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The Rise of Social commerce

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The Rise of Social Commerce

The Rise of Social Commerce

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  • 1. The Rise of Social Commerce By: Robin D. SteeleMKTG 7546: Marketing in a Digital Environment Professor Brey
  • 2. Introduction The process of buying and selling products over an electronic system has revolutionizedthe way consumers interact with a product. No longer limited to brick and mortar retail stores,shoppers can quickly search for a product on the internet and have it delivered to their front doorin a few business days. Because physical stores are no longer essential to selling products manyretailers experience fierce price competition from companies that are strictly internet based.Because of these low cost structures internet companies are able to offer products at extremelylow prices and take market share away from these large retailers. With internet usagescontinuing to increase customers are becoming more price sensitive because they know that theyhave several options when it comes to purchasing a product. As internet usage increases theusage of social media has followed, allowing people from around the world to be connected andinteract on a constant basis. The increase of social media has become integrated with electroniccommerce and created a subset known as social commerce. This type of business includesonline media that supports social interaction to assist in the buying and selling of products. Asthe usage of social media increases this trend will also increase and become more prevalent inthe future.Historical Overview There are many different ways to describe social commerce, but a general overviewwould be the “act of consumers with similar interests, passions, and needs collectively engagingin conversations related to products and services that satisfy those interests, passions and needs”(Cavazza 2012). The foundation of social media lies within the relationship between people andhow we interact with each other. It is a natural desire for people to want to be accepted and toseek the approval of others. This psychological concept is known as social proof where peopletend to go along with the actions of others and seek confirmation that their way of thinking iscorrect. This concept is very important in the purchase process because consumers now havemore choices than ever. The internet has opened up a brand new world of options and peoplewant to be sure that they are choosing the correct option. Research shows that a buyer is 71%more likely to purchase a product if it is recommended to them by a friend. People trust peoplethat they know and feel comfortable with, which is why word-of-mouth marketing is the bestform available. There is no substitute for people saying good things about your product to afriend and now that people are talking to their friends constantly through social media companiesmust capitalize on these connections. Shopping is an activity that is not just about purchasing a product, but it is a socialactivity that many people use for purposes beyond a sales transaction. It is a time for friends toget together and discuss their interests and share their passions all while browsing through retailstores. Now that the retail store is no longer the only channel for shopping, buyers can maintainthe social aspect of shopping on the internet through social commerce. Because social media isused primarily through mobile phones, social commerce reflects this transition through theintegration of commerce directly into mobile apps such as Foursquare. Social commerce hasalso been directly integrated into social media platforms such as Facebook (f-commerce) toallow consumers to shop from a company’s page without ever leaving their social community.As social commerce continues to grow retailers will be challenged to find more engaging ways
  • 3. for consumers to interact with their product and share their reviews to their social network(Hutton 2011).Impact of Social Commerce The impact of social commerce can be seen through increased brand loyalty, measurabletraffic increases to a company’s site, and more engaged buyers. These outcomes are desired byany company who wants to capitalize on the opportunities created by social commerce. Theultimate goal is to get people talking about your product and social media is an effective meansof accomplishing this goal (Cocotas 2012).Social commerce has impacted the business worldthrough many different channels, but one channel that has been completely revolutionized isfacebook. The use of social commerce through facebook (f-commerce) is a new avenue that isbecoming more popular as the use of social media continues to increase. Companies are lookingto enter this world where their customers are socializing and bring their products directly into thesite. Facebook is a great channel because it allows companies to see what their consumer’sinterests are and allows them to market directly to these interests. Companies must be careful tonot bombard customers with advertisements because that could aggravate facebook users andcreate a negative perception of the company (“Facebook Commerce”). Facebook also hasgeographic abilities that allow users to identify their exact location and receive advertisementsand coupons to specific stores in their area.Case #1: Malaysia Airlines Beyond simply using facebook for customer data purposes companies have created actualstore platforms where users can purchase products directly on facebook. These commerce pagesare usually integrated into the company’s personal facebook page and they tend to look verysimilar to their online website. A host of companies are using facebook commerce includingCoca-cola, Starbucks, and Nike. Although the appearance of these social media stores may lookdifferent they all share the common theme of selling products on facebook. A company that hasreally capitalized on social commerce and expanded its features is Malaysia Airlines. Manyairlines such as Delta have caught on to the trend of allowing passengers to book flights fromwithin a social network.Malaysia Airlines has expanded the trend by also allowing them tochoose their seat, post their itinerary on their wall and check in directly on Facebook.All of thisis made possible through a Facebook app called MHBuddy, which embraces the concept ofsocial seating and allows people to interact before they actually sit together on their flight. Ofcourse when given the option people are going to want to sit by people they know, but forfrequent travelers this choice is not usually available. Using this app people can view the seatingchart along with people who booked the flight and choose their seat based on common interests(“Airlines”). I think that Malaysia Airlines did a great job of expanding this trend of social commercethrough facebook by emphasizing the “social” aspect of flying. Space is limited on aircrafts, sopeople are many times forced to sit next to strangers that they share nothing in common with,which can make for a very uncomfortable flight. By leveraging the social power of facebookpeople can make these connections before the flight and begin the conversation beforehand sothat the initial meeting is not awkward. I think that the airlines could take this social aspect a
  • 4. step further by creating an actual “seat selection questionnaire,” where every passenger wouldanswer a couple basic questions that would help passengers determine where they would like tobe seated. For example, a question could be “Do you prefer to sleep, read or talk on flights?”This type of question could help people determine the type of personality they would like to beseated next to throughout a flight. Another question could be regarding personal hobbies andinterests, that way if a person sees that they share many of the same interests as another personon the flight they may choose to sit by them. These common interests can lead to conversationover facebook and can help establish a relationship before the people ever even meet. These types of connections represent the purpose of social media and how people can usethese sites to connect with someone they have never met and continue the relationship beyondthe initial meeting. This same concept can be used throughout the travel industry or really anyindustry where people will be meeting up for the first time and want to meet people online beforemeeting them in person. When preparing for a conference all attendees can fill out a similarquestionnaire and select who they would like to sit at a table with for the duration of theconference. When assigning people to dorm rooms as they enter college a similar map of thedorms is provided along with a forum for people to talk about their passions and educationalinterests. From these forums people could select their roommate(s) based on personalconversations as opposed to relying on college administrations to make these connections. Asthe world becomes more connected people can establish these connections before their initialmeeting, which will lead to longer lasting relationships.Case #2: Dell-IdeaStorm Another example of the impact of social commerce on digital marketing is the presenceof customer forums where companies interact directly with the customers. In these forumscustomers can post their ideas for products or give reviews of existing products. These forumsare based on social interaction amongst consumers and direct interaction between companies andthe consumers of their products. These types of forums have been used for several years wheresites such as Amazon allow customers to rate products and leave their reviews of products thatthey purchased. This concept has been very successful because people are more likely to buy aproduct if someone else suggests it, even if they are a complete stranger. Dell harnessed thepower of social interaction and created a website called IdeaStorm, which is a forum forconsumers to suggest ideas to Dell and give feedback on existing products. This socialsuggestion board gives customers a voice to interact directly with the makers of the product andprovide proposals on how it can be improved. Registered users are able to add articles and thenvote on which ideas they like the best. These ideas can also be linked to user’s facebook page togarner more votes and attract more attention to a new idea. Those ideas receiving the most voteseventually make it to the “popular page” where they are reviewed by Dell executives for possibleimplementation. This type of community is essential to increasing commerce because it makespeople feel like they are part of the production process and that their opinions are relevant (Dell). Dell did a great job of listening to its customers and giving them a direct channel toexpress their ideas and socialize with other consumers who have similar interests. Oftentimescompanies get too distant from their consumers and lose sight of what they actually want, butthis social ideation forum ensures that the connection remains strong. Dell could have taken thisconcept a step further by integrating the voting process directly into facebook and twitter, insteadof limiting it to registered users on a separate website. If people are able to vote directly on
  • 5. facebook that will attract more attention to Dell and it will be seen as a customer friendlycompany. They will also be able to penetrate additional markets and gain more exposure bybeing directly embedded on the largest social media sites. This type of forum would be useful inmany industries because customer feedback is important in every business. For example, arestaurant industry can have a social forum where consumers gather to share recipes and offersuggestions on how to improve menu items. The best items would be voted on by thecommunity and later added to the menu if management likes the idea. There can be a rotatingitem on that menu that is specifically dedicated to this social forum and the item is named afterthe creator. This would also be applicable for companies such as 3M and Ideo whose businessrelies on product innovation and creating useful products for their consumers. These types ofdiscussion forums would be a great way to generate ideas and get customers involved in thecreative process.Future of Social Commerce The future of social commerce appears to be bright as the usage of social media sitescontinues to increase. Customers are becoming more savvy shoppers and they are no longerpersuaded by cool advertisements from large companies. They want to know how a product willfill their need and be sure that they are getting the best possible return for their money. With theeconomy still in recovery mode from the housing crisis people are very price sensitive and notwilling to take risks on products that they are not well informed about. Studies show that 59% ofconsumers research a product before making a purchase. The internet has presented an array ofoptions for shoppers, so there is plenty of information available that will help inform the savvyshopper. Social media sites now present a new channel for consumers to get information andmany consider this source the most reliable. Rather than simply reading reviews from strangersonline shoppers can connect with people they know personally and get their feedback on aproduct. This type of social proof has deep psychological meaning for people who need thereassurance that they are making a good purchase. Those in the digital marketing industry areconfident that this trend will continue to increase because it was created on the fundamentalconcept of socialization (Anderson 2011).Interview with Media Relations Specialist During his short-time in the digital marketing industry Christian Ross has seen thegrowth of social commerce in many different industries. As the youngest member of his team heis charged with the task of staying knowledgeable on current trends and seeing how they can beintegrated into his organization. Because he works for a non-profit school district there is nodirect link to the commerce aspect, but he does see great opportunities to build brand awareness.“I think social commerce is just the natural next step for people to do business and interact withcustomers. Obviously this would not be possible without social media sites, but as they continueto grow businesses are forced to take notice and find ways to capitalize on this growth” (Ross).It is clear that social media sites have changed the social interaction landscape by presenting anew and convenient medium of communication. Social commerce will have this same impact onbusiness landscape as companies revalue their marketing strategies and look to create an onlinepresence.
  • 6. Is Social Commerce Business Worthy? The concept of purchasing products on the internet (e-commerce) has been growing foryears now and will continue to grow as the internet becomes more widespread. Currently, 14%of all transactions occur online, so it is vital that a company have an online store available,otherwise they are likely to miss out on a significant number of sales. Companies had to adjusttheir business model to account for this emergence of e-commerce and now they may need toadjust again to account for the presence of social commerce. Many companies are creating newpositions that deal directly with social media and how a company can benefit from its use.Media Relations Specialist Ross believes that this is a great opportunity for young marketers toenter the industry because this is a new field that directly targets the younger audience. “Incollege, I was approached by so many different small businesses that wanted to have a presenceon social media, but just didn’t know how to start. This is a way for young professionals to enterthe industry because there is a need for this type of knowledge” (Ross). Companies arereconfiguring their marketing budget to create these new positions and to financially supportthese new channels. The business landscape is constantly evolving and this is certainly a trendthat will affect how companies market to their customers. Because social commerce is such a widespread trend it affects any industry that sellsproducts online. Any retailer that has an online presence is constantly looking for ways to drivetraffic to their site and this is another tool to support that. Social commerce is mostly viewed asthe full integration of commerce into social media sites, but if a company can create buzz aboutits product by getting people to talk about it and exchange information that can be just asaffective. The target consumer would be those who use social media sites, which is constantlyincreasing. The idea is to connect to these consumers on a personal level and learn how you canaffectively market your product in way that is appealing to them. If they like your product, thenatural concept is to share it with their friend which is residual benefit that a company receives.These types ofoutcomes are difficult to measure, but they are vital to building brand awarenessonline. People will begin to trust your brand the more positive things they hear about it and thistype of advertising is invaluable (Hutton 2011). Social commerce will continue to grow as more people become more comfortable withinputting their personal financial information on these sites. When talking to Ross about wherehe sees social commerce in the future, he was very confident that it will have a major impact. “Ithink as companies see increased revenue coming from these social stores we will see a lot morecompanies following their lead. It’s only a matter of time before Facebook becomes the Wal-Mart of the internet because they are changing the way we do business” (Ross). In order tomaintain this competitive advantage social commerce must be properly integrated into an overallmulti-channel strategy. Although this trend is gaining momentum it is important that a companynot disregards its traditional marketing channels. These are still effective ways of reachingconsumers and must be continuously supported by the organization. As companies continue to mine customer data for insight into how they can better markettheir products, they must not forget the importance of the overall customer experience. Shoppingis a social activity, so it is about more than discovering an individual’s personal interests.Companies must leverage consumer’s social connections to attract a network of friends whowillbecome brand ambassadors for their product. For now it seems that social commerce is abusiness worthy trend that will only become bigger in the future.
  • 7. Works Cited“Airlines Use Social Commerce to Promote Social Seating.”Social Commerce Today. Jan. 2012. <http://socialcommercetoday.com/airlines-use-social-commerce-to-promote-social- seating-infographic/>Anderson, Matt. et al. “Turning like to Buy, Social Media Emerges as a Commerce Channel. Booz &Co. Nov. 2011. <http://www.booz.com/media/uploads/BaC- Turning_Like_to_Buy.pdf>Cavazza, Fred. “The Six Pillars of Social Commerce.”Forbes Magazine. Feb. 2012 <http://www.forbes.com/sites/fredcavazza/2012/02/01/the-six-pillars-of-social- commerce/>Cocotas, Alex; Blodget, H. “The Rise of Social Commece.”Business Insider. Feb. 2012 www.businessinsider.com/the-rise-of-social-commerce-deck-2012-2“Facebook Commerce Holds Promise for Retailers.” eMarketer-Digital Intelligence. Jan. 20 2012.<http://www.emarketer.com/Article.aspx?R=1008787&ecid=a6506033675d47f881 651943c21c5ed4>Hutton, Graeme; Fosdick, Maggie. “The globalization of social media: consumer relationships With brands evolve in the digital space.” Academic One File.Journal of Advertising Research. Dec. 1, 2011. Vol. 51, No. 4.Ross, Christian. (2012, Feb. 7). Telephone Interview.
  • 8. Interviewee bio: Christian Ross, Media Relations SpecialistChristian Ross is a graduate of the University of Tennessee - Knoxville and current MediaRelations Specialist for Memphis City Schools.During his tenure at UTK, Christian majored in Journalism and Electronic Media with aconcentration in News Writing. Though he is a journalist at heart, he found himself drawn to thefield of marketing and public relations. It is his love for the community that led him to return thevery school system that nurtured him through high school."I just want to be able to shed light on the great things that are going in MCS," Ross said. "Thereare so many things that people simply miss out because often times the news focuses on thenegativity in the city." As the media relations specialist, Christian is responsible for the creationand maintenance of all social media accounts for the school district. He role includesresearching this data to find innovative ways to market MCS events and projects to thecommunity.Before Ross returned from Knoxville, he served as an advertising intern with E.W. Scripps,social marketing representative at UTK and worked with DestinationImagiNation GlobalConference. His long-term career goals includeworking as consultant with either the BostonConsulting Group or opening his own agency.

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