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According to IT research and advisory company Gartner, by 2010 60% of Fortune 1000 companies will be using social media in some form as a way to improve customer relations. That’s the good news. Gartner also posits that over half of the companies using social media for this function will do it wrong and actually harm customer relations. Gartner suggests that companies focus their analysis on customer online buying in order to offer a direct calculation of return on investment in terms of sales and customer loyalty coming through social media sites.

Gartner says that there are four steps businesses need to pursue to successfully use social media to manage customer relations. The first step is clearly defining the purpose of the social media initiative. Second, they must be willing to give up some degree of control over the medium, because the public wants some degree of ownership of the relationship as a reward for participating.

Companies then have to reward those customers that participate socially. This may mean allowing them to vote on, or otherwise rate contributions and information on the site. Finally, companies must appoint someone in-house who has the skills to head up a social media customer relations initiative. Using social media for customer relations should never be an afterthought. In fact, it should probably have someone specifically devoted to it full time, with their own staff if necessary.

There is no question that social networking has changed the behavior of a critical mass of individuals as customers and prospects. According to Gartner, they can no longer be described adequately based on demographic information, which is the usual target for corporate customer relations efforts.

When it comes to your company, you’re not going to want to invest a lot of time or effort in such an undertaking without knowing if it will pay off in terms of driving quality traffic to your company’s website.

Non-linear Creations did a one-year study of the effects of five social media sites (LinkedIn, Facebook, Twitter, MySpace, Stumbleupon) on their own home page. After a year, it was determined that social media sites drove about 18% of their site’s visitors from the referring sites in aggregate.

In the Case of Non-linear Creations, Linkedin and Facebook outperformed the other social media sites. That’s important, but it isn’t the whole story. What about conversion rates? Non-linear Creations measured conversion rates by whether visitors downloaded one of their white papers, subscribed to their blog or newsletter, or contacted them by phone or email. In this case – driving real prospects – Linkedin outperformed the other sites. Traffic from Linkedin was much more likely to convert than the average site visitor. Other social media sites actually underperformed the average.

There’s no guarantee that Linkedin will give your company the tangible results that Non-linear Creations got. It probably depends on what type of business you have. It is not quite understood what the less tangible benefits are of reaching customers online in a way that makes them feel as if the brand is listening and cares enough to interact in the way they desire. One of the things people dislike about customer support call centers is their anonymous feel. It keeps them from feeling a sense of relationship to the brand. So far no obvious downsides of using social media for customer service, so it would seem to be in any company’s best interests to use this form of outreach.

It certainly isn’t hard to create accounts on social media sites. The hard part is in actually interacting with customers on them, listening to them, and analyzing your online visitor numbers to see which social media sites give you the most return on investment in terms of online sales or some other metric. At that point you’ll have to determine how much effort to put into making under-performing social media referrers more effective.