Developing and maintaining relationships can be a unique and rewarding challenge. Not only do those binds provide an emotional reward, but often, the development of these complex networks leads to an increase in sustainable business that adds value above other types of business. What is social capital and how can it help you in your business practice?
What is Social Capital?
Social capital varies slightly in definition based on the source, but can be generally understood as "...the economic resources garnered from human interactions. The resources include those of tangible and non-tangible assets, such as information, innovative ideas, and financial support." Much like a successful network may get you social clout or reputation, social capital encompasses the rewards that come from maintaining such relationships.
Why Does Social Capital Matter?
Social capital may bring increased return on investment (ROI). Word-of-mouth can not only draw more clients in to potentially use your services, but those customers whose friends or family refer them to a trusted product or service are more likely to experience brand loyalty. The results on a study of the implementation of social capital when using a customer referral program are especially telling:
The researchers also concluded that the difference in margin combined with the difference in customer retention amounted to a disparity in long-term customer value of 16% to 25%. “That’s not only a sizable chunk of money,” Van den Bulte says, “it also amounts to a 60% ROI over six years on the 25 euro that the bank paid for every referral.”
Source: Referral Programs and Customer Value, Philipp Schmitt, Bernd Skiera, & Christophe Van den Bulte
How Can I Use Social Capital?
Social Capital is a time-sensitive limited resource. Customers' and clients' attention is pulled into a thousand different directions every day and when they've elected to give you that attention, you should immediately capitalize on it. Here are a few ways to most effectively do that:
Meet new people
Your clients know a few people who could probably use your services, now or some time in the future. Use the goodwill you've built to suggest they share a marketing image or piece of collateral with someone they think could use it.
Pay it forward
Have some social capital built up but find yourself with nothing to spend it on? Promote a friend's service to your clients. This builds additional capital in the long run by not only reinforcing your relationship with your friend, but also showing your clients that you're not always looking out only for yourself. Even better if you can connect someone with a new service provider they needed that complements your own skills!
Data, data, data
If your audience knows they can trust you to look out for their best interests and believe you provide clear value to their life, they will give you data if you ask politely for it. You can use this to survey their thoughts on your current service offerings, your customer interaction skills, demographic makeup, or additional contact information. Just make sure that whatever you collect is used only to better your services - never betray a client's trust by selling or giving their information away to a 3rd party without their consent.
Most of all, try to remember that social capital is more like a garden than a light switch - it takes time to grow and must be used in its season before it withers on the vine. With a little patience, genuine care, and perseverance, you too can use social capital to help grow your economic prospects.Subscribe to the Dunham Blog