Pursuing the Influencers — Why Gilt Groupe Rewards High Klout Scores

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It’s such a good idea I’m almost amazed it took this long to do so. Yes, it verges on social media bribery but from a marketing standpoint the logic is crystal clear. Influencers drive business. And thus the decision by Klout to team up with Gilt Groupe (announced on March 5) to award discounts to shoppers based on their Klout scores makes a lot of sense. For the uninitiated, Klout is a company that measures social media influence by factoring in a variety of inputs including how often someone’s tweets are retweeted and their ratio of followers to followed. In the early days, Klout was very easy to manipulate and multi-level marketing hucksters seemed to nail the best Klout scores (I once wrote that the most interesting people on Klout were the ones with mid-range scores – high enough to mean people paid attention but low enough to mean that no one was aggressively gaming the system.)

Now Klout has some serious mathematicians working on its social influence algorithms and the service has some real value. How much? For high-end local merchants potentially a whole lot. Consider it this way: I personally will try a new restaurant or a new store if given a large enough discount. By this I mean beyond the 15% or so that is common in coupons. I actually shy away from stores and restaurants offering Groupon or group buying deals because (for better or for worse) I figure if they were really great, they wouldn’t need to run a deal. The exception to this rule is the luxury goods space, where Gilt Groupe makes it very easy to buy into huge discounts on famously posh brands. Whatever the case, local merchants know that influential customers can drive a whole lot more sales than average customers.

Local merchants know that influential customers can drive a whole lot more sales than average customers.

This is true simply because other people listen to influentials. Until recently, identifying influentials has been hit or miss and subject to self-aggrandizement. The world was rife with people who managed to boost their Google PageRank into the top 10 in any given category and amass the most Twitter followers. Unfortuantely, such measures are only noise and not signal. Identifying the true advocates and evangelists was not really possible because the qualitative measures were lacking.

Today Klout has taken considerable time and care baking qualitative factors into their calculations for social influence. So it is only natural that local merchants would be interested in leveraging Klout’s calculations. Equally important, the Internet public is growing less averse to “relationship marketing” where an acquaintance or colleague endeavours to sell goods or services to their social connections.

What is less clear is whether the influentials will opt in or opt out. It could go either way. On the one hand, discount in exchange for favorable publicity and treatment are a time-honored tradition (ask any travel writer how much they paid for their last trip to Hawaii). Only a select few can say they paid their own way and the industry standard is to help cover the costs in exchange for coverage that is pre-disposed to be favorable. On the other hand, influentials can be fickle and react negatively towards any attempt to co-opt their hard-won social cred for profits. With big, splashy brands like those sold in Gilt Groupe’s semi-exclusive private sales, the idea of diluting street cred is not a big deal. Luxury oriented local stores, common in the tonier ‘burbs and barrios, show off these same big brands, albeit minus the global marketing punch of Gilt or the brands themselves.

Which is why the Gilt / Klout tie-up is so interesting. Advertising to luxury consumers in local markets is very hard. There are some nice glossy regional publications with higher production values. But most publications have a wild mix of advertisers that could land a luxury ladies shoe store next to an Ace Hardware outlet. Online traffic that is both focused on luxury and local shopping remains limited. Klout, for its part, can help fill this gap by enlisting the local influentials in the service of stores they really like. For now, Klout will surely prefer to deal with big national brands that make payments simpler. But Klout’s easy-to-use API ensures that local rewards based on Klout are a comparatively easy tech trick to execute.

Alex Salkever is an executive at a cloud computing company and a former technology editor of BusinessWeek.com. The views expressed in his column are his own and not those of his employer. His Personal Fight column appears every Wednesday on Street Fight.