For leading-edge marketers, social media has moved beyond the novelty stage to a point where it can now produce real business value. There are now a variety of winning strategies that many organizations can emulate. However, most firms continue to pursue social media 1.0 tactics – Facebook pages, Twitter accounts, LinkedIn profiles – to attract new customers and engaging existing ones. Collecting many "friends" and "followers" is good, but it generally does not lead to higher revenues and profits. Companies looking to reenergize their social media programs would be smart to follow the examples of some pacesetters noted below.
A new study – recently published in the Harvard Business Review – looked at the social media strategies and results of more than 60 companies across multiple industries. The researcher, Miko?aj Jan Piskorski, discovered social media strategies that perform well and other strategies that failed to drive the business.
The poorly performing companies universally imported their digital strategies into social environments by broadcasting marketing messages or seeking customer feedback. These programs failed because they do not satisfy the needs of people who come to social media: to meet new people and to strengthen existing relationships. Simply put, users are interested in other people, not companies who flagrantly or subtlety look to sell them something.
The successful firms generated revenue and cut costs by implementing social strategies that help people establish and enhance relationships. These programs worked because they were congruent with the users’ expectations and behaviors on social platforms. Social-based strategies are superior to purely digital ones because they tap basic human needs around social connection. With a social-based strategy, the company assumes the role of facilitator of these interactions.
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Firms looking to deploy social strategies have 4 strategic options that vary by business impact (e.g., reduce marketing costs, increase/retain revenue) and social goals (meet new people, improve existing relationships)
1. Reduce costs by helping people meet
The reviewing site Yelp (50m visitors per month) decreases the cost of acquiring its most valuable content by helping people meet. The most passionate and prolific reviewers are invited to join through social media platforms the Elite Squad, a select group within the Yelp community. The squad meets and socializes at exclusive and fun Yelp-hosted events and parties. To maintain this access, squad members must regularly submit quality reviews over an extended period of time thereby ensuring a strong content flow and reducing the need for quality reviewers.
2. Increase willingness to pay by helping people meet
American Express drives membership revenues by helping small business owners meet like-minded members. AE launched a members-only social network called Connectodex, which allows users to post profiles, list services they offer & need, and freely connect to network. To take advantage of Connectodex’s social, business and networking benefits, members must obtain or continue holding an AE OPEN card. To date, more than 15,000 small businesses have joined the network. This program has effectively reduced customer churn and increased the willingness to pay for the card.
3. Reduce costs by helping people strengthen relationships
Zynga is an online games provider that runs on the Facebook platform. Their free social games, FarmVille and CityVille, could generate close to $1B in revenue in 2011. According to a survey done by Information Solutions Group, almost a third of players reported that the games helped them connect with family and current friends; another third said the games facilitated connections with old friends; and a third used the games to make new friends. Zynga’s social strategy has helped drive down the cost of player acquisition and strengthen existing relationships, in order to enable up-selling.
4. Increase willingness to pay by helping people strengthen relationships
eBay’s Group Gifts online application allows people to enhance their relationships by enabling them to pool their funds to purchase gifts for their friends. Individuals ask friends in Facebook to purchase a gift for a recipient (based on the recipient’s "about me" profile) through a link to a GG gift registry. To participate and garner social benefits, individuals must advertise GG to their Facebook friends and respond to their friend’s advertisements. The service has clear social and business benefits: it helps people purchase more appealing and more expensive gifts than they might otherwise do by themselves. Furthermore, this strengthens the connection with the recipient and helps foster relationships among the joint gift givers.
Mitchell Osak is managing director of Quanta Consulting Inc. Quanta has delivered a variety of winning strategy and organizational transformation consulting and educational solutions to global Fortune 1000 organizations. Mitchell can be reached at mosak@quantaconsulting.com