1. New publication from Roland Berger and the University of Münster: Social media creates new opportunities for customer retention and innovation management
2. Social networks influence purchase decisions as much as advertising in newspapers and magazines
3. Interactive dialog with customers facilitates the creative, ongoing development of brands and products
4. Customers have a powerful, formative influence on brand image
5. Digitalization is breaking up rigid organizational structures – Change must come from the top down
6. Quantitative and qualitative performance measurement is needed
7. Few companies know how to analyze smart data properly

Munich, July 27, 2014

Social media has become an integral part of people's private and professional lives. Users today devote around a quarter of their online time to social networks – and recommendations and feedback from other customers increasingly affect their purchase decisions. Roland Berger Strategy Consultants and the University of Münster's Digitalization Think:Lab have together penned a new publication entitled "Socialize your business: Ten things executives should know about digitalization and social media". And the authors' conclusions are unequivocal: Companies must open themselves to this new reality and not see it as a threat. On the contrary, they must seize the opportunity afforded by social media to sustainably improve their business development.

"Social media opens up new ways of communicating with employees, customers and suppliers. But it is far more than just a marketing tool," says Egbert Wege, Partner at Roland Berger Strategy Consultants. "Companies are increasingly using social media for sales and innovation management purposes." Why? Because open dialog and co-creative content enrichment spawn fresh ideas for new products and lines of business. Customers and suppliers alike thus find themselves drawn into an interdependent network.

"Yet social media is also a strategic challenge, because it affects the whole organization," affirms Thorsten Hennig-Thurau, Professor of Marketing at the University of Münster. "The goals pursued by the use of social media must therefore be rooted in corporate strategy." However, this demands a change in mindset that few companies have yet mastered – witness the fact that only 17% of companies approach the use of social media in a truly strategic way.

Critical opinions are a source of valuable information

Collecting and analyzing customer data, opinions and recommendations on the internet enables firms to engage in dialog with customers and sharpen their focus on the latter's needs. This process also brings about a fundamental shift in marketing and sales roles, because customers' ideas and preferences themselves actively contribute to improving products and brands: Their views and verdicts are instrumental in shaping the public image of a given product or brand.

To leverage the opportunities afforded by close interaction, companies must be able to deliver suitable content and address customers individually. "But you can only do that if you know what really matters to your customers," Wege says. "That's why companies should also welcome criticism, as this often gives you the most valuable information of all."

At the same time, regular information about products and industry trends boosts customer retention, forging loyal customer groups that readily give their backing to a brand and stand by a company through thick and thin. However, this goal can be achieved only if sales and marketing units adopt a carefully coordinated 360-degree strategy: Messages to customers must be harmonized but still individually tailored at all touch points if the recipients are to be encouraged to spread the word via their own personal networks.

Influential, well-connected customers in particular are invaluable as company ambassadors. Information gleaned from social media already shapes fully 6% of purchase decisions; and the figure rises to nearly 10% for choices of restaurants and media products. This form of influence is especially powerful if it is aligned with the appropriate stage in the purchase process, from demand creation to the after-sales phase.

Digitalization – A job for the boss

Social networks also help companies drive innovation more effectively and improve their business processes. They provide an informal forum for the joint development of innovative ideas and approaches across hierarchical divides within the company. New interfaces spring up between different units and disciplines, and typical silo structures are torn down. "Having said that, if you want to implement a social media strategy successfully, a culture change across the entire organization is indispensable," says Professor Hennig-Thurau. "That is why top management itself should drive this strategy, anchoring it firmly in the company's overall strategy."

Firms are also well advised to measure the actual quantitative and qualitative success of their social media strategy. The defined parameters should align with corporate goals and must make due provision for factors such as the strength and impact of customer engagement. Multidimensional performance monitoring lets businesses use their social media activities more selectively and better exploit the benefits of digital platforms – all of which helps them become more productive, dynamic and flexible.