InterContinental Hotel Group (IHG), the world's largest hotel group with seven brands including InterContinental, Crowne Plaza and Holiday Inn, is getting a strong return from social media marketing. How? By first using private online communities to really understand their customers.

According to Cassandra Jeyaram, Social Marketing Manager with the Global Consumer Marketing department, IHB's social marketing efforts have been underway for a couple of years. The goal is very simple: drive more revenue.

But, instead of just launching a cute video on YouTube and hoping for viral marketing success, IHG invested in three private online communities using technologies and services provided by Communispace. These communities enabled IHG to gain a deeper understanding of customer needs, and to test marketing ideas.

Market research meets social networking

Diane Hessan helped launch Communispace in 2000 during a time where "social" wasn't a buzzword. In that Web 1.0 world, where the mantra was "content, commerce and community," Hessan thought private communities could be a powerful way to help companies listen to customers and gain insight. As CEO since then, she has developed the firm into an industry leader with around 100 clients running over 300 communities.

Hessan says they found through experience that around 400 people is the optimum size for a private community. Just like focus groups or panels, to get good insights you need to carefully construct the community with people with the right characteristics (based on demographics, psychographics, etc.). Think of it as a kind of "focus group on steroids," Hessan says, which can yield valuable insights at a fraction of the time and cost of formal research.

The real secret to success is how the community is managed. Skilled moderators help start conversations, keep them going, and motivate community members to participate. Clients get a variety of reports on the insights gleaned from community interactions. If needed, Hessan says they can turn around an answer to a critical question in just one day.

Coming soon, the ESP feature, where you get an answer before you even ask the question.

Testing social marketing ideas

Making an attractive and unique offer is critical. Don't make the mistake of packaging something as "special" for your community if they can find it elsewhere, advises Jeyaram. The trust destroyed will take a long time to get back—just ask the cell phone companies that stimulate churn by giving the best deals to new buyers.

In one case, IHG tested a potential offer with 150 members of one community, which eventually reached 12,000 people in 30 countries as the offer was posted and forwarded. Based on tracking information, Jeyaram says they achieved an 8:1 return on their investment!

The point of the private online community is to create relationships and develop insight. Or, as Jeyaram likes to put it, to "give consumers a seat at the table with the executives." Insight can be used to develop offers, sure, but that shouldn't be the primary reason members are invited. Make sure they are really engaged with your brand, not just shopping for deals.

The choice of a community technology platform does matter, but a key reason Communispace was chosen was their experience in community facilitation. Without a skilled community leader/moderator, you're not going to get good results.

Social media is more than a marketing channel

Much of the buzz around social media has been about marketing—treating it like another channel to push offers. It should be about a real dialog.

A case in point was how I connected with Hessan: by requesting an interview through Twitter. Hessan told me that she has been tweeting for about 3 months now, to get real-world experience since "our business is all about listening." Now CommunispaceCEO has nearly 2,500 followers. Hessan has learned a lot and connected with some interesting people. And, oh yes, found some marketing value too. Twitter has actually help drive some leads, although that wasn't her intention.

As we've learned with CRM over the years, good technology is necessary but not sufficient for success. It's easy to see why IHG has been happy with Communispace. Hessan leads by example and is 100 percent focused on the services needed to make private communities deliver value for both members and the sponsoring companies. More technology firms should follow her example.