Social Marketing and Commerce

Social Marketing and CommerceMarketing and E-CommerceInternational Master in Industrial ManagementFrancisco Hernández Marcosfran.meMadrid, 23rd January 2012

About me SHAMELESS SELF-PROMOTIONEducation:Universidad Politécnica de Madrid, UNED, LondonBusiness School, University of ChicagoFirms I worked for full-time:Abengoa, McKinsey&Co, ABN AMRO, Real Madrid C.F.Entrepreneurship: CrisaliaConsulting requests (Social Media & Internet):francisco_hernandez@11goals.comFull profile:linkedin.com/in/franciscohm

Summary of session 1 REMINDER ¶ E-Commerce, E-Business… difficult to define and classify. Do not waste much time in figure-out where your model fits. ¶ 17-year history but still growing strong, now specially in emerging markets (broadband penetration, purchasing power), but maybe on mobile channels soon. ¶ E-Commerce is an intrinsically social activity. It evolved to the social space even before the social media phenomenon started. ¶ Generic types of business models on the web. ¶ Technology not a problem anymore; success is many times driven by innovative business models, sometimes easily copycatted if one does not protect oneself. ¶ 6 dimensions to social E-Commerce success. ¶ Takes time to refine an innovative business model. Test and error based on analytics is the best way to refine a model. Be patient, imaginative, and analytical. ¶ Long tail concept ¶ Freemium concept ¶ “Piggyback” concept Session 1 presentation

Summary of session 2 REMINDER  Online advertising  Affiliate programs  Referral marketing  Email marketing  SEO  Content marketing  Online public relations Social marketing  Fake marketing Session 2 presentation

Agenda  Web 2.0  Social media advertising  Building an effective online community  E-Commerce in Social Networks

The first online social network… Social networking service: “online service, platform, or site that focuses on building and reflecting of social networks or social relations among people, who, for example, share interests and/or activities” (Wikipedia)Photo: http://www.flickr.com/photos/ajc1/3367295141/

…and the first social graph Social graph: “the global mapping of everybody and how theyre related” (Wikipedia)

Definition of web 2.0 “Web 2.0 is the network as platform, spanning all connected devices; Web 2.0 applications are those that make the most of the intrinsic advantages of that platform: delivering software as a continually- updated service that gets better the more people use it, consuming and remixing data from multiple sources, including individual users, while providing their own data and services in a form that allows remixing by others, creating network effects through an "architecture of participation," and going beyond the page metaphor of Web 1.0 to deliver rich user experiences.” Tim O’Reilly (October 2005)Source: O’Reilly Radar: http://radar.oreilly.com/2005/10/web-20-compact-definition.html

Evolution towards web 2.0 “Social” “Catalog” “Search” “Web 2.0” (www) (Google) (Facebook)

Some important social networking websites

Facebook#1 international social networking website  Friends networking + Brand communities  >800 mill. active users  Grew concentrically: Ivy league universities -> universities -> high schools -> open  Open Graph  Facebook connect + API  Social gaming  Great content segmentation tools  Social advertising  Moving fast towards Mobile

Most popular Facebook pagesSource: Page Data http://pagedata.appdata.com/pages/leaderboard

Most popular Facebook appsSource: App Data http://www.appdata.com/leaderboard/apps

Tencent - QZoneChina’s largest social networking service(s)  >450 mill. Users  Part of Tencent Holdings, a diversified Chinese Internet company which became popular thanks to QQ messenger.  Unlike Microsoft, Tencent was able to turn a messenger tool into a successful, real social networking website.  Tencent is the third (after Google and Amazon) largest Internet company in the World by Market capitalization (USD 42 bill.)  Revenues: ~3 bill. /yr (less than 15% from advertising)

Twitter#1 Microblogging site  It is more a microblogging tool rather than a social networking site.  >300 mill. users  Works better for 1-to- many communication

Google PlusLatest SNS by the Google factory  >90 mill. users  Great usability and systems.  Great Circles and Hangouts features.  Deeply integrated with other Google services  However: there is already a predominant social networking site and it is hard for people to spend time in changing to another social networking site. People tend to use one service, and is reluctant to change unless there is a huge difference between services, which is not the case.

Sina Weibo#1 social microblogging website in China  Launched in 2009  >250 mill. Users  Huge engagement, 32nd website in the World by traffic (Alexa)  Celebrity accounts  Moving to mobile geolocated services.

Mixi#1 social networking website in Japan  ~25 mill. Users  30% from mobile  Revenues: mostly advertisement

GreeThe most profitable social company in Japan Yoshikazu Tanaka  Founded in 2004 by Yoshikazu Tanaka  Gaming Social Networking website, and specially mobile.  98% users from mobile.  Most of revenue coming from virtual goods.

CyWorld#1 Social Networking website in South Korea  ~20 mill. Users.  Owned by SK main telecom company.  Pioneers in virtual currency: Dotori.  ~80% revenues from virtual goods.  Failed to enter in the US and Europe.

World map of Social NetworksJune 2009Source: vincos.it

World map of Social NetworksJune 2011 The World is Facebokising. Specially relevant latest countries: Arabic world, India and MexicoSource: vincos.it

Facebook statsCountry ranking by users • The USA is clearly the country with the highest number of Facebook users. • Chile, USA, Canada, Australia and Sweden are the countries with more Facebook penetration on their populations. • Very interesting Facebook’s growth in India, Brazil (threat to Orkut?), Germany, Japan (Mixi?), and South Korea (CyWorld?).Note: Change refers to the last 6 monthsSource: Social Bakers

Women rule on Social NetworksSubtitle Some studies indicate that women are able to socialize better in social networks like Facebook. Women are able to maintain more relationships online, interact more, and when they share a content, it is on average more popular than if the content was shared by a man.Source: comScore, Inside Facebook

Web 2.0 is not only Social Networks… Social Microblogging Social Networks Blogs Social News Aggregators Social… shopping, video, photos, gaming, mobile, newspapers, aggregators…

EXAMPLEBlog NetworksWeblogs SL Founded in 2005. Leader Blog Network in Spanish Worldwide, and also leader in Europe any language. 86 mill. pageviews/month 21 mill. unique users/month Business model: create blog communities around an interest, and monetize by advertising.Source: http://www.weblogssl.com/2011/12/01-trafico-del-mes-de-octubre-de-2011

EXAMPLETraditional, offline Social Networks

Facebook ads format o Picture o Text o Social

EXAMPLECreate a Facebook Ad: Segmenting o Facebook allows to find your target group based on demographics and interest. o Example: 1,860 women liking Real Madrid C.F, engaged, living less than 50 miles from Madrid and speaking Spanish.

EXAMPLECreate a Facebook Ad: Ad auction o Similar auction system like Google’s, but one can choose CPM or CPC (in our notation PPI or PPC)

Contextual Vs Social Advertising Focus on “Keywords”. Focus on “Target Segment”. Unknown user. Known user: We know who he is and what he likes. Active user: He know what he wants because he is searching for it or mentioning it in his emails. Passive user. “one time” user. “continuously contacted/relationship” user. PPI PPI/PPC RECOMMENDED FOR: RECOMEMNED FOR: •“Direct response” from customers who have •“Direct response” from customers who have explicitly expressed a need (“Close the sale, NOT explicitly expressed a need (“Activate a message in the right moment, at the right time.”). subjacent need.”). •“First contact” with potential customers of slow-selling products (“Establish a productive relationship.”). •“Brand image” campaigns.

From a person to the online community People Community Online community Common interest Online • An online community is a group of people that interact and communicate online around a topic of interest. Internet allows those interactions to be real-time, effective, and free (as in free speech). • Due to members being scattered around the world, most of those communities would not be possible if online means did not exist. Many of those communities go directly to being an online community without being previously an offline community. • More and more communities are shifting online, with or without the brand’s leadership.

Three Forms of Community Affiliation “Pools” “Web” “Hub” • People have strong • People have strong • People have strong associations with a one-to-one connections to a shared activity or goal, relationships with central figure and Description or shared values, and others who have weaker associations loose associations with similar or with one another. one another. complementary needs. • Apple entusiaths. • Facebook. • Oprah Winfrey. Examples • Political party • Cancer patiens and • Hannah Montana. members. relatives. Key elements for an online community to work well: members identification, self- expression, interaction, and incentives.Source: “Getting Brand Communities Right”, Harvard Business Review, April 2009

EXAMPLECommunity member roles • Core participants • Needlers • Readers/Lurkers • Newbies or NewBees • Dominators • PollyAnnas • Linkers, weavers and • Spammers pollinators • "Black and White" Folks • Flamers • "Shades of Grey" Folks • Actors and Characters • Untouchable Elders • Energy Creatures • Defenders Full description: http://www.fullcirc.com/community/memberroles.htm Figure out your community roles

Do we need a [great] brand to create a [great] onlinecommunity? Online community Failure Success Strong Brand Weak or non-existent No Common interest

Do we need brand’s leadership to create a greatonline community?Facebook fans ranking Facebook engagement ranking27 Nov 2011 14 Nov 2011 No Motivated leadersSource: PageData.com y AllFacebook.com

The importance of the community over the brand • A community exists with or without a proactive management from the brand. History • Proactive community management has some advantages for the brand: information, conflict management, revenues, etc. The brand has to be Brand Company smart when carrying out proactive management. • Success examples: Apple, Harley Davidson, MySQL, Starbucks, Coca- Cola, etc. Community • Examples of failure: Nestlé Kit-Kat

Miths and realities about managing communities SUMMARY Myth Reality 1. A brand community is a marketing 1. A brand community is a business Strategy. strategy. 2. A brand community exists to serve 2. A brand community exists to serve the business. the people in it. 3. Build the brand, and the 3. Engineer the community, and the community will follow brand will be strong. 4. Brand communities should be 4. Smart companies embrace the lovefests for faithful brand conflicts that make communities advocates. thrive. 5. Opinion leaders build strong 5. Communities are strongest when communities. everyone plays a role. 6. Online social networks are the key 6. Online networks are just one tool, to a community strategy. not a community strategy. 7. Successful brand communities are 7. Of and by the people, communities tightly managed and controlled. defy managerial control.Source: “Getting Brand Communities Right”, Harvard Business Review, April 2009.

The most important learning about managing [online]communities “Robust communities are built not on brand reputation but on a deep understanding of members’ lives.”Source: “Getting Brand Communities Right”, Harvard Business Review, April 2009.

Priorities when developing the community LONG TERM • …. • …. MEDIUM TERM • …. • …. • …. SHORT TERM • …. • …. • ….. • …. Revenues + keep More More Fans fans and Engagement engagement

Customers trust each other, not the brand! 76% of American consumers believe companies don’t tell the truth in advertising -Yankelovich (2005) 60% have a much more negative opinion of marketing & advertising than a few years ago - Yankelovich (2004) 78% say consumer recommendations are the most credible form of advertising - Nielsen (2007) 83% say online evaluations and reviews influence their purchasing decisions - Opinion Research Corporation (2008) 84% trust user reviews more than critics’ reviews - MarketingSherpa (2007) Trust in “person like me” tripled to 68% from 2004-2006 – biggest influencer to consumers - Edelman Trust Barometer (2006, 2007)Source: Your Users Trust Each Other, Not You: Why and How to Implement Ratings and Reviews, by Molecular Inc.

Definition of Social Commerce “a subset of electronic commerce that involves using social media, online media that supports social interaction and user contributions, to assist in the online buying and selling of products and services.” Two types : • Social Media on E-Commerce Platforms: “Helping people connect where they buy”. We will focus on E-Commerce • E-Commerce on social media platforms: within Social Networks (or “Helping connected people to buy where deeply integrated to them). they connect”.Source: Wikipedia, Syzygy

What are CMOs (Chief Marketing Officers) worriedfor the next few years?Source: Customer Data, Social Media Top Marketing Priorities for CMOs Worldwide, eMarketer.com

What Booz & Co thinks social commerce is going tobe worth in 5 yearsSource: Booz & Co.

Marketing 3.0 BONUS CONCEPTKotler, Kartajaya & Setiawan Marketing 1.0 Marketing 2.0 Marketing 3.0 •Product-oriented •Client-Oriented •Human (society)-oriented • Long term (Vs short term) • Transformation (Vs Philanthropy) • Horizontal Marketing (Vs Vertical MKT) • Participation / Globalization / Creativity

F-Commerce“Facebook commerce, f-commerce, and f-comm refer to the buying and selling of goodsor services through Facebook, either through Facebook directly or through theFacebook Open Graph.” “Experts forecast that F- commerce transactions on Facebook will overcome Amazon’s annual sales ($34 Billion) over the next 5 years.”First purchase within Facebook: July 8th, 2009 on facebook.com/1800flowersSource: Wikipedia, Janice Diner, F-Commerce Ecosphere Visual

Key points about Social-Commerce on social mediaplatforms• Still in its infancy. Almost inexistent as of today. Mostly focused on the pre-selling stage: people talk about and discover products through social media, ads on social media, etc.• Most cases take advantage of the huge traffic that some social media platforms have, but do not leverage on social integration to offer better, customized products and services. Leveraging on social integration is better than merely sucking traffic because it adds value to the customer. The customer can find it very interesting to shop in a place where he/she has products he/she and his/her friends really like. Remember shopping can/should be a pleasant experience!• Referral marketing through social networks seems to be an obvious way to take advantage of someone’s social graph when doing E-Commerce. Concept of “Horizontal Marketing”.• Spotify integrated on Facebook is a good example of social commerce: you see what your friends are listening to, which is probably what you would like. Also, a friend listening to a song and you seeing it is a form of referral marketing.• Brands need to lose their fear to let people talk about them, and to invest in personalized, smart social apps to tackle the full potential of Social-Commerce. How would it be a social-commerce strategy in your company?

Today’s main takeawaysPage 1 of 2 ¶ Web 2.0 is not only Social Networking websites. There are other categories like social blogging, microblogging, video, gaming, etc. But Social Networks gave full sense to web 2.0 across all possible Internet services. ¶ Facebook is Worldwide leader in usage and technology. The World is still leaning towards Facebook in many countries where it is not yet the leading SNS. Only China and Russia seem to stay away from Facebook’s rule, the second one due to its blocking. ¶ Asian countries, specially China, are specially interesting case studies. To some extent they pioneered the social web (virtual networks, gaming, virtual goods, etc.), but failed to internationalize. ¶ Women are more relevant social nodes in an SNS than men. Always take it into account while designing a social media strategy. ¶ SNS is indeed yet another human activity (social networking) translated to the Internet. ¶ Social media advertising is intrinsically different from other type of ads like contextual advertising. They complement each other rather than compete. They should be used for different goals.

Today’s main takeawaysPage 2 of 2 ¶ Building an effective online brand community is an important business tool for many companies. However it is a very difficult one to achieve. ¶ It is a frequent mistake to believe that having a good brand makes it easier to have a good online community. ¶ In order to build your own successful online community it is important to understand in depth your underlying community: how your members affiliate, what are their key roles within the community, how do they benefit from being a member, etc. ¶ Online communities take time: first hire fans, then engage them (almost immediately after hiring them), and finally try to monetize them in the least possible frictional way. ¶ Customers trust each other more than a brand, so big expectations are put on Social- Commerce (E-Commerce within SNS). ¶ Social-Commerce is very related to the Marketing 3.0 concept proposed by Kotler, Kartajaya and Setiawan. ¶ Facebook already has a set of tools to allow Social Commerce in its platform. Possibilities are infinite!

Thanks!Francisco Hernández Marcosfran.me@franciscohm

Social Marketing and Commerce

by Francisco Hernández on Jan 23, 2012

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Social Marketing and Commerce — Presentation Transcript

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