Forget Social Media

LEVEL5 Brand Perspectives Series

Forget Social Media: think Social ProFitabilityDiscussion Paper May, 2010

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Contributing Authors:

David Kincaid

Ken Wong

Andris Pone

Kerry Munro

Ben Wise

Forget Social Media

We should not be surprised that the marketing department has assumed

control over social media. After all, for more than a decade, the corporate

world has considered and used the Internet as an important marketing

medium. All the while, the web was evolving from one-way brochure ware

to communities of conversations – to the point that it has now fully

outgrown its characterization as merely media in the marketing sense.

And yet, our collective understanding of the business potential created by

this evolution has not kept pace, as witnessed by the very coining of the

term “social media” to describe the coalescing of technologies, processes,

capabilities, behaviours and culture that comprise the phenomenon. It is

our tendency to use any new technology in the same way we used its

previous iteration: only later do we see ways to use the new technology

differently than before (consider how cell phones were at first a mobile

landline – and think of what mobiles have become). Referring to social

media as a “media” perpetuates our bias towards it is as a marketing tool,

as opposed to an enterprise-wide brand building capability, and that it does

belong squarely in the marketing department’s domain.

The unfortunate result of the “media” moniker, and resultant marketing

department dominance, is the marginalization of social media from the

May, 2010 LEVEL5 Brand Perspectives Series Forget Social Media: Think Social Profitability

“Social Media haS Fallen

into one oF thoSe iMPonderableS

So oFten Side-StePPed by the c-Suite at itS Peril.”

“Referring to social media as

a “media” perpetuates our

bias towards it as a marketing

tool.”

2

C-suite in general, and in particular, the CEO. Overwhelmingly, our

research concludes that CEOs believe that social media is simply a

marketing tool and marketing expense; that any relationship it may have

with profitability and competitive advantage is at best vague and perhaps

non-existent; that its connection to earnings per share and EBITDA – metrics

at the very top of the CEO’s agenda – is even further removed. They believe

that social media is ultimately not worthy as a priority for their attention,

or a matter of strategic importance to the entire organization.

Unfortunately, those CEOs are wrong.

Think Social Profitability

In fact, social media is all about driving revenue, EBITDA, earnings per

share and competitive advantage – and that is why CEOs, and the

C-suite as a whole, should be deeply interested in it as a strategic matter

and why they should seize control of it from the marketing department -

immediately.

Social media is fundamentally about profit, not marketing. We have

defined this opportunity as social profitability: the set of technologies,

processes, capabilities, behaviours and culture that relate to social

networking but have value only insofar as their positive impact on overall

brand health and corporate profitability. As you may have inferred, we

propose dispensing entirely with the term “social media” and instead

propose using the less marketing-centric “social networking” to describe

that which is the means to one end: profit.

At LEVEL5, we see the brand as a crucial business asset and ultimately, as a

business system. While great brands have always known how to scrutinize

every element of their business system through the lens of the brand, we

believe that many companies today have lost their way when it comes to

capitalizing on their brand to drive growth and create value. They have

followed the siren call of growth through acquisition, and profitability

through cost-cutting, neither of which is sustainable.

Think of your own brand as a business system and all of the functions that

includes. Of course marketing and advertising are on the list, but so are

finance, HR, procurement, production – the list goes on. If your company

has deemed a function important enough to have its own Vice-President,

then it is a significant enough part of your value chain to benefit from

social profitability. Not only does a strategy of social profitability change

the information flows within each of these departments, but in a truly


“Social Media iS FundaMentally about ProFit, not Marketing. We have deFined thiS oPPortunity

aS Social ProFitability.”

3

“Social media is

fundamentally about profit,

not marketing. We have

defined this opportunity as

social profitability.”1Theme #


cross-enterprise fashion, it re-defines the flows of information and deci-

sion making between departments as well.

Best Practices? No One Is Doing Everything Well

Instead of taking a long-term, cross-enterprise approach driven by the

CEO, marketing departments are using social networking on largely a

tactical basis. Many successful brands are making good use of social net-

working, yet even the leaders are using it in only a few areas of the value

chain – concentrated, of course, around marketing and sales. But what of

the missed opportunities to leverage existing assets and build the value

of your brand by extending social networking beyond the marketing plan?

To understand these missed opportunities, CEOs should be asking ques-

tions such as:

• Howcansocialnetworkingaffectourcompetitiveadvantage?

• Whatistheroleofsocialnetworkingwithinourbrandedbusiness

system, both internally and externally?

• Whataretheassociatedresourceandcapabilityimplications?

• Howareweapplyingsocialnetworkingoutsideofmarketing?

A Case Study

Consider the “Fiesta Movement,” a recent Ford initiative in support of

an overall drive to improve its business position by targeting Americans’

growing interest in more fuel-efficient and eco-friendly cars. To build

buzz for the spring 2010 launch of the new Ford Fiesta, the company

selected 100 individuals (from over 4,000 online entries) to receive the

new car, on the condition that they would blog about their experiences

and share their thoughts with others via social networking sites including

Twitter and YouTube. Based upon the social networking activity of these

100 people, almost 100,000 individuals expressed interest in learning

more about the Fiesta. Just as remarkable, a full 97% of them did not

own a Ford vehicle.

By most measures, this campaign was a huge success; but Ford’s use

of social networking in this case lies largely in the marketing department,

ignoring the opportunities to leverage social networking in other value

chain activities. Surely Ford did not expect to give a free car to 100 people

and end up with possibly 97,000 new customers? Had they prepared

themselves to produce those vehicles by seamlessly integrating social

networking into primary and support activities, they may have coordinated:

“Many SucceSSFul brandS are Making good uSe oF Social netWorking, yet even the leaderS are

uSing it in only a FeW areaS oF the value chain.”

4

“Leverage existing assets

and build the value of your

brand by extending social

networking beyond the

marketing plan.”2Theme #

http://www.fordvehicles.com/fiestamovement/

• Inbound logistics – imagine the senior manager in the warehouse being

bonused on maintaining less than seven days production materials.

How would “real-time” access to customer demand help him get that

bonus?

• Operations – having the facilities’ manufacturing capacity organized to

meet the higher than expected demand for some cars, while reducing

vehicle assembly on less popular models

• Outbound logistics – delivering the Fiestas to dealers in a timely fash-

ion to maximize show room marketing and advertising investments

• Service – including real-time parts supply and staff training for repairs

on the new vehicle based on consumer needs and questions

• Procurement – connecting the purchasing group in real-time to the

burgeoning interest in the car; allowing that intelligence to affect ability

to secure superior materials pricing

• Firm infrastructure – ensuring the finance group is connected to the

real-time demand for leasing

• Human resources – using real-time knowledge of consumer demand

to affect manpower and shift planning to ensure the right number and

type of autoworkers on the assembly line

• Technology development – having IT capture social networking conver-

sations to incorporate feedback into future product development

In a different industry, consider the rapidly changing buying cycles in mobile

telecommunications. Before the advent of social networking, a buying

cycle at Bell or Rogers might be tested only once every several years. Yet

today’s teenagers and twenty-somethings have rapidly shrunk the buying

cycle by switching cell phones and smart phones more than once a year in

many cases.

Coincident with this phenomenon, social networking allows for the

measurement of the purchase cycle in real time – by making offers and

promotions to those who follow your brand on social networks, and then

by monitoring their purchase behaviour and listening to their feedback.

Well beyond the limitations of traditional focus groups and marketing

campaigns, you now have a greater ability to do test and control, and get

immediate results. With your finger on the pulse of changes in the buying

cycle, imagine the recalibrations that can be made throughout your value

chain – production forecasting, raw materials, inventory management,

production and distribution, to name a few.

Dell is among the few brands using social networking to integrate custom-

ers within the value chain in a fashion more varied than Ford or others – yet


5

“... by making offers and promotions

to those who follow your brand on

social networks, and monitoring their

purchase behaviour, listening to their

feedback ... you now have a greater

ability to do test and control, and get

immediate results.”


they still fall short. Dell engages its customers by running more than

30 Twitter sites on a global basis – to discuss new product information,

provide customer service and sell new and used products and peripherals.

Under the auspices of its IdeaStorm initiative, Dell engages consumers in

new product development by encouraging them to submit product and

service ideas. On the Dell website, one can see that almost 14,000 ideas

have been submitted – and over 400 have been implemented.

While this is an effective use of social networking, consider just a few of

the opportunities Dell could leverage more ambitiously across, and within

the links of, the value chain:

• Inbound logistics: how do you plan the volume of inputs you require?

• Outbound logistics: how do you plan how much product to ship to dif-

ferent regions based on online sentiment for your products?

• Market research: unlike traditional methods, a greater number of the

people communicating with you through social networks are actual

customers. What are these customers telling you?

• Segmentation: how do you segment customers that are using social

networks to provide more granular information?

• Price elasticity: how do you test for price elasticity? For example, your

most loyal segment’s willingness to absorb a 20% price increase?

• Customer service: how do you assist your consumers on the social

networks that they use?

• Forecasting: how do you integrate data from social networking into

your production, inventory and sales forecasts?

• Production planning: how do you use data from social networks to

plan your production and optimize capacity utilization?

• Buying behaviour: how do you map the buying experience of your

valuable brand loyalists that use social networks? Are you treating

them differently than non-social network transactional customers?

• Finance: have you restructured profitability deciles based on the

changes made by your marketing team?

• Legal: what legal issues might arise from the way that consumers or

employees talk about your product on social networks? How are you

monitoring online conversations to spot potential legal risks?

• Labour relations: what are employees saying about your brand on so-

cial networks? How can this information be used in negotiations with

individual employees or unions?

• Human resources: Do you track employee morale and stay ahead of

labour management issues? Why did 25% of your management group

update their LinkedIn profiles in the same week?

6

http://www.dell.com/twitter

http://www.ideastorm.com/


One Size Does Not Fit All!

If these kinds of questions are of interest or concern to you (and they

should be), there are a number of interesting solutions out there, many

of which are able to automatically pull information from both existing HR

systems and external social networks to increase the efficiency of internal

information sharing. IBM Lotus Connections, an enterprise 2.0 network,

works much in the same way as Facebook, but runs smoothly inside your

corporate firewall providing piece of mind to company execs. Danone, the

French-based global food group has recently implemented their own vari-

ant after receiving requests from its workforce for a means of quickly and

collaboratively sharing information internally.

Bottom line, you cannot apply a single social networking approach to

achieve different corporate ends (all with the objective of driving profit, of

course). For example, social networking can develop customer intimacy,

and it can also achieve operational efficiencies – but not by the same

means. As a simple example, taking part in conversations with customers

on Twitter can provide customer intimacy, while tracking the volume of

Twitter conversations about a new product can gauge demand for produc-

tion planning and generate operational efficiencies – the same tool used in

two different means for two different results.

C-Suite Implications

CEOs: would you let your marketing intern address your AGM? From the

way most of you are allowing social networking to be used at your firm, it’s

our assumption that you would. With full respect to the marketing depart-

ment, you’re allowing them to run social networking solely as a marketing

tool. That’s akin to launching a new product and saying the most impor-

tant thing about it is the advertising campaign. Marketing’s dominance of

social networking marginalizes its importance and eliminates the pos-

sibility of weaving social profitability throughout all levels of the business

system and using it as an enabling platform for the entire company. You

are leaving money on the table, and losing to firms in your competitive set

that are starting to run social networking from the C-suite.

No one is asking you to master the technology of social networking.

Instead, we are highlighting your obligation to better understand the stra-

tegic elements of social networking and the wider digital realm, so that you

are aware of its potential in driving enterprise growth and value. It is vital

that you begin asking questions that signal your commitment to equipping

your organization to meaningfully participate in this new digital era – as

7©LEVEL5 Incorporated

“you May be leaving Money on the table, and loSing to FirMS that are Starting to run Social

netWorking FroM the c-Suite.“

You cannot apply a

single social networking

approach to achieve

different corporate ends.3Theme #

https://www-01.ibm.com/software/lotus/products/connections/



well as force an enhanced level of thinking among your senior leadership

team around their digital strategies. Broadly put, first questions should

include:

• Howhavedepartmentalcorecompetenciesbeenaffectedbythe

advent of social networking?

• Hascompetitiveadvantagebeenenhancedorerodedbasedonour

capabilities, or lack thereof?

• Whataretheareasofopportunitytoexploitsocialnetworkingbeyond

the walls of marketing?

• Whatnewmeasurementsmustbeincorporatedintothefinancialindi-

cators that drive shareholder value and create competitive advantage?

• Whatnewbehavioursareconsumersexhibitingandhowcanthis

change be leveraged by different parts of your organization, i.e. sales,

customer service, call centres, operations?

• Howwellisourcorporateculturepositionedtoachievesocialprofit-

ability?

• Whatwillbethenextbigthing?Associalnetworkingcontinuesto

evolve, are we set up to adapt to and capitalize on changes – technol-

ogy, software, data and otherwise – to provide sustained competitive

advantage?

As CEO, your greatest challenge may be to prioritize social profitability as

a key performance indicator for the business – one which is discussed as

openly as governance, asset utilization, and business or financial strat-

egy. This requires your dedication to stay the course – or risk having the

discipline be relegated back to a single department.

Having read this far, are you ready to look at the cross-enterprise implica-

tions and opportunities of social networking, or do you still want to leave

it to the marketing department? If you are in the latter group, then you

can probably stop reading. If, on the other hand, you are ready to take the

leap toward social profitability and lead the effort from the C-Suite, there

are significant opportunities to be realized.

As CEO, your greatest challenge may

be to prioritize social profitability as

a key performance indicator for the

business – one which is discussed

as openly as governance, asset

utilization, and business or financial

strategy.

“revenue. coMPetitive advantage. ProFit. thiS iS What’S to be gained by enacting a Strategy oF

Social ProFitability. “



What’s to be Gained?

Revenue. Competitive advantage. Profit. This is what’s to be gained by

enacting a strategy of social profitability.

How to get started? Keep in mind that based on our research no one has

yet to weave social profitability into every aspect of their business system.

As we have seen, a small number of brand titans have done it well across

a number of competencies. But no one has taken a completely top-down

view toward integrating social profitability at every touchpoint. Therein

lies the big opportunity. Seize upon it by including social profitability in

your planning cycle.

The phenomenon of social networking does, however, have a very specific

and unique set of considerations which you must also be cognizant of

from the very beginning:

• Understandthetrueimplicationsonresources,costandtime:Many

think that creating a branded Facebook page will solve your social

networking needs without a significant time or financial investment;

if you are one of these people, think again. An investment in capturing

the data from social networking can be substantial, both in time and

resources, but is essential to truly understanding your consumers.

• Frequencyandrelevance: Defining the process for, and properly staff-

ing for the continual updating of external content to ensure timeliness

and relevance of information.

• Redefinetheinformationflows: The flows of information into and

within your company will change drastically. Competitive advantage

will come from understanding this change and how to share the data

captured through social networking in a way that all departments can

utilize for better decision making.

• Culturalshift: Being socially mindful and developing a culture of look-

ing at your business from the outside in requires, in many cases, both

a change in management and organizational mindset.

• Developingnewcompetencies: Companies must learn to listen and

engage rather than just speak. Social networking is about becoming

part of the conversation, providing thought starters and stepping back

to let your consumers express themselves.

• Adapting:Creating and growing from a digital core is an evolutionary

process. There are currently no best practises to follow, it’s up to you

and your organization to define and redefine processes that are right

and forward looking as technology and consumer behaviour continues

to evolve.

“the PhenoMenon oF Social netWorking doeS have a very SPeciFic Set oF conSiderationS you

MuSt be cognizant oF FroM the very beginning.“

A small number of brand

titans have done it well

across a number of com-

petencies. But no one has

taken a completely top-

down view toward inte-

grating social profitability

at every touchpoint.

4Theme #



Moving forward, the role of the marketing department is a critical con-

sideration. Once they recover from the initial shock of hearing that the

CEO is taking over social networking, they will thank you. Because in all

probability they see the cross-enterprise potential of social networking,

but do not have the authority to make it happen on their own. Only you

do. Functionally speaking, marketing could very well continue to press

the buttons on social profitability - with the vital difference being that

it will now be with the full authority of the CEO. Adoption of your social

profitability strategy will thereby be embedded throughout the organiza-

tion, no longer being seen purely as a marketing tool but as a means of

driving profitability throughout the entire value chain.

Please don’t be sitting here two years from now, looking at “social media”

as a line item on your P&L. You’ll have made a strategic mistake. The

speed of technological change and adoption may have you concerned,

feeling you can’t “catch up” – so how possibly to get started? But if you’re

having trouble with this decision today, hold on – because with the explo-

sion of mobile applications, it’s only going to get faster.

So press the stop button – now! Forget about social media: think social

profitability.

“PleaSe don’t be Sitting here tWo yearS FroM noW, looking at “Social Media” aS a line iteM

on your P&l. “


11

18 King Street EastMezzanine FloorToronto, OntarioM5C 1C4

416-361-3468

www.LEVEL5.ca

©LEVEL5 Incorporated

We’re eager to hear your thoughts on the following:

Marketing: Does embracing social media across your enterprise diminish

marketing or are you looking at marketing as a deeper, wider player in

your enterprise?

C-Suite: So, apart form everything else, your customers now want to

socialize directly with you. Is this something new for executives or simply

reinforcing your mandate as brand role model?

HR: Where are the social mediators in your organization? In this new 24/7

relationship, how are you going to find and reward the kind of people

needed to maximize this opportunity?

Finance: More money going to the web? How will you measure perfor-

mance in this new world?

Board: Do we get in on the conversations as well? How do we set per-

formance metrics for the company’s executive based on this whole new

skill set? If we are a bit slow coming to the ‘social media’ table, what else

might we have missed that looms in the near future?

We welcome your thoughts, critical appraisal and enlightened perspective

on brand matters. Feel free to comment directly to us anytime at

[email protected]

Thank you.

www.LEVEL5.ca

noteS:

Forget Social Media

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