Social strategies that work

1,253 views

Published on

Very useful document about social media

Published in: Business, Technology
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
1,253
On SlideShare
0
From Embeds
0
Number of Embeds
6
Actions
Shares
0
Downloads
52
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Social strategies that work

  1. 1. HBR.ORG NovemBER 2011reprint R1111HSocial StrategiesThat WorkBusinesses that thrive on social platforms don’tjust sell stuff—they also help people connect.by Mikołaj Jan Piskorski
  2. 2. Businesses thatthrive on socialplatforms don’tjust sell stuff—they also helppeople connect.by Mikołaj JanPiskorskiMore than a billion people use social plat-formssuchasFacebook,eHarmony,Renren,and LinkedIn. What’s the attraction? Theysatisfy two basic human needs: to meet new peopleand to strengthen existing relationships. Fee-baseddating websites, which collectively grossed $1 bil-lion in 2010 by connecting strangers, now accountfor an estimated one in six new marriages. Facebook,which fortifies friendships, boasts a staggering 750millionusersandavaluationinexcessof$100billion.Numbers like those attract traditional companies,which have launched Facebook fan pages and Twit-ter accounts in hopes of finding new customers andengaging existing ones. But few of those companiessucceed in generating profits on social platforms, de-spite collecting lots of “friends” and “followers.”Social StrategiesThat WorkNovember 2011 Harvard Business Review 3For article reprints call 800-988-0886 or 617-783-7500, or visit hbr.org
  3. 3. Social Strategies That WorkTo find out why some firms fail while others suc-ceed in these venues, I studied more than 60 compa-nies across industries ranging from manufacturingto consumer packaged goods to financial servicesas they ventured into online social realms. Whatthe poorly performing companies shared was thatthey merely imported their digital strategies intosocial environments by broadcasting commercialmessages or seeking customer feedback. Custom-ers reject such overtures because their main goal onthe platforms is to connect with other people, notwith companies. That behavior isn’t hard to under-stand. Imagine sitting at a dinner table with friendswhen a stranger pulls up a chair and says, “Hey! CanI sell you something?” You’d probably say no, prefer-ring your friends’ conversation over corporate ad-vances. Many companies have learned that lessonthe hard way.In contrast, the companies that found significantreturns devised social strategies that help people cre-ate or enhance relationships. These work becausethey’re consistent with users’ expectations and be-havior on social platforms. To return to our dinneranalogy, a company with a social strategy sits at thetable and asks, “May I introduce you to someone orhelpyoudevelopbetterfriendships?”Thatapproachgets a lot more takers. (See the exhibit “Digital Strat-egy vs. Social Strategy.”)You Scratch My Back…To explain successful social strategies, I find it use-ful to characterize them in a simple statement withthree components that all the strategies share:Successful social strategies (1) reduce costs orincrease customers’ willingness to pay (2) by help-ing people establish or strengthen relationships(3) if they do free work on a company’s behalf.This definition yields four types of successfulsocial strategies that firms can pursue (see the table“Four Ways to Pursue Social Strategies”):• Reduce costs by helping people meet.• Increase willingness to pay by helping peoplemeet.• Reduce costs by helping people strengthenrelationships.• Increase willingness to pay by helping peoplestrengthen relationships.The work people do on a company’s behalf can in-clude customer acquisition, supplying inputs suchas RD and web content, and selling the company’sproducts or services.To see how the strategy of reducing costs by help-ing people strengthen relationships works, considerZynga, a three-year-old company whose free socialgames, including FarmVille and CityVille, are ontrack to generate $1 billion in revenue in 2011. Thegames run inside the Facebook environment andhave attracted more than 250 million users (thetypical player is a middle-aged woman). The Face-book platform allows the games to access the demo-graphic data of players and lists of their “friends,” aswell as to post status updates that those friends cansee. In CityVille, players plant seeds on a virtual plot,cultivate the land, harvest crops, and sell them to lo-cal virtual businesses. They then use the profits tobuy more seeds, build businesses, or expand the city.The game presents players with obstacles such aslimits on the number of plots or businesses they canpossess. To increase the limit, players can pay withvirtual goods they buy from Zynga—a major sourceof the firm’s revenues. Or, to the social-strategypoint, they can enlist friends, via Facebook statusupdates or Zynga’s messaging system, to help. Andthey can return the favor by sending virtual gifts tofriends and by visiting their plots.The positive impact that Zynga’s games have onplayers’ social lives is clear. According to a surveydone by Information Solutions Group, almost a thirdof players reported that the games helped them con-nect with family and current friends; another thirdsaid games facilitated connections with old friends;and a third used the games to make new friends. Myinterviews with dozens of players revealed how.Many use the opportunity as an excuse to connect. Awoman with two children told me, “When I am donewith work and kids, I want to reach out to my friends,but it’s too late to call. So I go to play, and see if I canhelp them outwithsomething.Theynoticeit,whichhelps us stay connected.” Others consider posting agame-status update on Facebook as an invitation tocontact them. A younger male player said, “I am notgoing to post on Facebook that I had a bad day, but Imight mention something about it, when I post, thatI need something in a game. My friends will see itand often someone will call or e-mail.”To obtain these social benefits, people under-take actions that help Zynga. In exchange for an op-portunity to reestablish and maintain contact withfriends, players encourage others to join or returnto Zynga’s games. By my estimates, those socialmechanisms slash Zynga’s customer acquisition andretention costs by half, improving its profitability byPeople’s maingoal on socialplatforms isto connectwith otherpeople—not withcompanies.4 Harvard Business Review November 2011
  4. 4. approximately 20 percentage points. Hence, Zynga’ssocial strategy (1) reduces its acquisition and reten-tion costs (2) by allowing people to reconnect withfriends (3) if they invite them to return to the game.The reviewing site Yelp uses a different typeof social strategy: It reduces costs by acquiring itsmost valuable content for free by helping peoplemeet. Advertisers provide Yelp’s revenues, but itscontent—18 million reviews of local establishmentsso far—is written by an educated cadre of volunteers,called Yelpers, mostly in their twenties and thirties.The site traffic, about 50 million visitors a month, at-tests to the usefulness of the reviews; it’s the com-pany’s social strategy that significantly accounts forthat quality.The most passionate and prolific Yelpers may beinvitedtojointheEliteSquad,aselecttierintheYelpcommunity. Squad membership gives them accessto exclusive Yelp-hosted events that range from therefined, such as cocktail parties at museums, to therowdy, like a Mardi Gras–themed bacchanalia at SanFrancisco’s Bubble Lounge, which attracted hun-dreds of revelers in 2009. Such events commonlyproduce new friendships and other relationshipsthat continue beyond the confines of Yelp.To maintain these social benefits, Squad mem-bers must continue to produce reviews, as the elitestatus is renewed—or not—every year. My inter-views with elite Yelpers indicate that they will con-tinue to write reviews specifically to maintain theirstatus. The effects for Yelp’s business are substan-tial. My research shows that an average elite Yelperwill write reviews at a constant rate for nearly twoyears, whereas otherwise identical nonelite Yelp-ers without such social benefits will reduce theircontributions after about six months. Therefore,the average elite Yelper will produce about 100more reviews than a nonelite; without these elitecontributions, Yelp’s review stream would fall byabout 25%. Thus, Yelp’s social strategy (1) helps itobtain quality content for free (2) by allowing thebest contributors to meet like-minded people (3) ifthey write reviews.Business and PleasureBecause Zynga and Yelp are online startups with in-herently social products, devising their social strate-gies is relatively straightforward. But companies invery different sectors are developing social strate-gies as well.Consider eBay’s Group Gifts online application,launched in late 2010, which people use to poolfunds to buy gifts for their friends. A group organizerlogs on to eBay and names a gift recipient, either di-rectly or by picking the name from a list of her Face-book friends. eBay then offers a set of general gifts,or the organizer can authorize an eBay application toaccess the recipient’s Facebook “about me” profileand base a gift recommendation on that. The orga-nizer then selects a gift and issues an invitation toother contributors by posting a request to contrib-ute on her Facebook page. The invitation containsa link to the eBay gift page, where contributors cancontribute and write a note to the recipient. Whenthe gift price is reached, eBay sends the gift and well-wishers’ notes. The social benefits are clear: GroupGifts helps people purchase better-targeted andmore-expensive gifts than they might otherwise.That not only strengthens relationships with therecipient but also can help enhance relationshipsamong the joint gift givers. As one interviewee said,“If it wasn’t for the Facebook update, I would neverknow about the farewell gift for this guy, and no oneaskedmetocontribute.ButIsawthisandchippedin,and just yesterday I got a thank-you note.…I think itwill be easier to stay in touch with him.”To obtain such social benefits, people must ad-vertise Group Gifts to their friends and respond totheir friends’ advertisements. Such friend-to-friendadvertising generates dramatic results: A third ofIdea in BriefMost companies don’t succeedin online social platforms.That’s because they merelyimport their digital strate-gies to these venues. Butcommercial messages andfeedback opportunitiesare not what customersprimarily seek. They wantto connect with people, notcompanies.Businesses that win inthis arena adopt a socialstrategy that (1) reducescosts or increases custom-ers’ willingness to pay (2) byhelping people establish orstrengthen relationships (3)if they do free work on thecompany’s behalf.Successful social strategieshave all three components.They’re built, bit by digitalbit, through helping peoplewith the social challenges ofconnecting and interactingwith friends and strangers.November 2011 Harvard Business Review 5For article reprints call 800-988-0886 or 617-783-7500, or visit hbr.org
  5. 5. Social Strategies That WorkGroup Gifts participants sign up for new PayPal ac-counts, and a third return to eBay within a month topurchaseotheritems.What’smore,theaveragepriceof Group Gifts goods is five times higher than that ofan average eBay sale. Thus, eBay’s social strategy (1)increaseswillingnesstopay(2)byallowingpeopletostrengthen their friendships through gift giving (3) ifthey ask their friends to buy from eBay.Social strategies can also be tailored to addressthe challenges of meeting people for professionalpurposes. American Express developed such a strat-egy for its OPEN credit cards, which target smallbusiness owners. Customer churn is a challenge inthe credit card business, so AmEx set about makingOPEN cards stickier. Initially, the company hostedconferences focused on small business managementfor card members and then launched an online plat-form, called OPEN Forum, to showcase conferencecontent. The forum site was a hit, attracting morethan a million visitors a month.Management observed that cardholders wereconnecting with one another through the contentand launched a members-only social network calledConnectodex, which allows users to post profiles,list services they offer and need, and freely connectfor business. More than 15,000 small businesseshave joined the network. Although members coulduse other professional networks such as LinkedIn,they report preferring Connectodex, as small busi-nesses with which they interact are already vettedby AmEx. A Forrester Research study confirmedthis need when it found that nearly half of ownersof small businesses with more than $100,000 in rev-enues say they wanted to learn from other owners.To reap social and networking benefits from Con-nectodex, small business owners must obtain orcontinue holding an AmEx OPEN card. As a result,the service has effectively reduced customer churnand increased willingness to pay for the card. At thesame time, platform users’ net promoter scores (agauge of their likelihood of recommending the card)now significantly surpass nonusers’ scores. Thus,the American Express social strategy (1) increaseswillingness to pay (2) by helping professionals tomeet others like them (3) if they maintain their cardmembership.How to Build a Social StrategyI have observed many companies seek to build so-cialstrategies,withvastlydifferentoutcomes.Thosethat failed in the effort focused on their businessgoals and paid less attention to customers’ unmetsocial needs. These strategies didn’t effectively helppeople with relationships, so they were unwillingto do jobs for the company. In contrast, companieswith successful strategies first thought through howto address unmet social needs and then connectedthe proposed solutions to business goals. Becausethe process of identifying unmet social needs is of-ten hard, I recommend that firms focus on helpingpeople with four types of social challenges: connect-ing with strangers, interacting with strangers, recon-necting with friends, and interacting with friends.Let’s look at how a major credit card company I’llcall XCard devised and tested a social strategy (thecompany requested that its name be disguised). TheCMO assembled an eight-person team that includedmembers from marketing, product development,and IT—plus consultants, myself included. Thegroup ultimately reported directly to the CEO. Weled the team in a structured strategy-developmentprocess in which team members devised at leastone strategy for each of the four types of social chal-lenges that card members may face. In each case,the goal was to increase card-member spending orretention,or acquirenew customers,in exchangeforDigital Strategy vs. Social StrategyThe primary advantage of a social strategy over a purely digital one is intapping into how people really want to connect—with other people, notwith a company. A business with a successful social strategy helps peopleform and strengthen relationships in ways that also benefit the company.Digital Strategiesbroadcast commercial mes-sages and seek customerfeedback in order to facilitatemarketing and sell goods andservices.Social Strategieshelp people improve existingrelationships or build newones if they do free work onthe company’s behalf.CompanyTwitter FacebookadvertisingCustomersCompany6 Harvard Business Review November 2011
  6. 6. solutions to those challenges. Each of the four socialstrategies of course adhered to the core principle:They reduced costs or increased customers’ willing-nesstopaybyhelpingpeopleestablishorstrengthenrelationships if they did free work on the company’sbehalf.Social challenge A: Reconnecting with acquain-tances and friends outside a core group can beawkward.SocialstrategyA:Helppeoplereconnectthroughshopping with friends. The team devised a programthat would give cardholders an excuse to reconnectby inviting others who already had the card or whohad agreed to sign up for one to join them for shop-ping. Shopping together at the same retailer at thesame time would yield additional reward points.Social challenge B: People need help interactingwith acquaintances and friends outside a core group.Social strategy B: Help people interact throughgift giving. The XCard team envisioned a gift pro-gram in which, upon request, XCard would examineanother member’s purchases or purchase locations(only if they had opted into the program) and recom-mend gifts targeted to their purchase profile. Theprogram would give members an incentive to useXCard more in order to build an accurate purchasehistory, resulting in well-targeted recommendationsfor friends.Social challenge C:Finding strangers with whomyou have something in common isn’t easy.Social strategy C: Connect executive womenwho have XCard’s high-end charge card. Many ofthese customers travel frequently and have few op-portunities to socialize with women like themselves.Theteamdevisedinvitation-onlyeventsatexclusivehotels in major cities to convene these cardholderswhen they traveled.Social challenge D: People find it uncomfortableto interact with strangers without first knowingmore about them.Social strategy D: Help moms with young chil-dren learn something about one another. Thesecustomers have an appetite for information aboutchild care products, but some have difficulty find-ing trusted advice about them. The team conceiveda branded card that would allow moms to access adedicated social platform, search for other cardhold-ing moms who had bought a particular product, andconnect to them. Only moms who made themselvessearchable and continued to make purchases withthe card would be allowed to search.First thinkthrough howto addresscustomers’unmet socialneeds; thenconnect theproposedsolutionsto businessgoals.Theory into PracticeHaving identified several potential strategies forhelping people create or improve relationships, theteam evaluated them using three tests.Socialutilitytest:Willthestrategyhelpcustom-erssolveasocialchallengetheycan’teasilyaddresson their own? This test requires that you focus onan important—but unmet—social challenge for thetarget group. People doing such analyses often as-sumethatiftheydon’tpersonallyexperienceagivensocial challenge, others don’t either. That is usuallywrong. Social-strategy development requires an un-prejudiced look at the target group’s social needs.The shopping-with-friends, executive-women,and moms strategies passed the test’s requirementto address an important, unmet social need. Thisevaluation required researching the demand for so-cial solutions in each group—for example, executivewomen’s interest in networking opportunities. Theresearch revealed that although networking groupsare plentiful, invitation-only events for executivewomen that capitalize on their heavy travel sched-ules are not. The team also confirmed that momswant to find other moms who have bought a specificproduct and that no existing tools allowed them todo so. Similarly, the research revealed a substantialappetite for shopping with friends. However, theteam found that people would hesitate to use a pro-gram that, by making gift recommendations basedon their purchase patterns, in effect revealed theirpurchase preferences to others. For that reason, theteam disqualified the gift-giving strategy.Social solution test: Will the strategy leveragethe firm’s unique resources and provide a differenti-ated,hard-to-copysocialsolution?Theteamrealizedthat the card’s leadership in an exclusive segmentand its superior rewards program were distinctive.Those resources conferred a hard-to-replicate advan-tage for the executive-women strategy and offered abetter-than-alternatives option for that segment.Likewise, the shop-with-friends strategy continuedto look promising, primarily because it leveraged thecard’s superior rewards program. The moms strategydidn’t fare as well in this analysis because the firmlacked the detailed transaction data needed to cre-ate a service that competitors couldn’t readily repli-cateorevenoutperform.Concernsalsosurfacedthatlarge retailers of children’s products, such as Toys“R” Us or Walmart, could create a more effective plat-form. The team sought to address this concern, butultimately the moms strategy was disqualified.November 2011 Harvard Business Review 7For article reprints call 800-988-0886 or 617-783-7500, or visit hbr.org
  7. 7. Social Strategies That WorkBusiness value test: Will the social solutiondirectly lead to improved profitability? This testrequires that the strategy directly lower costs or in-crease willingness to pay. The executive-womenstrategy that had thus far survived stumbled here be-causeofthesmallsizeofthetargetgroup—only0.2%of cardholders. Although reducing defection amongthis small but disproportionately profitable segmentcould have a measurable bottom-line impact, theteam determined that it was not as large as that of-fered by the shop-with-friends option.Before piloting this option, the team checked thattheactivitiesintendedtoimproverelationshipsweredirectly related to jobs that help the company lowercostsorincreasewillingnesstopay.Thatwastrue,forexample, in the Zynga and eBay Group Gifts strate-gies, which allowed people to connect only if theyposted status updates advertising the product. In-deed, the shop-with-friends strategy tightly alignedsocial and economic benefits: The social act of invit-ing a friend to shop is the very act that yields profits,by generating fees if the friend becomes a new cardmember, makes a purchase with the card, or both.Because each new customer recruited, for free, by acard member roughly halves customer-acquisitioncosts, the team calculated that the strategy had greateconomic potential. As this strategy performed beston all three tests, the team chose it as the one to pilot.The Pilot Takes OffBy e-mail, XCard invited 10,000 customers inone metropolitan area to receive a pilot Facebookshop-with-friends application. Almost 45% of re-cipients checked out the application; half of thatsubgroup signed up. Signatories were required toenter their credit card number for validation andthen were asked to pick a time to go shopping withfriends. Subsequently, they were prompted to posta Facebook status update announcing when theywould like to shop and informing others that all in-volved would receive additional XCard rewards forcoshopping.When friends clicked on the update, they were re-turned to the application, where they could sign upfor an XCard or register their existing card and con-firm their attendance. During the two-month pilot, afifth of those who had signed up posted a status up-date, of whom three-quarters received at least oneresponse (some received as many as six responses).A third of those who responded became new card-holders, and 75% of invitations to shop together re-sulted in purchases.Pleased with the results, the CEO and CMO green-lighted the social strategy for a full rollout in 2012.With changing corporate priorities and increasedfocus on the exclusive cards, the executive teamalso asked the group to pilot the executive-womenstrategy. Most important, the company establisheda permanent social-strategy unit that reports to theCMO and is tasked with developing and testing newsocial strategies.As most businesses are accustomed to helpingpeople meet their economic rather than their socialneeds, creating social strategies will require fun-damental changes in the way companies approachstrategy development. As social platforms becomeeven more central to consumers’ lives, companiesthat don’t figure out how to appropriate their valueand create true social strategies will find it harderand harder to compete with those that do. Startingthis process soon, even in small steps, is both a criti-cal defensive and offensive move.  HBR Reprint R1111HFour Ways to Pursue Social StrategiesHere’s how four companies have successfully implemented theirsocial strategies. Each firm reduces costs or increases custom-ers’ willingness to pay by helping people establish or strengthenrelationships if they do free work on the company’s behalf.SocialImpactStrategy ImpactYelpacquires valuablecontent by helpingpeople meet if theywrite reviews.American Expresshelps professionalsto meet otherslike them if theymaintain their cardmembership.Zyngahelps friends stay intouch if they recruitnew players andretain existing ones.eBayallows peopleto strengthenfriendships throughgift giving if theyask friends to buyfrom eBay.EstablishRelationshipsStrengthenRelationshipsReduce costsIncreasewillingness to payMikołaj Jan Piskorski, who often goes by Misiek, isan associate professor in the strategy unit at HarvardBusiness School. His forthcoming book is Connect: WhySocial Platforms Work and How to Leverage Them forSuccess (Princeton University Press, 2012). Twitter:@mpiskorski8 Harvard Business Review November 2011For article reprints call 800-988-0886 or 617-783-7500, or visit hbr.org

×