Sorry, Brands…Your Digital Agencies are Lying to You - Levi Shapiro

Brands spend a fortune on marketing – more than 9% (b2c) and 7% (b2b) of total revenue. Within marketing budgets, the fastest growing portion (+40%) is social media. Unfortunately, a growing body of evidence suggests that garnering LIKES on a Facebook page does nothing to foster community or increase engagement. Your digital agency has been lying to you. The better approach for lowering customer service costs and increasing engagement is to transform your organization into a social business.

Step I: Focus on managing your own portal, not Facebook - The single most important aspect of a social business, according to “ The Social Economy” from McKinsey, is user generated content. A vibrant community can produce user generated content, with customers helping each other and innovative product ideas emerging from the community.

One notable example is Amazon, whose share price has risen more than 400% over the last 5 years. Product reviews on Amazon’s portal create a Word of Mouth experience. Product and marketing ideas, notably the Kindle, have emerged from Amazon’s online conversation with its 166 million customers, not its 56,000 employees. Amazon consistently ranks among the top brands in the University of Michigan’s annual Customer Satisfaction Index.

According to Andreas Nicklas, Head of Business Development EMEA for Lithium, who will keynote this week at Socialize13 in Tel Aviv, “Facebook should be less of a priority than your own website. It is crucial to cultivate your own community on your own portal and own the interaction. Our data shows that 90% of consumers trust their peers but only 14% trust advertisers. Too many digital agencies still advocate push marketing, defining success in LIKES, even though the world changed from push to pull.”

Unrealistic values are frequently ascribed to Facebook LIKES, even though less than 5% of those liking a Facebook Fan page ever return (ComBlu, “State of Online Branded Communities”).

Giffgaff in the UK is a social business that generates 75% of all sales by word of mouth. More than 85% of all community questions receive responses within 60 seconds. Finally, only 0.5% of all incoming customer service requests are handled by the customer call center. The rest are answered by the community. Becoming a social business has drastically reduced GiffGaff’s marketing and customer service expenses.

Step II: Integration Across the Organization and Business Processes - According to McKinsey, only 3% of companies obtain substantial benefit from social technologies across customers, employees and business partners. The main reason is that social does not fit into a silo approach. For example, the same customer interaction could provide input for multiple departments but typically is not shared across the organization. Andreas says, “Sometimes you talk with the CMO, sometimes the head of customer support. Organizations should have one person who owns social strategy across the entire organization.”

One example of social commerce is Sephora Beauty Talk, a content-centric forum for young women to learn from their peers and obtain feedback. Besides the ongoing discussion, Beauty Talk brings the conversation into the store. Community members in Sephora shops are invited to take photos and solicit feedback from the Beauty Talk community. In real-time, the community provides trusted feedback. Community members purchase 2.5x more than standard customers.

The technology and telecom sectors have been the first to embrace social business processes. More recently, retail and financial services companies are moving in this direction. So, when will your company become a social business?

Levi Shapiro is a Partner at TMT Strategic Advisors, a research and strategy firm focusing on the technology, media and telecom sectors. He can be reached at levi@tmtstrat.com or via twitter: @levshapiro

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