are clear: in the pilot markets, profits have increased by 12% when sales in casual dining overall were decreasing by 1%

Here is what they did. They leveraged their database of email subscribers and profiled customers through a questionnaire to determine both the strength of their brand affiliation and their level of activity on social networks. Then they created their own social network, called HQ, that was an invite-only brand community (with eventually 10,000 members). Houlihan’s “traded” inside information about recipes and store designs in exchange for honest feedback not intended for public broadcast. In this way, the company was able to combine customer data and social networking in a venue that promoted direct, candid feedback and discuss between the company and its Best Customers.

Houlihan’s receives both valuable feedback and a secondary benefit — customers who are enrolled in the HQ portal have become fanatic supporters of the new changed menu, bringing friends to the restaurant often because they feel like they contributed directly to the end product. So the approach is also valuable (albeit in a small scale) at driving referrals from Best Customers as well.

As companies are flocking to the open social media networks today, it is useful to stop and consider this example of an alternative approach. Here is how this initiative achieved real, meaningful benefits:

1. Customers were identified and solicited based on their prior activity. Now, the activity Houlihan’s used was simply email registration, but the strategy was correct. If you have a customer database, then you can do more extensive selection by choosing customers with specific behavior patterns.
2. Houlihan’s made selected Best Customers feel special. Note that Houlihan’s did not offer discounts or coupons to these members. Rather, they made the customers feel special by “bringing them into the inside” with recipe and design previews that other customers did not receive. Exclusivity was the benefit.
3. A private discussion area was created. Houlihan’s created HQ, a site where Best Customers could engage with each other without the whole world watching (and participating).
4. The impact was measured (at least in the aggregate). This is where Houlihan’s falls down a bit, since they do not have an easy method of tracking individual customer transactions. If you select customers based on their transaction history (e.g. frequency, spending level, length of relationship), you can track and evaluate changes in their behavior as a result of the social media efforts.

Now, increased revenue from participants was not Houlihan’s  goal; it was to gain real world insight and collaboration from Best Customers to improve the menu and store design. But the seconday benefit of referenceability could be expanded to a larger group, while still maintaining a sense of exclusivity. Then the effort can have a greater impact on customer behavior, in an approach that is both meaningful and relevant.

In the coming year, many companies will jump into social media in order to “keep up” with their competition or because they have heard that it is the “coolest thing.” Many of those companies will sour on their efforts and abandon them in 2011 due to lack of measurement and the significant effort required.

Houlihan’s lays out a framework that, if applied, will permit your company to create social media efforts that are meaningful, relevant and measurable. Combine those three factors, and you will soon find your CEO is a member of your Facebook fan page and is following you on Twitter.

Then you can be genuinely afraid!

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Tagged as: Best Customer, best customer experience, best customers, bestcustomer, Customer Centricity, Customer Management, customer relationships, Facebook, Fast Company, Internet marketing, marketing measurement, Social media, Social network, Twitter