hey, retail! get serious about social acquisition the real truth about public social networks (like Facebook and Twitter)

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

Lithium social software helps the world’s 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:

contents

1 intro

2 the state of social media for retail

3 the social media imperative

4 the social media good news/bad news

6 social networks are not communities

7 social network volume and velocity

8 it’s a small world—and getting smaller

9 public social network limitations

12 resources

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intro

Social shopping may be in its infancy, but like most infants, it’s only getting bigger—and it’s growing fast.

The potential benefits for retail are hard to beat: social

offers lower acquisition costs, viral buzz, more eyeballs—and

more focused eyeballs—for targeted advertising that lead to

increased click-throughs. The impact that social will have on

the way people shop—and on your bottom line—is 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

deliver on their purchase intent

48%

$231

2012 2013 2014 2015 2016 2017

$262 $291 $319 $345 $370

14%year-on-year growth

forecast: US online retail sales, 2012 to 2017

(US$ billions)

CAGR from 2012to 2017: 9%

share of total retail sales13% 11% 10% 8% 7%

8% 8% 9% 10% 10% 10%

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the state of social media for retail

What you’re literally acquiring over social media is awareness

and interest—winning customers’ attention and influencing

them to check out what you have to say. It‘s 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 company’s social footprint

and dramatically extending the range and impact of its

messages. Public social media channels (and not merely

because they’re 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 breed—connected, empowered,

influential, and they value customer reviews above the

company line. One key driver of their revolution is mobile

innovation, which—ready or not—has 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

access to you, too—as 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, today’s top brands are doing more

than just satisfying their social customers, they are sparking

their passion and enthusiasm to help drive new business.

community member spend

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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 doesn’t just

empower brands to tap a much larger consumer pool or get

to know their customers really well. It doesn’t 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; it’s 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 today’s social customer will help

define your rate of acquisition and your profits, now and into

the future.

the social media imperative

long-term, profitable relationships

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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.

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 do—propagate messages. But what it propagated—at

breakneck speed—were negative impressions of Netflix

throughout the marketplace, and this took a sizeable bite out

of the brand’s 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.

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

source: CMO Council

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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. It’s 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 best—attract

lots of eyeballs and spread your message fast. It’s vital that

you not waste time, money and goodwill trying to force public

social channels to do what they fundamentally can’t, 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. We’ve 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 they’re all directly connected to you. Those

interpersonal relationships mean there’s 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,

there’s not much room left for other engagements—your

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 pre-

existing 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 it’s

not even common. Community members represent a wide

range of origins and types. The common element—the glue

that keeps their community together—is that they all care

about the same thing: the shared interest of their community.

That shared interest means that there’s more initial relevance

inside a community than in a social network.

Communities and social networks are different structures,

but that doesn’t 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.

commoninterests

pre-existinginterpersonalrelationships

held together by

may have

comm

on interest relationships

social networks online communities

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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 doesn’t slow

down acquisition. On the contrary, if you’re 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, it’s almost

real-time. We learn about uprisings over Twitter before

dictators a world away fully know what’s 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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it’s 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), let’s

take a look at how the interconnected structure of networks

like Facebook and Twitter are shrinking the world—to 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 Earth—anyone, anywhere at all—and

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 it’s 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 there’s 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. That’s 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 degreesof 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 don’t do

everything that your brand needs social to do. To say that

they’re shallow, doesn’t mean that fan pages don’t also lead

to purchase actions—they do. We call public social networks

shallow because after making the initial draw into the early

stages of the funnel, fan pages simply don’t add a whole lot

more to the funnel’s natural conversion dynamics. Those

conversion dynamics develop only through the combination of

engagement and enlistment strategies.

The reason public social networks can’t 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 aren’t gathered around a common interest. The

content they pass along to one another over Facebook or

Twitter, even when it’s 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.

irrelevance and noise Even though you’re casting the widest net in the biggest

pool, when you delve into social networks you’re still not

going to acquire everyone. That’s because the bigger a chan-

nel 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 it’s utterly non-specific—

it’s got to have something for everyone. As individuals, after

all, we’re 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 brand’s 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. It’s not just the billions of people

hanging out in these networks—it’s 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.

just 2% of fans returnto brand pages theylike on Facebooksource: AllFacebook.com

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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. That’s why just

being there is never enough.

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.

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

that’s 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.

off-domain ain’t your domain While public social networks are terrific top-of-the-funnel

tools for acquisition, powering reach and driving the aware-

ness, 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 don’t own these channels. You don’t

own your Google+ fans, Twitter followers, or your Facebook

pages. You can’t control the experience your customers have

when they view your content and interact with your brand on

YouTube or Pinterest, and you certainly can’t 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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Further, on platforms you don’t 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, well-

timed, totally personal message to them there, but they’re

still missing the kind of engaging social customer

experiences they can—and do—get from brand-owned

customer communities.

Facebook, Twitter, YouTube, Pinterest all attract consumers

in huge numbers and yes, you need to set up shop there,

too. But the difference is that in the new order, it’s not nearly

enough to catch-and-monetize—today, that’s the same

as catch-and-kill: you only get to monetize them once. In

today’s 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.

the Canon Forum community accumulated over 5,100 registered users and 2.8M page views in its first 6 months

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

Lithium social solutions helps the world’s most iconic brands to build brand nations—vibrant 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.

resourcesi. U.S. Online Retail Sales to Hit $370 Billion by 2017, Forrester Research

ii. Social Media Is A Highly Valuable Tool for Retailers, The Guardian

iii. Majority of Consumers Relay on Social Networks to Guide Purchase Decisions, Gartner Research

iv. Digital Brand Experience Report, Razorfish

v. US Digital Future in Focus—2013, Comscore

vi. Social Media Report, Nielsen

vii. Smartphone Adoption Soars, Internet Retailer

viii. The State of Retailing Online, Forrester Research

ix. STUDY: Facebook Timeline Doesn’t Affect Engagement, AllFacebook.com

x. Online Retailers’ 2013 Top Priorities, Forrester Reesarch

xi. 9 Retailers with the Worst Customer Service, USA Today

xii. How to Measure Your Facbook Engagement, Social Media Examiner

xiii. The Digital Divide, Lithium & the CMO Council

resources