Companies Seeking to Obtain Customer Loyalty Via Social Media are Biggest Spenders

NEW YORK CITY—August 27, 2010—U.S. companies that use social media primarily to deepen customer loyalty spend almost twice as much on this emerging channel as competitors who use it for brand awareness, customer acquisition and other core marketing purposes, according to national survey results jointly released by the Direct Marketing Association (DMA) and COLLOQUY.

Specifically, the DMA-COLLOQUY survey results show the average social media spend for marketers whose primary objective is to obtain customer loyalty was $88,000 last year, compared to $53,000 for brand awareness and $30,000 for customer acquisition, the objectives that attracted the next highest spending levels.

Additionally, the DMA-COLLOQUY survey shows that the amount of social media budget marketers allocated to loyalty objectives increased by 293% over the past 12 months, easily surpassing allocation increases for all other social media-related marketing objectives.

One of the key revelations from the research is that the absolute dollar amount marketers are setting aside for social media is low. When asked what percentage of their company’s overall marketing budget is spent on social media:

• the largest group, covering 24% of survey takers, selected “don’t know;”

• 17% of respondents said they allocated only 1% of their annual marketing budget to social media; and

• 16% said they allocate 4-5%.

• Smaller companies with tighter budgets are significantly more likely than large companies to say they spend almost 50% of their marketing budget on social media.

“Social media budgets for loyalty objectives experienced the most growth last year and, in fact, the last three years,” said COLLOQUY Managing Partner Kelly Hlavinka. “Savvy social media marketers recognize they must turn first to their best customers and apply the same principles inherent to loyalty, which are combining economic incentives with social capital.”

DMA and COLLOQUY teamed this year to create a profile of U.S. marketers’ social media activities, with a focus on spending trends and metrics for success in building customer loyalty. In late June and early July they tapped via email survey the expertise of COLLOQUY subscribers, DMA’s nationwide membership and other qualified marketers, obtaining 369 valid responses from marketers to a 17 point questionnaire.

A conclusion that can be drawn from overall survey results is that the use of social media as a marketing tool is still in the early experimental stage. “Marketers across all sectors are involved in social media,” said DMA Research Manager Yoram Wurmser. “However, after five or six years in the space and growing social media budgets, marketers are still testing the waters to figure out what works, with the incentive to accelerate their efforts is being driven by consumer’s rapid adoption of this trend.”

In fact, research from Nielsen released this week shows that consumers are spending 43% more time on social media than a year ago, making social networking and blogs the top online activity followed by online games and email.

Another key finding reveals a lack of metrics for success differentiated by objective:

• When asked to identify the most important measure of social media success, nearly two-thirds of respondents selected “don’t know”

• Of those who identified a measurement, the largest group, covering 20%, said engaging customers to respond and provide feedback

• 65% of respondents said they’re not using any listening tools to monitor what their customers are saying about their brand.

DMA and COLLOQUY hosted a free webinar, Deploying Social Media to Generate Customer Loyalty: A Tell-All Marketers Survey yesterday afternoon. Additionally, a report containing complete survey results is available from DMA for a price of $135 for DMA members and COLLOQUY subscribers, and $240 for non-members/subscribers. To purchase a copy of the report please visit DMA’s Bookstore by clicking here. Members of the press may request a complimentary copy of the survey by contacting Carmela Uzzi, DMA media relations manager, at cuzzi@the-dma.org.

About Direct Marketing Association (DMA):
The Direct Marketing Association (www.the-dma.org) is the leading global trade association of businesses and nonprofit organizations using and supporting multichannel direct marketing tools and techniques. DMA advocates standards for responsible marketing, promotes relevance as the key to reaching consumers with desirable offers, and provides cutting-edge research, education, and networking opportunities to improve results throughout the end-to-end direct marketing process. Founded in 1917, DMA today represents companies from dozens of vertical industries in the US and 48 other nations, including nearly half of the Fortune 100 companies, as well as nonprofit organizations.

In 2009, marketers – commercial and nonprofit – spent $149.3 billion on direct marketing, which accounted for 54.3% of all ad expenditures in the United States. Measured against total US sales, these advertising expenditures generated approximately $1.783 trillion in incremental sales. In 2009, direct marketing accounted for 8.3% of total US gross domestic product. Also in 2009, there were 1.4 million direct marketing employees in the US. Their collective sales efforts directly supported 8.4 million other jobs, accounting for a total of 9.9 million US jobs.

About COLLOQUY:
COLLOQUY comprises a collection of publishing, education and research resources devoted to the global loyalty-marketing industry. Owned by LoyaltyOne, COLLOQUY has served the loyalty-marketing industry since 1990 with over 30,000 global subscribers to its magazine and www.colloquy.com the most comprehensive loyalty web site in the world. COLLOQUY’s research division develops research studies and white papers including industry-specific reports, sizing studies and insights into the drivers of consumer behavior. COLLOQUY also provides educational services through workshops, webinars and speeches at events throughout the world and is the official loyalty-marketing partner of both the Direct Marketing Association and the Canadian Marketing Association and a content provider to the American Marketing Association. COLLOQUY also operates the COLLOQUY Network, a global consortium of practitioners certified in COLLOQUY’s proprietary methodology. COLLOQUY magazine subscriptions are available at no cost to qualified persons at www.colloquy.com or by calling 513.248.9184.