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By Rajeev Gupta, Senior Retail Consultant at MindTree Ltd

Social networking websites have been the Internet success story of the past 12 months. Their appeal is based on the ability to quickly connect with family and friends, share photos, videos, and Internet links. Facebook, for example, has more than 250 million active users. Retailers are eyeing social networking sites as a very promising and high potential channel for increased commerce. Retailers believe that an online recommendation on social networking site can be very powerful. Many Retailers are also discovering that it is the way the majority of young consumers find out about them — much more so than any other marketing activity or catalogues. Retailers are trying to build social commerce into their business model by doing things to create conversations on these sites, such as delivering goods in brightly colored boxes and adding in a free bag of sweets. While questions remain about the value and ROI of social commerce initiatives, retailers are still planning to increase 2010 spend for these initiatives and tolerate the ambiguity around ROI.

Presented below are five ideas that retailers can adopt to effectively leverage social networking and indirectly increase their sales.

1. Define social networking strategy
1. Identify the right social media channel — Retailers should analyze various social media channels like social networking sites (such as Facebook, MySpace, Twitter), blogs, wikis, etc., and identify the ones that are most visited or viewed by their shopper community. Although it may sound that social networking sites are more popular among the young crowd, they are becoming popular among elders as well. For example, more than 2/3 of Facebook users are out of college and the fastest growing demographic is those 35 years and older.
2. Dedicate a team to focus on social media initiatives — Retailers should have a dedicated team to focus exclusively on social media and define a retailer's social networking strategy.
2. Communicate with customers through social media
1. Increase your presence in social media and communicate directly with your customers by creating an interactive platform. For instance, Sears has recently launched MySears and MyKmart Communities (www.mysears.com and www.mykmart.com) to allow customers to share their insights, experiences, and product reviews by creating a two-way dialogue between the retailers and their customers. This is accomplished through discussion forums, blog entries, ratings, reviews, polls, and surveys, and an exciting new idea suggestion area and platform to leave comments.
   
   To start with, retailers can become more active in social media by doing simple things like creating a profile on social networking sites and interacting with customers directly. Getting a retail brand on to the popular social networking sites not only raises its profile, but also creates a direct link between advertising and sales and makes them only one click apart.
3. Use social networking as a marketing tool
1. Leverage customers' networks to spread word of mouth publicity, conversations on the latest promotional offers, share coupons etc. Imagine Facebook pages with pictures of retailer's products, and customers giving feedback not only on the product, but also on their shopping experiences or suggestions for improvements. Twitter updates on a frequent basis — announcing sales, product updates, etc. LinkedIn updates with connections to key business partners in a retailer's corporation. Retailers should consciously conduct social events or give freebies that engages people into conversations on social sites and that indirectly promotes the retailer's brand.
2. Retailers can provide exclusive promotions and coupons for online shoppers who are subscribed to any of the social networking sites.
4. Alliances with social networking sites
1. Initiate alliances and partnerships with social networking sites to create brand awareness and increase Web site traffic. For example, Walgreens pharmacy chain has tied up with BzzScapes, a new social networking site specifically designed for discussions about brands. BzzScapes allows users to follow and interact with brands by creating "communities" where they can upload pictures, add links, and upload videos to each brand's profile. Companies can, in turn, respond back to consumers with pictures, comments, coupons, and even private conversations. Brands can pay BzzAgent to receive trend reports and detailed personal profiles of users. Similarly, Czech electronics retailer, Datart, has signed a deal with the social networking Web site Facebook to allow its clients to use their Facebook login details for the Datart online store.
5. Leverage information to target customers
1. Social networking sites can give information that advertising agencies can only dream about. For example, Facebook knows where a person lives, who his/her friends are, what his/her interests are, where you go on holiday, and which groups you belong to etc. From gathering this very transparent information, brands can target customers in a way that the world has never seen before.