Business Report

Figuring Out Whom to Please First

Customers’ capital on social-media sites is becoming a data point worth analyzing.

Pity the person who answered the phone when Heather Armstrong tried to get her washing machine fixed for the fourth time in two months. According to Armstrong, a surly customer service rep for Maytag said she didn’t care that Armstrong had 1.5 million followers on Twitter. But Maytag ended up caring after Armstrong’s angry tweets about the machine went viral and caught the attention of the media.

Peer review: Joe Fernandez is CEO and cofounder of Klout, which scores people’s ability to spread the word on the Web.

Now that ordinary people can use social media as a megaphone, companies are trying to find ways to avoid public-relations debacles like the one caused by Armstrong’s Twitter tirade in 2009. At the time, if Armstrong hadn’t have mentioned her following, Maytag would have been hard pressed to find out about it. But in the past two years, a handful of startups such as Klout and Peer Index have developed ways to measure a person’s social-media capital and then feed that information to companies in real time.

Klout measures a person’s online influence on a scale of 1 to 100.  By looking at data from Facebook, LinkedIn, and Twitter, its algorithm determines who starts conversational trends and who gets people to click, comment, or retweet. It can gather this score from public data, and it can incorporate private data as well, if subjects who are curious about their Klout scores allow it. “We have data on 75 million people—and most people who are active, most of the influencers, we’ll have data on,” says Klout’s CEO and cofounder, Joe Fernandez. Klout also offers breakdowns of influence by category, because a tweeting sommelier in Manhattan may require closer attention from a vineyard than from an airline. Still, Fernandez admits that the tool is not foolproof; Warren Buffett, for example, is not on Twitter but certainly is influential.

Several providers of customer relationship management (CRM) software have incorporated Klout into their applications in the past year. If a customer like Armstrong calls up a company that is using such an application, the phone rep can get a quick readout of the person’s score—assuming the rep has key pieces of information, such as the e-mail address that the customer uses on Twitter or Facebook. Citibank, McDonald’s, Delta Airlines, and Coca-Cola are among the companies that can pull up a Klout score, according to Jesse Engle, the CEO and cofounder of CoTweet, which incorporates Klout into its CRM software and counts those four companies as customers. “Everyone engaging in social media is constantly making judgments about who to engage with and how to engage,” Engle says. However, he points out that a customer’s Klout score is just one metric to track, in addition to the person’s buying history and customer service record.

Ecomom, a small online company that sells eco-friendly baby products, uses Klout scores within the CRM tool Assistly.  When an Ecomom customer signs up for e-mail alerts or asks to review a product for a blog, the company will look at the person’s Klout score. “A lot of what goes on in the mom world is word of mouth,” says CEO and cofounder Jody Sherman. The Klout score “will allow us to determine if we introduce them to our standard referral, or whether we proactively reach out to them with something more beneficial: here’s $15 you can go spend with Ecomom.” Experience has confirmed the value of the score, Sherman says, because customers with higher Klout scores tend to refer more new customers than those with low scores.

Still, the loudest voices are not necessarily the ones with the biggest followings, says Yany Grégoire, a professor at HEC Montreal, the business school of Université de Montréal. Grégoire, who has researched about 1,000 instances in which angry customers retaliated against a company on social-media sites, finds that the most vehement complainers are once-loyal customers who have two bad experiences with a company’s customer service—what he calls a “double deviation.” Besides, any rant can turn into a social-media phenomenon: when a relatively unknown musician named David Carroll made a video about United Airlines called “United Breaks Guitars,” he put it on YouTube and got 10 million views. Rather than measuring Klout scores, Grégoire recommends that companies more carefully monitor their loyal customers, take note of the number of times any person has called customer service, and study their experience each time. “Just empower your frontline people,” he says.

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The increasing power of data analysis technologies is giving companies more opportunities to understand what their customers want and need. Whether they’re scouring transaction records and Web clicks or newer sources of information, such as physical data from sensors and smart phones, companies are trying to improve their customer service and increase sales. The challenge is in choosing which data to crunch and how to act on the results. Throughout May, Business Impact will explore the technologies behind this new wave of data analytics and offer case studies of these ideas in action.

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