Volume 5, No. 5
July 2009

"Conducting Effective Investigations Of Harassment & Discrimination Complaints" By Mel Muskovitz

Small Business & The Internet
"iPhone 3G:
One Year Later"
By Mike Gould

Read all about
local business
people and firms

Ann Arbor Area BUSINESS MONTHLY magazine brings the reader the latest business news and information important to the businesspeople in Washtenaw County. Each month articles cover real estate, legal, Internet, employee concerns and the climate of business in the greater Ann Arbor area. There is news about company employees and feature articles on local businesses. We cover business news from Ann Arbor, Chelsea, Dexter, Manchester, Milan, Saline, Whitmore Lake, and Ypsilanti.

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The Straight Buzz
On Social Media
For Businesses

By Mark Ziemba

"Time" magazine in June, highlighting the Web's latest buzz: social media. While social media might seem like a strange new fad to some small business owners, chances are that many have already been using it, and their customers have been, too.

If they have connected with friends and family on Facebook, read a blog post, shared photos on Flickr or video via YouTube, or even read customer reviews on Yelp, they already know something about it.

Small businesses should welcome social media, because it will enhance their connection with customers, but they should do so with care.

What's Social Media?

Social media is really just a new way to interact with a group of people with shared interests, mainly over the Internet. The key phrase is "interact," because it's really about developing relationships and engaging in conversations.

Admittedly, "the definition of what is social media is changing as rapidly as the technology that underlies it," says Michigan State University Professor Richard Cole, Ph.D., the chair of the College of Communication Sciences Department of Advertising, Public Relations and Retailing, and the creator of MSU's New Media Drivers License course, which began in January. He says, however, that social media is essentially "the use of technology for communication interaction."

Cole adds that social media is "primarily Internet-based tools for sharing information and engaging people in discussions." He emphasizes, "It's all about relationships. It allows people to share opinions, insights and perspectives."

East Lansing-based Biggby Coffee CEO and co-founder Robert Fish actively uses social media to engage with customers, and says, "Social media is two-way." He adds, "social media has the advantage of interaction."

Small Business Administration of Michigan Vice President of Communications Michael Rogers says that social media is "a variety of Web 2.0 tools that help make it easier to interact with and collaborate with your customers."

Social media services on the Web are numerous, but can be grouped into general activities: social networking, blogging, link sharing, media sharing and customer reviewing. Of the most use to small businesses are probably social networking, blogging, media sharing and customer reviewing.

Social networking services allow people to stay in touch with a group of people via the Web. Facebook concentrates on connecting friends, family and students. MySpace is a popular community site favored by youth. LinkedIn creates a way for business associates to network, sharing expertise and personal recommendations. Ning is a platform that allows users to start their own specialized social networks. Meetup offers the ability to organize in-person meetings with others sharing the same interests. There are also social networking sites that specialize in business - both "Business Week" and "Fast Company" magazines host such sites - and others that cater to specialized customer interests, such as gourmet cooking.

Blogging services provide users with the ability to inform an audience about news and ideas through short posts. Many businesses are already using blogs as public relations tools. Blogs help businesses share news about events and promotions, as well as offering information of interest to their customers. Popular blogging services include Blogger, WordPress, TypePad and Twitter. The latest sensation, Twitter is known as a micro-blogging tool. Twitter limits posts to 140 characters, short enough to fit into the text message standard, which allows added functionality when linked to a mobile phone capable of text messaging or Web browsing. Used with a mobile phone, Twitter's advantage is that it allows real-time updates. It has also become a way to quickly share links to a new blog post or relevant Web site.

Media sharing services allows users to share visual content, such as video or pictures, or audio content, such as podcasts. YouTube and Flickr are the most well-known visual content sharing sites, and podcasts can be found on iTunes, among other sites.

Customer review services allow customers to rate and comment on their experience with local businesses. These are useful for gathering unvarnished customer feedback. Some of the most visible customer review services are Yelp, Yahoo! Local, Insider Pages and Angie's List.

"There are probably hundreds of different little pieces of software, but it seems to be shaking out into three main ones: Facebook, LinkedIn and Twitter," says Rogers of all the social media tools.

Why Pay Attention to Social Media?

Small businesses should pay attention to social media in order to connect with customers.

Many small business customers are using social media now.

Small Business Association of Michigan Vice President of Communications Michael Rogers says, "Because of very rapid changes in technology and the rapid advance of all the available broadband Internet connections, your customers are expecting to be able to access you through social networking tools."

Certified Executive and Business Coach John Agno of Ann Arbor-based Signature says, "It's important to be out there where your potential clients gather. Social networks allow you to be doing that without being physically present."

Social media also allows small businesses to leverage their greatest strength: customer connection.

Rogers says, "Unlike a big business, the owner of a small business is usually the one who is having that actual interaction with customers." He says that most successful small business owners are collaborating with their customers to improve products and services, or even customize something.

"When we talk about why people should patronize a small business, we say it's because when you walk in the door, probably the person you see behind the counter is the owner," says Rogers. "You don't have to work your way through layers of bureaucracy."

MSU professor Cole says, "The only way businesses survive is with the permission of their customers. Their customers' permission is granted and earned daily - the strength of which is dependent on the relationship." Cole says that businesses can strengthen that relationship through the technology of social media.

Agno says that the formula for success is "your human capital, which is what you know and can do, times your social capital, which is who you know and who knows you, times your reputation, which is who trusts you." Agno notes that "social capital is now being morphed into what we now call social networks and social media."

Social media encourages a more personal and authentic approach, which plays to the strengths of small businesses.

Rogers says, "People today are craving authentic connections. That is something that small business owners can provide to them using these Web 2.0 tools."

He adds, "There is much more authenticity with the small business owner communicating via Twitter, Facebook or LinkedIn because the customer is talking directly with the owner."

CEO Robert Fish handles all the social media for Biggby Coffee business personally, as an example.

Since social media is two-way, it provides avenues for conversation with customers, which can enhance relationships.

Cole says, "This is now a free exchange of ideas and opinions. If you're in business, you want to be part of that conversation. Social media will help you do that."

Customers share opinions about their experience with businesses on social media - sometimes good, sometimes bad. Some social media sites are specifically devoted to customer reviews.

Fish says, "It's effective to have a two-way communication with a customer that may have been dissatisfied."

Fish sees customer feedback via social media as opportunities for both customer service and marketing - ways to find solutions for customers and maybe even make some new ones.

"The minute you see it in social media, it becomes a social media marketing opportunity," says Fish.

Interacting with customers in social media provides a larger public platform for customer service. "When it happens on social media," he says, "you have an audience."

Professor Cole says that social media technology allows businesses to respond quickly to customer issues. Handled well, he says, it can strengthen the relationship. "If I say to my customer that I got your feedback and, by the way, I fixed the problem - and not only did I fix it for you, but I fixed it for everybody else," says Cole, "word travels rather fast through social media."

Cole says, "The smart company is redesigning its whole business mentality and its approach to the marketplace by making sure it's interacting," especially with dissatisfied customers. "Social media is changing the business model."

Leading small companies are paying increasing attention to social media, outpacing even successful large companies. Conducted by Nora Ganim Barnes, Ph.D., and Eric Mattson, a University of Massachusetts Dartmouth Center for Marketing Research study called "Social Media in the Inc. 500: The First Longitudinal Study" shows that 77 percent of Inc. 500 companies used some form of social media in 2008. The study indicated that the social media most used by Inc. 500 companies in 2008 were social networking at 49 percent, online video at 45 percent, and blogging at 39 percent. In fact, in 2008 the number of Inc. 500 companies that were publicly blogging was nearly double the 19 percent who were publicly blogging in 2007. In contrast, only 11.6 percent of the Fortune 500 companies were doing so in 2008, compared with 8 percent in 2007.

Social Media Strategy

If small business owners see that social media will benefit them, they should understand what a social media strategy requires, and then plan one.

Most social media tools are free, but they do require ongoing investment.

"The out-of-pocket cost is very little or nothing, but the cost in time and attention can be substantial," says Small Business Association of Michigan Vice President for Communications Michael Rogers. "If you're going to get into this, you have to be willing to put in the time and effort."

MSU Professor Richard Cole agrees that social media takes work. "If you're going to be engaged in a social network of any kind, you have to work at it."

Certified Executive and Business Coach John Agno of Signature says, "You really have to maintain your reputation for adding value to the people you connect with." He emphasizes that "if you're not responding to the people you are connected with, it really has little value for you and for them."

Rogers adds that small business owners should think about whether they can to take on such a project themselves, or seek help from qualified staff or professionals.

"Social networking tools are communications and marketing and public relations tools," says Rogers. He says that whoever uses these tools should have some skills in those areas.

Technical qualifications should not be the only criteria for whoever handles social media for a small business. Tact is a necessity for good public relations, for instance.

Social media may provide avenues for marketing, but it relies on relationships. "There is a new set of rules that applies, having to do with honesty and transparency and basic ethics," says professor Cole. "You can't cover stuff up on the Internet."

Biggby Coffee CEO Robert Fish says, "It has to be true." He points out that social media participants can immediately contest what is written because the process is a dialogue.

Agno warns, "There are no erasers on the Internet. You have to be careful what you put up there." He adds that what you write on the Internet can damage your reputation.

Good social media strategy also requires an understanding of the business and the customers.

"The companies that are most successful with social media are able to communicate the personality behind the business," says Fish. "If you want to use social media, understand who you are first."

Agno says, "Identify what your core competencies are. What separates you from the others?"

He adds, "identify who your customer is."

Rogers says, "Think about who you are going to talk to and what it is that you want to do once you engage them in that conversation."

Then, Agno says, "Identify the social media that will work best for your customer and best for you."

It's possible to measure some aspects of a social media strategy, but small business owners should realize that it's part of an overall business strategy.

Useful measuring tools for social networking might be the number of social connections, or the number of approvals or comments by connected users about posts.

Useful tools for measuring blogs might be site traffic, page views and comments. Google Analytics provides detailed information about Web sites. Twitter counts connections with those who follow you, and a third-party tool known as Twitalyzer measures several metrics about your Twitter use.

While you may be able to measure some aspects of your social media plan, "it's very difficult to decide how much your efforts are returning to you in dollars and cents," says Rogers.

"That's a hard question to answer with any marketing, short of using a coupon," says Fish. "The metric that a business can use, particularly in retail like me, is only the metric of something like same-store sales. Are we doing better today than we were yesterday?"

Same-store sales measures sales of a company's existing stores over a period of time, excluding sales from new stores.

Fish is also the chairman of the board of the Michigan Restaurant Association. He notes that full-service restaurant same-store sales have been down 10 to 15 percent year-to-date over 2008, and his largest competitor, Starbucks, is down 9 percent. In contrast, Biggby Coffee is up 1 percent.

Fish notes that a 1 percent increase is impressive given the current economy, especially when you consider the spread between Biggby and such a sizeable company as Starbucks.

"I'm not able to directly attribute that to social media," says Fish, who only began using social media in 2008. When the economy is as tight as this, however, anything that can help improve customer service and promote business makes a difference.

Fish presents some anecdotal evidence that social media is helping, however. He travels to a different store every week to buy coffee for customers for two hours in the morning. The event is promoted at the store, with messages to current customers, and through social media. Fish says that when he started, he bought about $400 worth of drinks for each event. Now he buys at least double that.

Fish sees social media as just a new form of media, and part of an overall business strategy. It is a strategy that offers an opportunity to connect with customers, which allows small business to compete better with big business.

"Social media is expanding dramatically," says MSU professor Cole. "The biggest misconception is that it is going to be possible to be successful in business and ignore social media."