So what is social commerce for? Why would you want to sell with social technology? What’s the point of helping people connect where they buy and buy where they connect? What, in other words, should be your social commerce objective?
With so many shiny new social toys, it can be tempting to jump right in and deploy a solution, any solution, without a clear objective or a strategy for achieving that objective. Such a Ready-Fire-Aim approach is likely, in our view, to lead to nothing very much. So what that there’s a third-party app solution for publishing your e-commerce store in Facebook? Why would you want to do that, anyway? Unless you can answer that question, just don’t.
We think the right place to start is not with a solution, but with a clear objective. It’s the first step of strategic planning. By having a clear objective, you can then set a strategy, and then make an informed choice from social commerce solutions available. Only by having a clear objective will your resulting social commerce initiative be measurable. And it’s only by being measurable, will it be manageable. We know this is all motherhood and apple pie, but you’d be surprised…
The social commerce objectives open to you will of course depend on how you define social commerce. Definitions abound but the simplest definition is perhaps selling with social technology, i.e. using social technology – media and tools – to assist in the buying and selling of products and services. From this perspective, social commerce objectives are related to but distinct from other social media objectives
- Using social media to do Customer Service: e.g. Answering pre- and post-sales queries on social platforms – Key Outcome: Customer Satisfaction
- Using social media to do Public Relations: e.g. Using social media to manage your reputation online – Key Outcome: Reputation
- Using social media to Advertise: e.g. Facebook ads, self-advertising on YouTube, Twitter, or Facebook Pages – Key Outcome: Response
- Using social media to do Market Research: e.g. Using polls, surveys and user data in social media to better understand customers – Key Outcome: Insight
- Using social media to do Sales: e.g. Using social technology to complete or facilitate sales transactions – Key Outcome: Sales
Of course, to say that the objectives of social commerce are sales-related is fairly self-evident. But dig a little deeper and four distinct social commerce objectives emerge.
1. Make More Sales
This is an obvious goal of social commerce, using social media as a sales channel and social technology for sales optimisation. For example, by deploying social plugins (Facebook, Gigya, Bazaarvoice or PowerReviews) on an e-commerce site, you may achieve a sales boost of about 10% through the combined effect of boosting traffic, order value, and conversion. Likewise, a Facebook store may increase sales – providing an incremental boost to overall traffic, order value (social networkers may spend more online), and conversion. Additionally, social commerce can boost sales by acting both as a channel for sales promotions, and for enhancing shopper experience – both of which can translate into a sales boost
2. Win More Customers
Customer acquisition is also a legitimate objective for social commerce, by monetizing the referral value of existing happy customers through advocacy activation, and by reaching new customers by selling in the social space – either directly or through the brand effect of the initiative. For example, a pop-up fan-store on Facebook giving fan-first access to a new product or brand merchandise may activate fan advocacy that brings in news customers. The initiative may also bring in new customers indirectly, through a branding effect – communicating an attractive, trial-inducing image. The net result is that trial rates increase. The key metrics for social commerce for customer acquisition are an increase in the proportion of new customers coming to you by referrals (word of mouth recommendation), and an increase in trial rates.
3. Keep more customers
Customer retention, i.e. customer loyalty, can be a third key objective for social commerce and this is done by using social technology to lock customers in with unique customer-first offers and experiences. For example, the UK telephone mobile operator O2 offers a Foursquare-style check-in deals service, only available to existing customers. Similarly, Starbucks uses Facebook as a platform for its Starbuck Card loyalty program, and American Express uses Facebook user data to personalise loyalty rewards. The solution involves use social technology to offer a superior customer experience, and to enhance brand appeal. The key metric for this loyalty objective is customer life-time value (LTV – the discounted purchase-value of a customer over their tenure with you), which should increase if your social commerce initiative delivers. When LTV is not used, the loyalty value of social commerce can also be measured in other ways – such as increases to customer tenure, reduction in churn rates, and or increases in purchase-frequency, and share-of-wallet)
We think there also is a fourth, equally valuable, non-commercial social commerce objective and that is to Learn about customers. For example, luxury fashion designer Tory Burch sells on Facebook not to make sales, but to learn about its fans (and reward them). Likewise for Procter & Gamble. The rich Facebook data associated with fans allows brands to learn more about them – their needs, their desires and their (changing) expectations. This user data can be supplemented by polls, tests, pilots and surveys to get a better understanding of customers through customer-closeness, and this can be used to sell, market and innovate smarter. In other words, social commerce can be used as a pilot channel to learn, test and refine what you do. Or, put differently, use social commerce as a market research tool. By selling in social channels, not only can you learn more about your customer, you can learn more about the changing relationship that consumers have with technology. However, to have value, the learning derived from social commerce must have commercial utility, i.e. it must usefully inform business decisions. A simple way to measure this value is to write up learnings into an ever-evolving ‘insight catalogue’, and regularly ask yourself and your colleagues which ones if any have informed a decision, and rate them in terms of the commercial value they would assign to it.
Make it SMART
So there we go, four key social commerce objectives to choose from. They are not mutually exclusive, but they are distinct, and each will require a different social commerce strategy (which we’ll cover tomorrow). Whilst it’s perfectly possible to have multiple social commerce objectives, we’d recommend choosing and prioritising one key objective, in order to keep things simple, manageable and measurable.You’ll remember that good objectives are SMART
- Specific – We want to achieve [specific desired outcome – what, how much/many]….
- Measurable – …measured in terms of [key metrics, KPIs].
- Achievable – The case or precedent for achieving this is [why it will work]…
- Relevant – …which delivers against [specific business priority]
- Timed – And we’ll achieve this by [time frame]
So the next step, once you have decided your principal overall objective, is to make your objective SMART. For example your general objective may be to make more sales but if your business objective is to increase sales by 10% in the next 12 months, then your SMART social commerce objective may be to achieve a 10% increase in sales within 12 months with a social commerce strategy (we’ll cover social commerce strategies tomorrow).
A final optional task in objective setting can be to set your social commerce objective within a time-horizon. In other words, is it a short-term, medium-term or long-term objective? (re-branded (with tweaks) by McKinsey as Horizon 1, Horizon 2 and Horizon 3 objectives).
- Horizon 1 (short term) objectives: (typically 0-12 months) Typically, using social technology to make efficiency gains; making more sales more efficiently to existing customers in existing ways
- Horizon 2: (medium term) objectives (typically 1-2 years) Typically, this might include using social technology to acquire new customers from your existing target group, or better retain existing customers by enhancing the shopping experience; selling to existing or target customers in new ways
- Horizon 3: (long term) objectives: (typically 2+ years) For example, the use social sales technology to break into new markets – selling to new customers in new ways
McKinsey recommend setting multiple objectives – one for each time horizon – in order to future-proof your social commerce strategy. But be aware that this will require setting up multiple work-flows. Having one good social commerce objective, properly resourced with an effective strategy for delivering against it, will be better than multiple under-resourced initiatives.
So there you have it, a simple, practical framework for setting your social commerce objectives. Let us know if you find it useful, and tune in tomorrow for more on setting your social commerce strategy – how you will achieve your social commerce objective.