hey, retail!

get serious about social acquisition

the real truth about public social networks (like Facebook and Twitter)

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contents

1 intro 2 3 4 6 7 8 9 the state of social media for retail the social media imperative the social media good news/bad news social networks are not communities social network volume and velocity its a small worldand getting smaller public social network limitations

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Lithium social software helps the worlds most iconic brands increase loyalty, reduce support costs, drive word-of-mouth marketing, and accelerate innovation.
Lithium helps brands to build vibrant customer communities that:
reduce service costs with grow brand advocay with drive sales with innovate faster with

social support

social marketing

social commerce

social innovation

lithium.com | 2013 Lithium Technologies, Inc. All Rights Reserved

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intro

Social shopping may be in its infancy, but like most infants, its only getting biggerand its growing fast.

forecast: US online retail sales, 2012 to 2017

$231
CAGR from 2012 to 2017: 9% (US$ billions) 2012 year-on-year growth 14% share of total retail sales 8%

$262

$291

$319

$345

$370

2013 13% 8%

2014 11% 9%

2015 10% 10%

2016 8% 10%

2017 7% 10%

The potential benefits for retail are hard to beat: social offers lower acquisition costs, viral buzz, more eyeballsand more focused eyeballsfor targeted advertising that lead to increased click-throughs. The impact that social will have on the way people shopand on your bottom lineis projected to do nothing but grow. In fact, new estimates predict that in the next two years the value that social media offers to retail will more than double. This paper aims to unpack the specific potentials (and limitations) of public social media networks like Facebook and Twitter as engines of acquisition, and part of your broader social strategy.

53%
of people on Twitter recommend companies and/or products in their Tweets

48%
deliver on their purchase intent

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the state of social media for retail

What youre literally acquiring over social media is awareness and interestwinning customers attention and influencing them to check out what you have to say. Its ultimately about bringing in new potential customers, of course, but social media strategies function principally as a top-of-the-funnel mechanism for expanding your companys social footprint and dramatically extending the range and impact of its messages. Public social media channels (and not merely because theyre huge) represent a giant set of tools and services for retail, beginning with the infrastructure to generate that huge new audience.

Going online has transformed retail from the top shelf to the bottom line, from how brands market, stock and grow, to how they support, innovate and monetize. When it comes to acquisition specifically, social customers have totally changed the game. They are a new breedconnected, empowered, influential, and they value customer reviews above the company line. One key driver of their revolution is mobile innovation, whichready or nothas already brought social into your bricks-and-mortar stores. Today, over 40% of US smartphone owners compare prices on their mobile device while in-store shopping. By 2015 smartphone users are projected to rise to 159 million, up from just 82 million in 2010. Social offers your brand access to many millions more consumers than ever before. In turn, they have greater

reach

aw ar en es s

access to you, tooas well as a growing power to move your bottom line. Social customers expect real-time service and an excellent customer experience to be included in the sticker price and they complain loudly and effectively when disappointed. That said, todays top brands are doing more than just satisfying their social customers, they are sparking their passion and enthusiasm to help drive new business.

relevance

action des ire

int ere st

community member spend

non-members

2x members community 10x superfans

community

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the social media imperative

The market itself has already responded to social media disruption with a shift in priorities. For retailers today, the point of sale is now only the beginning of a long-term, profitable customer relationship. Social media doesnt just empower brands to tap a much larger consumer pool or get to know their customers really well. It doesnt merely enhance the speed, reach and relevance of word-of-mouth messaging. Social media makes each of these things an economic imperative. At this point, a complete social strategy is more than a matter of gaining a competitive edge; its a matter of survival. Increasingly, social consumers expect retailers to deliver an integrated shopping experience across all channels. Brands failing to deliver risk irrelevance. Already, more than 74% of consumers rely on social networks to guide their purchase decisions. Over 64% of consumers have made a first purchase from a brand because of a digital experience such as a visit to a social network or community, a mobile coupon, or an email. How well you adapt to the changing landscape and meet the growing expectations of todays social customer will help define your rate of acquisition and your profits, now and into

long-term, profitable relationships

the future.

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the social media good news/bad news

Overall, the outlook for online retailers remains sunny. Online retail has seen double digit growth since 2010 and is expected to top $367 billion by 2016. Fifty-eight percent of retailers say their online conversion rates were up and cart abandonment rates down in 2012. But we all know the tide can turn at any moment. In 2009, Netflix had been outperforming the average Internet retailer in customer satisfaction for years and was considered the top retailer by the American Customer Satisfaction Index (ASCI). But in 2011 and 2012, the once mythically popular video streaming company fell to the lowest rated Internet retailer.

80% of consumers are more likely to try new things because of social media.

source: CMO Council

What happened? Netflix, arguably, made some pricing and policy missteps. Importantly, though, social media added fuel to the fire. Social media only did exactly what it was supposed to dopropagate messages. But what it propagatedat breakneck speedwere negative impressions of Netflix throughout the marketplace, and this took a sizeable bite out of the brands image. But channels like Facebook, Twitter, Google+, YouTube, Pinterest and Instagram can propel acquisition just as efficiently as they can accelerate disaster.

For retail, the trick is in making sure the messages kept afloat with social customers are about the positive experiences they have with your brand. To do that, you need to have a social strategy that understands how those messages propagate. When social media-based customer communities flourish around brand messages, they create interest, awareness and loyalty, and the potential to become one of your most efficient drivers of acquisition.

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Social networks are the top online destination. For most social customers today, the components of your acquisition strategy will define their first direct experience with your brand. Its the face you put on that all-important first impression. Sixty percent of people who use three or more digital means of researching products first learned about a retailer through a Facebook or Twitter post. Any effective social strategy needs to recognize and invest in what channels like Facebook are designed to do bestattract lots of eyeballs and spread your message fast. Its vital that you not waste time, money and goodwill trying to force public social channels to do what they fundamentally cant, like deepen relationships or enlist customers. Those aims are better left to communities.

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social networks are not communities

Social networks and communities are just how we describe two different kinds of social structures that have been around for many thousands of years. Weve been organizing ourselves in groups since the beginning, and we still do. But here are the important distinctions between the two when it comes to social strategy: Social networks (like Facebook and LinkedIn) are held together by pre-established interpersonal relationships between individuals, like family, friends, classmates, and colleagues. You know everyone in your network personally because theyre all directly connected to you. Those interpersonal relationships mean theres more initial trust in social networks than in communities. Ironically, though, all those friends tend to get in the way of your brand goals. The reason is that networks like Facebook do such a great job at maintaining connections between trusted relationships, theres not much room left for other engagementsyour brand included.

Communities (like Yelp, Wikipedia, and brand communities) are held together by a common interest. They form around members hobbies, goals, art, politics, as well as the products they use everyday. Although there may be preexisting interpersonal relationships between members of a community (ie: you rarely already know people in your community the way you already know everyone in your network), knowing people personally is not required and its not even common. Community members represent a wide range of origins and types. The common elementthe glue that keeps their community togetheris that they all care about the same thing: the shared interest of their community. That shared interest means that theres more initial relevance inside a community than in a social network. Communities and social networks are different structures, but that doesnt mean that they are mutually exclusive: they overlap, intersect and weave in and out of each other. In fact, social networks can (and often do) exist inside communities.

social networks

online communities

pre-existing interpersonal relationships

n
int

held together by

common interests
ip

e re

st

may have

n re l a t i o

sh

co m
m

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social network volume and velocity

volume
In a public social network, the comparative lack of relevance puts a limit on what your brand can do, but it doesnt slow down acquisition. On the contrary, if youre trying to acquire more customers, and keep their numbers reliably growing, social media gathering places are your richest pools. Simply by increasing the number of aware consumers, brands benefit from a proportionally greater number of conversions at the other end of the funnel. In other words, just by setting up shop where the crowds are already thickest you get a bigger audience. With over a billion active users, Facebook alone offers businesses an irresistibly wide pool. Toss in a couple of other public social networks like Twitter and Google+ and your opportunities get even bigger.

velocity
Messages travel across social media so fast, its almost real-time. We learn about uprisings over Twitter before dictators a world away fully know whats hit them. These days, people can attend a conference virtually by following the hashtag for the event on their Twitter stream. And when the Supreme Court makes a decision, Facebook and Twitter are hosting reactions within seconds of the first announcement.

Because information shared across social networks is so fast, using social networks to propagate your messages helps to spark customer engagement with an increased sense of urgency and timeliness. Engagement can and often does happen on your acquisition channels, though the interactions are not usually very deep. This shallow engagement, however, is often enough to grab the attention of your potential customers, and therefore helps you acquire more effectively.

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its a small world and getting smaller

To understand why social networks offer such high velocity (so that you can build tactics that take advantage of it), lets take a look at how the interconnected structure of networks like Facebook and Twitter are shrinking the worldto the benefit of brands. We know that information travels across social networks from one person to another via sharing. So your message will propagate through the network faster when the connections in it have, on average, fewer degrees of separation. This is the familiar theory of six degrees of separation. The American psychologist Stanley Milgram tested and made famous the idea that even though there are infinitely many paths connecting any two people in the world, you could still select any person on Earthanyone, anywhere at alland contact that person using nothing but a chain of about six individuals, at least one of whom is a personal acquaintance. Off-line, some chains are much longer and some end up being shorter, but in general, the shortest and most efficient path between any two people on the planet is on average about six people. That means it takes only six re-shares for information to spread throughout the entire social network in the physical world.

The interesting thing is that online, the path is even shorter and its shrinking. As we build our networks, establishing relationships and following people, we become more and more tightly connected. Facebook, for example, started out mimicking our physical social network pretty well with an average of 5.73 degrees of separation. Now theres an average of 4.74 degrees of separation between any random pair of Facebook users. Twitter is smaller still. It began with an average of 4.12 degrees of separation between users. Now the average is 3.43. Thats the reason that breaking news is so often heard first over Twitter. The relatively small size of our online personal networks about 229 friends, on average not only enables us to know our friends better, it also keeps information that is only relevant to a few people well-contained. On the other hand, when the information is relevant to a broader audience, then the small world property of our social network enables each person to spread it rapidly to a large audience. This balance between relevance and reach is what gives public social networks like Facebook the power to drive interest and awareness so effectively.

average degrees of separation

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public social network limitations

broad but shallow

We know that Facebook fan pages are effective at bringing new consumers through the shallow, upper layers of the traditional purchase funnel, but by themselves they dont do everything that your brand needs social to do. To say that theyre shallow, doesnt mean that fan pages dont also lead to purchase actionsthey do. We call public social networks shallow because after making the initial draw into the early stages of the funnel, fan pages simply dont add a whole lot more to the funnels natural conversion dynamics. Those conversion dynamics develop only through the combination of engagement and enlistment strategies.

irrelevance and noise

Even though youre casting the widest net in the biggest pool, when you delve into social networks youre still not going to acquire everyone. Thats because the bigger a channel is, the less focus it has, and the less focus it has, the less relevant it is to any one individual. The reason YouTube got so big in the first place is that its utterly non-specific its got to have something for everyone. As individuals, after all, were all interested in something different, personal, unique to us. When the audience is that broad and diverse, as it is on large social networks like Facebook and Twitter, when you focus on strong relationships instead of common interests, your brands message will inherently suffer from a lack of relevance. The other downside of big social networks is that big comes with a lot of noise. Its not just the billions of people hanging out in these networksits the gazillions of conversations across every imaginable subject flying around them. Lots of consumers means lots and lots and lots of conversation. The onslaught of social media conversation creates a huge challenge both for your technology and your staff, because with those noisy conversations comes a lot of irrelevance to you.

source: AllFacebook.com

just 2% of fans return to brand pages they like on Facebook

The reason public social networks cant drive deep-funnel behaviors well enough on their own has to do with the relevance issue: the fact that friends and family in our social networks arent gathered around a common interest. The content they pass along to one another over Facebook or Twitter, even when its timely, is really just hit or miss. The upshot is that acquisition is necessary, but not sufficient on its own to create a holistic social strategy.

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That said, however daunting, that endless spool of social media conversation threads also represents a golden opportunity. First and foremost, it allows you to learn a lot more about the consumer in general and more about your customers in particular. Gathered well, those insights can lead to a real understanding of their interests, likes and dislikes. That data lets you understand your customers better so that you can become more relevant to them, which in turn makes your acquisition efforts more effective. Thats why just being there is never enough.

By spreading their presence too thin, brands are essentially shooting themselves in the foot. One of the results we found in developing the Community Health Index is that you need a concentration of activity to produce a sense of livelihood that attracts new members and grows the community. If brands spread their activity too thin, they can only blame themselves. Further, the content that most companies share is rarely optimized for their fans newsfeeds. Instead, the content gets optimized for what the company wants to communicate. If thats the case for your company, then your fan pages have just become another one-way communication tool, which is not what social is all about. In fact, this one-way approach is the very opposite of social.

the most common mistake

One of the most common mistakes companies make with social media is to launch many, many fan pages for every last feature in their products instead of creating a cohesive social strategy for their online presence.

off-domain aint your domain

While public social networks are terrific top-of-the-funnel tools for acquisition, powering reach and driving the awareness, they fall short on the deep engagement you need, and miss enlistment entirely. The simple reason for this is that they are off-domain. You dont own these channels. You dont own your Google+ fans, Twitter followers, or your Facebook pages. You cant control the experience your customers have when they view your content and interact with your brand on YouTube or Pinterest, and you certainly cant interact with customers on these properties in any scalable capacity.

If people simply put a follow me on Facebook or Twitter or on their corporate home page without an integrated strategy, they are actually driving traffic away, and doing themselves a dis-service. The effect would be N times worse if they have N fan pages.
Jeremiah Owyang, The Altimeter Group

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the Canon Forum community accumulated over 5,100 registered users and 2.8M page views in its first 6 months
Further, on platforms you dont own, the data available to you is fleeting and any benefits they yield are inherently short term. Why? Because at anytime, Facebook can change their interface, their pages, layout, the way groups and people connect, how much information is available to you (or not) pretty much anything. That alone hinders your ability to learn, adapt and innovate on the social customer experience you deliver. Moreover, fans go to Facebook to interact with their friends, not with your brand. You might pitch a clever, welltimed, totally personal message to them there, but theyre still missing the kind of engaging social customer experiences they canand doget from brand-owned customer communities. in huge numbers and yes, you need to set up shop there, too. But the difference is that in the new order, its not nearly enough to catch-and-monetizetoday, thats the same as catch-and-kill: you only get to monetize them once. In todays marketplace, the point of sale is only the beginning of the profitable relationship. Gaining long-term competitive advantage is about winning the social customer experience such that you can monetize customers over and over again. The business goal of a sustainable social strategy is to engage social customers to co-create something of mutual value with your brand, and then enlist them to become, in turn, your most efficient engines of acquisition.

Facebook, Twitter, YouTube, Pinterest all attract consumers

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resources

resources
i. ii. iii. iv. v. vi. vii. U.S. Online Retail Sales to Hit $370 Billion by 2017, Forrester Research Social Media Is A Highly Valuable Tool for Retailers, The Guardian Majority of Consumers Relay on Social Networks to Guide Purchase Decisions, Gartner Research Digital Brand Experience Report, Razorfish US Digital Future in Focus2013, Comscore Social Media Report, Nielsen Smartphone Adoption Soars, Internet Retailer

viii. The State of Retailing Online, Forrester Research ix. x. xi. xii. STUDY: Facebook Timeline Doesnt Affect Engagement, AllFacebook.com Online Retailers 2013 Top Priorities, Forrester Reesarch 9 Retailers with the Worst Customer Service, USA Today How to Measure Your Facbook Engagement, Social Media Examiner

xiii. The Digital Divide, Lithium & the CMO Council

Lithium social solutions helps the worlds most iconic brands to build brand nationsvibrant online communities of passionate social customers. Lithium helps top brands such as AT&T, Sephora, Univision, and PayPal build active online communities that turn customer passion into social media marketing ROI. For more information on how to create lasting competitive advantage with the social customer experience, visit lithium.com, or connect with us on Twitter, Facebook and our own brand nation the Lithosphere. lithium.com | 2013 Lithium Technologies, Inc. All Rights Reserved

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