April 17, 2011

Turning “Like” to “Buy”

Now that social networking has become embedded in the fabric of everyday life for millions of consumers globally, social network sites promise to be the next generation of e-commerce engines and are moving rapidly in that direction. Marketers and strategists are smart to feel a sense of urgency in understanding and experimenting with direct commerce within these platforms; early movers will have a solid foundation on which to build their social commerce capabilities as the platform evolves. As always, learning what doesn’t work will be as important as learning what does.

Social media has revolutionized the way people communicate and maintain relationships. Globally, Internet users now spend more than four and a half hours per week on social networking sites, more time than they spend on e-mail. There is a public quality to how communication happens on social networks—people are, to use the Facebook analogy, sharing their thoughts on “a wall” for others to see. As more and more of what people think and do ends up getting communicated on these new-age bulletin boards, it is inevitable that social networks will start to affect what consumers buy and how they shop. In a way that has never before been true, consumers are determining which products and services succeed and are shaping the messaging.


The Era of Social Commerce

If the new medium of social networks is creating challenges for companies, it is also handing them an opportunity. Retail, consumer electronics, and media companies are among the many types of organizations that have followed consumers into the social arena, creating Facebook fan pages, sending microblog messages, and building communities. Lead generation—the ubiquitous “likes” of Facebook—will not be the most important activity for long, however. The next phase will go beyond mere communication and influencing. Consumers will transact commerce inside social networks—selecting products, adding their selections to shopping carts, and completing purchases through payment with credit cards and points. As they do so, the era of social commerce will commence in earnest.

Companies that are pursuing social commerce regard it as a distinct channel underpinned by a significant new aspect of consumer behavior. This new channel represents the merger of e-commerce and social media, as transactions are actually performed within the platform rather than at the retailer’s e-commerce site. How ready are consumers to buy products through social media? A 2010 survey by Booz & Company of consumers who spend at least one hour a month on social networking sites and who have bought at least one product online in the last year provides some insight. Twenty-seven percent of respondents said they would be willing to purchase physical goods through social networking sites. Moreover, 10 percent said their buying through social networking sites will be incremental to other buying they do—that is, they will end up buying more physical goods overall. The 73 percent who said they would not purchase goods through social networking sites largely cited concerns related to security and privacy, two areas that many big social networking sites are already working to improve.

“These emerging attitudes make it unlikely that social commerce—a cousin, after all, of the more familiar e-commerce—will face hurdles related to its newness. And as companies find ways to embed their e-commerce engines within social media, the market for social commerce will skyrocket, helped in part by new models for buying and by the availability of products developed specifically for social networking sites,” said Ramez Shehadi, Booz & Company Partner leading the IT Practice in the Middle East.


Social Commerce Opportunities

Today, companies already see opportunities to use social commerce at every moment along the path to purchase—awareness, consideration, conversion, and loyalty and service—and also to measure the success of their efforts. Each step along this path—generating awareness, enticing customers to buy, and cultivating their loyalty—presents its own opportunities. Companies should be considering targeted efforts all along this path, while integrating social commerce as part of an overarching multi-channel strategy. Developing an integrated and comprehensive strategy for gathering customer data and mining it for insights, imagining new methods for customers to decide and buy together, and building a compelling customer experience will be essential to succeed in this new era of socially powered commerce.


Mastering Social Commerce

But for most companies, social commerce represents a new channel, with much to learn and master. There are four imperatives that every company should keep in mind.

Imperative 1: Jump in soon and learn by doing. It is usually a good idea to study a new opportunity closely, but given the fast pace at which social commerce is evolving, companies must be willing to learn while doing.

Imperative 2: Develop a strategy for getting the data you need. Companies should develop a “wish list” of information relating to social commerce and then segment it by how hard it is to get.

Imperative 3: Define what the customer experience should be. Companies should use tests, pilot projects, and sociographic data to map out different social commerce strategies to get a sense of what their customers will see, how they will respond, and what they like best.

Imperative 4: Integrate social commerce into an overall multi-channel strategy. As social commerce becomes a bigger part of the overall sales mix, it is important to understand its position in the company’s broader multi-channel strategy, and in particular to determine the impact social commerce will have on other channels.


A Sales Channel in its Own Right

“The market for social commerce has been embryonic to date, but that will change over the next five years as companies race to establish stores, pushing up social commerce revenues sixfold, to US$30 billion globally. As this growth surge happens, social commerce will take its place alongside stores, telesales, and the more traditional Web to emerge as a significant sales channel in its own right,” concluded Shehadi.