Tuesday, December 28, 2010

Social media is so last year. Make way for social commerce.

Social commerce is the next generation of social media / marketing as it relates to growing a business. It’s traditionally defined as the monetization of social media and its unique ability to influence virally – to drive online / e-commerce sales activity. I’d also introduce offline sales activity to the definition as well, since over half of offline retail sales are directly influenced by online research - prior to making a purchase.

The term social commerce was coined by Yahoo, way back in 2005, to describe a new set of online collaborative tools that it was developing, such as shared pick lists, user ratings and reviews and other user-generated content relating to online products and services. It has quickly evolved at a velocity that requires all B2C organizations to take note and to re-allocate social media resources to encompass and grow their social commerce component. Bazaarvoice is an organization that has been extremely successful in assisting clients in leveraging user-generated content to increase online conversions and grow e-commerce sales. It recognized, early on, the direct correlation between increasing sales conversion rates and the quality of guest reviews.

I am a firm believer in the increasing relevance of social commerce and how it can help B2C organizations grow revenue more cost-effectively than traditional media channels and social media applications. What makes social commerce so appealing to me is that it’s super-efficient at targeting current and potentially new customers that have a high affinity to purchase your product or service; it’s extremely cost-effective; it’s very trustworthy for consumers and it has extraordinary viral / referral potential. Most importantly, it directly influences every potential customer who visits your website or offline store; from those who matter most - your cheerleaders (guests, associates, vendors and 3rd party influencers such as bloggers, media and article authors). I like to call these superstars your key influencers. They can have a dramatic effect on your top-line - if given the opportunity, tools and encouragement to take the time to help others make good purchasing decisions.

Trust, believability and social connectivity become front and center in social commerce since brands, products and services are rated and voted for by real people that have direct experience using your product. You have a good, better and best product assortment and your best products will have 4 or 5-star ratings. Your opportunity here is to make sure you buy more of these and less of your lower-rated products, since you will be converting your best at a much higher ratio. Concurrently, you would want to reduce or eliminate any 1-star or 2-star products that are not only being rated poorly by your guests, but is also slowly and painfully damaging your brand. A referral, recommendation or a 5-star rating is infinitely more valuable than a traditional advertisement where the message is distributed through more traditional “push" advertising channels - i.e. TV, radio, newspaper or other corporate-generated commentary.

Social commerce also helps to increase overall business productivity by significantly reducing returns, providing better product selling forecasting, inventory control; reducing recurring marketing and advertising expense, increasing guest loyalty, improving customer acquisition rates and growing brand equity. According to the National Retail Federation, around 40% of all gift recipients return at least one item each year. Amazon recently filed a patent application regarding new technology which, they claim, could significantly reduce gift returns using “screening” methods that would require an approval from a gift recipient from certain gift givers (think plaid shirts and ties) - and give them the opportunity to convert the unwanted gift to a credit or gift card before it ships. Interesting concept, though I think there’s going to be significant controversy with this one, and understandably so.

Below are some examples of social commerce channels that are increasingly being used today –

  • Customer product ratings and reviews. Between 60-70% of us check out and use online consumer product reviews prior to making a purchase. Online mega-retailer Amazon is the king of mastering customer ratings and reviews to increase conversions and reducing returns. Trip Advisor is another terrific example from the travel category. Bazaarvoice and Power Reviews are the leaders in this channel.

  • User recommendations and referrals. 90% of us trust recommendations from people we know. 70% of us trust product recommendations - from people we don't know. Consumer recommendation have become today's most credible form of advertising.

  • Pick-Lists and Wish-Lists. These facilitate and make gift-giving infinitely more efficient and allow givers and recipients to connect though social channels. These tools are highly interactive and are proven winners in gaining loyalty and reducing returns.

  • Social Shopping. Crowdsourcing wisdom reigns with social shopping. The success of group shopping concepts such as Groupon and Social Living are examples of how shopping has become more social. In this case, you are joining other shoppers in purchasing a great online deal. Groupon emails a “deal of the day” to its subscriber list and sets a minimum number of shoppers needed to purchase the deal before it is offered. It’s a great way for guests to get half off deals to local offline businesses and it’s a terrific customer acquisition tool for local businesses. A retail client of mine with a single retail location generated 1,000 Groupon purchases within 6 hours and immediately expanded their customer base by 20% and experienced an incremental 40% sales lift over and above the groupon amount. Social shopping sites also serve as an aggregator for like-minded shoppers. ShopSocially, Kaboodle and StyleFeeder are two examples of sites that focus on fashion-oriented conversations. ShopSocially is a site that promotes social shopping directly through individual Facebook accounts and can ask questions, rate products and shopping experiences in real time. Growing online marketplaces such as Shoply and Facebook-specific Payvment are also good examples of this growing channel.

  • Forums and Communities. Forums help to create a community. It's your opportunity to listen to what customers are talking about regarding your brand, products and shopping experience. Trip Advisor is the best example of a comprehensive travel community, where travelers post their experiences, photos and referrals of airlines, hotels, destinations and activities and rate the overall experience. Trip Advisor is owned by Expedia and has over 40 million monthly visitors to their site. If you’re looking for travel information, Trip Advisor should be your first stop. Amazon also has very unique shopping forums and communities that highlight specific recommendations and experiences.

  • Social Media Optimization. SMO is simply converting social media information into website clicks or offline transactions. SMO is one of two methods of attracting visitors to your website. The other is search engine optimization (SEO). SMO tools can be added to social content such as RSS feeds, share and comment buttons, keyword hyper-text links, rating and review options and file/video sharing. Blogging, article generation, blog commentaries and postings also serve to improve SMO productivity. Viral marketing, referral and sharing options such as bookmarking, photo sharing, re-tweeting and Facebook sharing offer additional SMO opportunities. Lastly, online reputational management (ORM) is a channel with growing importance within SMO – organizations should be monitoring, learning and reacting to social and web chatter regarding their brands. There a several online tools to help you monitor web chatter. Eastman Kodak took this idea one step further and recently created a new senior-level position – Chief Listening Officer, with the purpose of monitoring, learning and reacting to the brand’s online and social chatter.

  • Real-time Question and Answer, live-chat and best-in-class customer service. Simple stuff here. Don’t make it frustrating for customers to shop or get answers. It’s been proven many times over that real-time chat modules can reduce direct customer support costs, improve sales conversions and reduce returns. If you force a customer to leave your site without an answer, chances are greater than 50% that they wont' return to complete their original transaction.

  • User generated-content such as stories, testimonials, contests and experiences. Customers who write reviews or submit user-generated content spend more, and users who read them convert at a higher ratio. The higher the quality of your user-generated content, the higher you will convert. It’s real, it’s believable and people tend to trust peers more than corporate copywriters. Zale Corporation launched a campaign in 2009 to encourage customers to share their “Love Stories” and were included in multiple channels including their web home page, targeted emails, contests and social networks. It’s an extraordinary way to grow your brand awareness and leverage social commentary with traditional marketing channels such as TV, video and radio.

Here are some amazing social commerce statistics that were compiled by Bazaarvoice, a leading player in the social commerce sphere -

- The power of social commerce can be summarized from a recent Harris Interactive poll (June, 2010). When asked what sources “influenced your decision to use or not use a particular company, brand or product” – 71% claim reviews from family members or friends exert a “great deal” or “fair amount” of influence.

- Not surprisingly, consumer reviews are significantly more trusted vs. manufacturer product descriptions – nearly 12 times more, according to an eMarketer survey from February, 2010.

- More than 90% of online shoppers trust recommendations from people they know, and 70% trust the opinions of unknown users (eConsultancy, July, 2009).

- The average consumer mentions specific brands over 90 times per week in conversations with friends, family and co-workers (Keller Fay, WOMMA, 2010).

- 53% of Twitterers recommend companies and/or products in their Tweets, with 48% of them actually making a purchase (ROI Research for Performance, June, 2010).

- 44% of moms use social media for brand/product recommendations. 73% trust online community recommendations (BabyCenter, LLC, July 2009).

- 67% of shoppers spend more online after recommendations from an online community of friends (Internet Retailer September, 2009).

- Consumers say that word of mouth is still the number one influence in their electronics (43.7%) and apparel (33.6%) purchases (RAMA / BIGResearch December, 2009).

- Recommendations from family and friends trump all other consumer touch-points when it comes to influencing purchases (ZenithOptimedia Ad Age, April, 2008).

- 61% of people rely on user reviews for product information or research before a buying decision is made(Razorfish, 2008).

- 83% of all holiday shoppers are influenced by customer reviews (ChannelAdvisor “Consumer Shopping Habits Survey).

- High product ratings will increase the likelihood of purchase for 55% of consumers (eConsultancy, July 2010).

- By 2014, 53% of the total retail sales (online and offline) will be influenced by the web, as consumers increasingly use the internet to research products before purchasing (Forrester, March 2010).

- Luxury institute research revealed that, of the customers who shop for high-end merchandise online, 78% did so in order to find the best price, while 77% did so to compare brands (BrandWeek, January 2010).

- The Trust in Advertising survey of 26,000+ found that consumer recommendations are the most credible form of advertising (Social Media Marketing: The Right Strategy for Tough Economic Times” Awareness, 2008).

- Some 70% of Americans say they consult product reviews or consumer ratings prior to purchasing, according to an October, 2008 survey by Penn, Schoen & Berland Associates (BusinessWeek, October 2009).

- Customer reviews are the most effective social tactic for driving sales, followed by Q&A features and Facebook Fan pages with frequent and relevant posts (Etailing survey of 117 companies, September 2009).

- Brands with the highest “social media activity” (including reviews) increased revenues by as much as 18% (Media Post News, July 2009).

- 9% of companies using Web 2.0 have gained measurable business benefits (McKinsey Quarterly, September 2009).

- Customer Stories campaign drove 13,000 new prospects (La-Z-Boy, 2009).

- Products with syndicated reviews convert 26% higher (Bazaarvoice Case Study, 2009).

- Shoppers who browsed the sites new “Top Rated Products” page, which featured the sites highest rated products, had a 59% higher conversion rate than the site average and spent 16% more per order than other browsers of products (Bass Pro Shops, June 2008).

- Marketing Experiments tested product conversions with and without product ratings by customers. Conversions nearly doubled from .44% to 1.04% after the same product displayed a five star rating (Marketing Experiments Journal, July, 2007).

- 25% of search results for the world’s 20 largest brands are links to user-generated content (Socialnomics, August, 2009).

- Consumers were willing to pay between 20 and 99% more for a 5-star rated product than for a 4-star rated product depending on the product category (ComScore/Kelsey, October 2007).

- By 2013, nearly 155 million US internet users will consume some form of user-created content, up from almost 116 million in 2008 (eMarketer, 2009).

- Over half (51%) of consumers are using the internet prior to making an offline purchase, educating themselves on the best deals available (VerdictResearch, May 2009).

- Online consumers are becoming precision shoppers. For every $1 spent online, $5.77 is influenced in-store (Macy’s CEO, 2009).

Finally, I've included some real-world social commerce applications that have proved extremely successful and might give you some ideas about your business –

  •  1-800-Flowers set up the first online retail store embedded into Facebook called “Facebook Shoplet.” Shopping without leaving Facebook. Talk about monetization!

  • Mattel added a “ShopTogether” social shopping feature to their website. It allows users to invite friends to shop online together in real-time and chat, compare and shop together in a very social, real-time online experience.

  •  In 2009, the iconic luxury brand Burberry launched a website called “Art of the Trench” that featured the history, looks and legend of the Burberry trench coat. The site solicited and posted user-generated content and included voting and product ratings from viewers. The unique concept has been incredibly successful and the site itself has generated over 7 million visits from late 2009 to mid-2010 and has firmly vaulted Burberry into a leading player in brand-positioning Web 2.0.

  • BlendTec created a “Will it blend” viral campaign that focused on how its blenders could stand up to tough blending jobs. They had some fun with it, generated low-cost videos and asked people to send in their blending video stories. Now you can watch their CEO blending odd things like I-Phones and Barbie Dolls to show how durable the product is. The campaign was, and still is, hugely successful in repositioning the brand - with sales increasing over 700% over several years; launching a YouTube following of over 200,000 and generating some awards along the way.

  • Carrefour, the world’s second largest retail chain recently offered a “FaceShopping” application featuring flash deals to their Facebook fans through a real-time deal feed.

  • Dell has really jumped on board with a couple of successful social shopping applications. They offered special deals through their “deal feed” on Twitter – netting them around $7 million in sales. They also launched “Dell Swarm” – a group-buy concept that rewards users with better deals when more people participate and purchase. It follows in the heels of the super-successful group shopping concept, Groupon.

  • Facebook connect is another rising star in social commerce applications, where shoppers can log into their Facebook accounts through a window on an e-commerce site and chat about a purchase in real-time and onsite. Any opportunity to keep a customer on your website is a good investment.

  • PETCO realized a 5X increase in email click-through rates by including relevant ratings and reviews content in the campaign promotion (Bazaarvoice / PETCO, June 2007).

  • Top rated product email drive 46% higher revenue per email in A/B test (Bazaarvoice / GolfSmith, June 2007). Highly targeted, segmented and relevant offers can dramatically improve your email conversion rates.

  • I like Best Buy's IdeaX - Idea Exchange forum, which is the online equivalent of a customer suggestion box that encourage sharing, voting and discussing new ideas. I really like the voting aspect - where people can vote for the best suggestions. I also think their Twitter social connectivity platform - Twelpforce, which serves as an online community of tech pro's that provide answers to customer tech-related questions - is a solid social commerce application. As of January 2011, they had a following of over 33,000. It's free and it helps to develop a stronger relationship between Best Buy and their customers. Gina Debogovich, Best Buy Community Manager commented, "having the Twelpforce tweets exposed directly into the community really helps us to continue the conversation, helping more than just those asking the original technical question." Keep in mind, as with any open forum, you need to be prepared for all kinds of comments, positive and negative. For those negative comments, it's a terrific branding opportunity to back up your passion for taking care of every customer and making it right - show your social connections that you care and follow up within 24 hours.

  • Zappos.com recently launched its "product showdown" - where two products enter and one leaves victorious. You can create your own competition between two products and see which one wins. Winners are rated on a scale of 1 - 5 and comments help to gain color on individual user experiences. What a great way to engage with customers on products they are passionate about, and not so passionate about!

  • Sears has been extremely interesting to watch lately. They’ve become rather innovative when it comes to social shopping and growing their e-commerce side of the equation. Take a look at their ShopYourWay program, which gives customers lots of options when it comes to making a purchase on Sears.com. They offer tons of mobile applications such as Wishbook mobile and I-phone apps, “bumpin Santas” holiday app (very cute), text alerts, etc. I also like their Sears Marketplace concept, which is their first attempt to branch into 3rd party re-selling. They’ll take your inventory and help you sell your wares or they can drive clicks to your own website – for a fee of course. Their “ready in five” promotion guarantees that if you pick up your online purchase in-store, you’ll get it within five minutes or you’ll get a $5 coupon. They also offer personal shoppers, live phone and chat support, home or in-store delivery options and a gaggle of other services. For the week ending November 27th (Thanksgiving week), Sears/Kmart ranked 3rd for multi-channel retail website traffic in the US.

So there you have it - social commerce is here to stay and it’s quickly changing the way we shop and market our goods and services. I think it’s a good thing for all of us, as it encourages competition in the marketplace, weeds out marginal products and players and it gives consumers the opportunity to reap rewards from the wisdom of crowds in an effort to making more educated decisions. Embrace it, have fun with it and have a profitable and happy 2011.


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