The state of social commerce: notes for Social Media Influence 2012

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Image: Hiut Denim jeans tell a tale with their on “history tags”…

Tomorrow I’ll be on a panel at the ever-brilliant Social Media Influence about social commerce. Often at conferences I will publish notes and slides as I go on stage or slightly afterwards, but this time I thought I would post my notes and thoughts up early. Any thoughts, additions and criticisms would be very welcome…

Does the term stand up?

First up, what is it? Our working definition of social commerce at Brilliant Noise is:

Social commerce is the use of social media in business, specifically relating to customer acquisition and new commercial models made possible by social media. In terms of customer acquisition, the opportunity is seen as either:

  • Direct: Customers making purchases in social media spaces, repsonding to promotions or using tools to guide purchase decisions.
  • Advocacy: Customers recommending a service to their friends / social networks.

Wikipedia’s definition begins:

Social commerce is a subset of electronic commerce that involves using social media, online media that supports social interaction and user contributions, to assist in the online buying and selling of products and services.

More succinctly, social commerce is the use of social network(s) in the context of e-commerce transactions.

In the talk section of Wikipedia someone notes that this is “one of the most poorly written articles on Wikipedia in terms of grammar and syntax”.

“Social” has become a prefix to all sorts of business terms, grafted on to connote new-ness and an urgent need for discussion and the hiring of consultants. It is good to be sceptical about new terms and test them frequently to see if they stand up.

“Social business” has earned its keep and is useful – but what about social commerce? At times it sounds like just anew way of saying social media (take a look at the six Cs of social commerce in the Wikipedia entry: this is no different to what you might say about social media marketing generally).

So social commerce is the use of social media in any activity related to commerce. A bit vague, really…

What is it good for?

Working with Nokia on its broader social media strategy, we saw first hand that commerce was a priorty for its social media team. The use of Facebook especially was notable for the direct referrals that were being generated from its product pages and its advertising in social media was also very effective.

So, “social commerce” is a useful phrase – at least it seemed to be at Nokia – for denoting efforts in social media focused purely on commercial outcomes (this presentation from Nokia’s Tejal Patel gives some more detail on this).

In a webinar we chaired for MarketingFinder earlier in the year, the Marketing Director of Play.com talked about how the company’s work in Facebook had led directly to sales. Tools like EngageSciences, BuddyMedia et al are helping people sell through social media – they help most by allowing them to really understand what customers and fans in social want from them.

The screenshot below shows the detail you can go into with the EngageSciences tool in understanding who is engaging with what content in social media.

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ROI and metrics

Companies doing best in social media and commerce are the ones with the ability to use tech/data and at the same time be very human: creating engaging content, understanding and responding to individuals.

In San Francisco last week, Direct of Engineering at Zappos, Will Young (no not that one) was reported as saying that a customer Tweeting their order generates US$33 in revenue, while a Pinteterst “Pin”, generates 75 cents.

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This comment shows the sophistication of Zappos approach to measurement. It is tracking revenue against different social platforms. We don’t know how they got to those numbers, but it is interesting to hear about them – they represent the end point of a process that begins with a customer-obsessed approach to business, with social media a part of so many aspects of how the business works – from customer service to internal communications.

What trends are driving growth in social commerce?

  • Discovery and micro-affiliate deals: There are so many curation approaches and tools out there at the moment – Pinterest, The Fancy etc. – and this area of the social web is still new. Expect to see consumer behaviours and brand responses evolving over the coming year. IBM recently showcased a Brazilian shop called Magazine Luiza that lets customers create their own storefronts and share them via Facebook and Orkut, getting a cut of any sales that go through them.
  • Customer-focus: The growth of Net-Promoter Score and models like McKinsey’s Loyalty Loop as an alternative to the traditional sales funnel.
  • Everywhere web: Mobile is everything. Take a look at some of the stats from Mary Meeker’s recent Internet Trends 2012 presentation to get a sense of the exponential growth in mobile web use right now (my analysis in this post also). But it’s not just mobile devices – the web is spreading in all sorts of ways: the mount time we are using it, the activities we enhance with it, and the objects to which we are attaching data. For instance…
  • Product life-time storytelling: I recently bought a pair of Hiut Denim’s jeans that come with a history tag, which users can record the story of their jeans. We’ve seen similar approaches with things like Oxfam’s Shelflife project, where scanning the barcode on a second-hand item in one of their shops will tell you a little about its history.
  • Senior executive focus on social: IBM’s CEO study shows that senior executives see social media becoming a key customer engagement channel in the next five years: in the retail sector, 72% say that it is a priority. As social media is recognised as an issue in boardrooms, there will be more top-down pressure for companies to get social commerce right.
  • Market correction in brand spending: There is a market shift in brand spending from paid media into earned media or inbound marketing right now, which should increase the focus on social commerce as well as the resources available. Blogged about this at Brilliant Noise (Spurned Media and Earned Media Marketers Unite! posts).
  • …and it all results in Advanced Persistent Opportunties: All of the trends above – senior sponsors, more budget, bettter measurement, a focus on customers and customer needs, are resulting in social media and earned media getting more serious, and approaches to it being scaled up by serious players. Borrowing a concept from the security industry, I call this Advanced Persistent Opportunities - programmes of activity in social media and commerce which are well resourced, planned for the long term and constantly adapting the opportunities – in terms of customer behaviours and available technologies – that come along…

Links of note

The following are some useful sources of information on social commerce that’ve pulled from my bookmarks in recent months. They don’t quite fit into the analysis above, but it would be a shame not to share them:

  • This is Social Commerce, by Guy Clapperton: Definitive and practical guide to the topic, guy looks at companies like Naked Wines, Zappos and more established companies like Autoglass and how social commerce fits into their business models.
  • Patagonia Common Threads: Scheme helps people find a new home for Patagonia gear they don’t want or recycles it. Patagonia’s putting its values and a focus customer needs above making a quick sale. That’s impressive.
  • Giantnerd: A US outdoor gear store that weaves social media into everything it does. I love the look of it, but the fact that I am a massive nerd for cycling and running gear could have something to do with it…
  • The value of a social commerce referral: Post from about a year ago by Jesse Farmer about measuring the value of traffic from Pinterest, The Fancy and the like…
  • Social media selling, by eBay: This is eBay’s advice to sellers about building profiles, communities and boosting sales through social media. It’s a pretty good primer for anyone…

3 comments

  1. Rebecca Caroe

    Thanks Antony. Here in New Zealand one shoe retailer is still having good results from a loyalty scheme which spreads using WOM rather than social tools. Is that “social commerce”? http://m.overlandfootwear.co.nz/

    I would add that traditional retail skills of merchandising still underpin goon social commerce. I am working on Rowperfect.co.uk and Globalculture.com both retailers and it’s clear that social at the point of sale is still a step too far for both.

  2. socialshout

    Hi Rebecca. Interested to know how Overland Footwear are generating WOM? Pretty hard to measure offline WOM. When it comes to online WOW, surely that has to happen on the social networks, no? As for your point about traditional skills – 100% agree. Social Commerce is really just another channel. The basic rules of retailing & merchandising still apply.

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