Ideas to market by

Viewpoint

Social media has turbocharged the ways we market. But along with numerous positives, in the hands of inexperienced users, the technology can also under perform. Having a clear idea of what you want to accomplish with a social marketing program is good but not enough. Understanding the limitations of the technologies and knowing the ways that people interact with it can prove to be the difference between success and mediocre performance. This Beagle Research Group Viewpoint discusses ways to optimize your social marketing programs.

September 2010

Introduction Social media has taken business by storm the way any successful new idea usually does. Originally a set of tools that help manage ones social life, social media have penetrated the business world with great speed and, unfortunately, mixed results. Part of this uneven success is to be expected whenever a market adopts a new technology and tries to figure out its best use. In ones personal life thats easy and people seem to naturally gravitate to the most popular incarnation of an idea but in business the stakes are higher and the path less obvious. In our personal lives MySpace was the early leader but then Facebook came from nowhere and captured nearly half a billion patrons. It would be tempting to say that Facebook has won the race but, especially in business, circumstances change and the reasons people use one or another product amount to more than preference. Like any tool category, social media have different applications and what might be right in one instance is not in another. Social media is actually an umbrella term for a set of Internet software tools that enable masses of people to develop and maintain mutual connections with minimal overhead. There are significant differences among the tools some are oriented toward outbound messaging while others are focused on gathering customer input. While individuals can easily decide that they may only wish to deal with outbound communications, businesses understand the need to have bidirectional conversations with their customers. The social media discussion in business is about finding the best mix of inbound and outbound media to use in a coordinated program that enables the business to develop conversations with its customers. When done right, the result is improved front office business practices, better revenue flow and happier customers. This Beagle Research Executive Viewpoint introduces several ideas that nearly every business can use to make its social media initiatives more successful. Know the customer The Wisdom of Crowds (2004) by James Surowiecki and Crowd Sourcing (2008) by Jeff Howe provide many of the ideas behind todays social marketing. But these books are only the most recent in a field with experimental data going back more than one hundred years in such disciplines as statistics and economics. These books show, among other things, that a group of knowledgeable but dispassionate people can often do a better job of predicting the future than the smartest people in the group. Applied to marketing this means knowing what will sell and how best to sell it. You need only look to the popular television show, Who Wants to Be a Millionaire? to see the principle in action. On Millionaire, audience voting has a better than 90 percent accuracy rate compared to individual friends whose rating is only 65 percent. The big takeaway? When you need a lifeline (and who doesnt?) ask the whole audience. Surowiecki documented the three conditions for successful crowd wisdom diversity, independence and decentralization. Briefly, that means
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crowd members should have a range of ideas and perspectives and they should be able to express them without influence from anyone else. As for decentralization, self-managing groups perform better than those managed top down. This might seem a long way from social marketing but it isnt. In social marketing it is key to first discover what the marketplace (the crowd) needs and then find the most effective way to deliver it. In true bulls-eye fashion, the crowds opinions will be scattered all over the map, most answers will be wide of the mark but wide left cancels out wide right and the same with top and bottom. Whats left in the middle is the prized answer. The practical conclusion? Its critical to know something about the people in your group and to ensure that they cant stuff the ballot box. This one vote per customer approach has several benefits. It fosters diversity and independence in the sample by preventing a few people from influencing the crowd to go their way. Without this control its too easy for a crowd to provide an answer that fails to catch fire when turned into a campaign. The other big benefit that comes from this approach is better understanding of your demographic. Suppose you want to target 45 year-old suburbanites. Do you really want a lot of 25 year-olds living in cities to provide data? Maybe you do, but youll also want a way to sort them out. So, knowing customer demographics is important especially in situations where you want to discover something you didnt know before, but its not necessary in all situations. For instance, if a product is broken in the field, maybe you shipped a bad batch, you dont need elaborately structured data to see a problem and to begin a remediation process. This neatly shows the difference between discovery and feedback and why we need different approaches to each but thats the subject of another piece. Inbound and outbound social media Social media is a set of tools that are ideal for different parts of the social marketing process. They come in two fundamental categories though most people have trouble naming more than one. For the record, theres the popular outbound category that includes social sites like Facebook and LinkedIn and micro-blogs like Twitter as well as blogs, wikis and anything else that lets a company provide information to its customers, fans and friends. The inbound category is less easily described but vitally important. Most of the effort in social media today is directed at outbound products. Though not the earliest products in the category, outbound social media drove the initial boom. We use outbound social media to tell anyone who might listen, or read, what were doing, where were going, whats on sale, whats in, whats out and whos on first. But before there was outbound, there was inbound. Those first social applications focused on capturing customer input, which informed other processes like product development and marketing. The need for inbound social media has not gone away but it has been relatively eclipsed by outbound social media. But over reliance on outbound social media can have the

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negative effect of turning off followers. A good way to avoid that predicament is to rely on gathering customer input which can inform product development and marketing messaging. Gathering customer input need not be difficult but for many marketing organizations it is not a high priority. Marketers are incentivized to create and execute programs that generate leads, which are counted as the number of click- throughs or almost any other metric that can demonstrate a customer response to management. But such responses are often erroneously taken to mean interest and few people ask the fundamental questions about motivation, behavior, bias, or open-ended questions about need. Inbound social media is organized around the idea of communities, which tie directly into crowd sourcing and crowd wisdom. To be sure, a logical and very successful way to use inbound social media is for capturing customer notions about products and services and many companies do this. But even more importantly, highly successful organizations also use inbound media to understand customer biases, unmet needs and wants. This is pure crowd sourcing and it can lead to the insights that companies need for designing new products and deducing (and testing) the messages that will resonate with customers. Outbound social media is complementary to the beginning and end of this function. Using outbound messages vendors can invite people to participate in communities to provide the all-important customer input. Outbound media can be used again to communicate information about new products and value propositions based on the original input. The big question for all of us is why we dont use inbound social media more often? Its human nature to avoid whats difficult and what doesnt show immediate gain. Inbound social media is both of those things. But another important part of human nature is using our intellect to puzzle through difficulties to achieve solutions that are not obvious. The reward for using social media appropriately out shines the easier results by a long shot. Those who can make small investments will achieve great things. Membership is not participation There are two ways to analyze customer participation through social media. The first is by tracking the overall number of members and the second is through understanding the percentage of members who actually participate. And of course, knowing something of the demographics of all participants is absolutely critical. We commonly mean that people are participating in a community if they contribute something and since were dealing with the web, the contribution usually takes the form of some kind of post. It could be as little as one hundred forty characters on Twitter or something longer on a blog or more creative say posting photos or a video on Facebook or MySpace. The member who does not participate is a cipher. Does that member actually log in to observe but not say or do anything or is the person a no-show? In reality its both but its hard to know which. Relying on member statistics rather than participation rates community can lead to misinformation, insights
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that are wide of the mark and missed revenue targets if the data generated by these sites is used for strategic purposes. There is no substitute for knowing about participant demographics and for generating the largest sample of participants possible. Thin participation in your target demographic can give the willies to the people signing the checks for a marketing program or new product development. Recent research from a variety of sources illustrates how serious the challenge is for marketers. For instance, last year a study at Harvard Business School showed that ninety percent of the tweets on Twitter came from the ten percent most active members. Professor Mikolaj Jan Piskorski and MBA student Bill Heil conducted the study. Their data also showed that more than half of the 300,000 survey subjects tweeted only once every 74 days. Not exactly the participation levels most of us would hope for. Another study by Pingdom.com (with a small sample) showed a small dominance of women over men participating on social sites. Women edged out men 53% to 47% in the average of all sites reviewed. But the ratio was as different as the site selected for study with Bebo garnering 64% women and Slashdot attracting over 80% men. What to make of this? Its all good, if you know going in what the participation rate is. If you want a predominantly male or female cohort to test an idea you can find it, the real issue comes from not knowing. Since so much of crowd sourcing and crowd wisdom depends on independence and diversity its simply important to control for it in your study. It may seem counter intuitive controlling in rather than controlling out in what amounts to a scientific experiment, but these are the new rules. More women use Facebook (and Twitter, and LinkedIn and ) Were beginning to see research reports that focus on the efficacy of social media and its about time we took a critical look at this new technology as a business tool. There is no doubt that online social interactions between vendors and their customers can be beneficial to both parties, theres really only the question of which practices are best. Many studies on social media point to the same conclusion that women are more social creatures than men. At least more women frequent the pages of popular social sites. Thats not universally true, there are places where guys congregate but many arent places that appeal to the great cross section of women. So, very quickly we have gotten to the point of specialization in social media and thats ironic on at least one level. The technology that was supposed to bring us together is actually helping to segment us into ever-smaller demographics. Social marketing is taking on the full appearance of conventional marketing in one important aspect: you still have to go where the customers are and, increasingly, that means having a plan with multiple outlets and multiple shades of messaging. If you offer products that appeal to a broad audience you still need to ensure your efforts cover the waterfront or youll miss some
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business. Not only do you have to account for different physical limitations such as Twitters 140 character limit, but you also have to pair messages with customer demographics. Defining and appealing to groups is one way to help target customers but as the groups and social sites proliferate in your outbound programs it becomes a juggling act to keep it all straight. Tools that manage messaging and its distribution become necessary eventually. When you get to that point you will begin to understand the real power of social marketing because it will enable you to keep near real time tabs on messages and markets that, in conventional marketing days, could only be managed through monthly reports. Avoiding blacklash The ugly truth about Facebook for business (http://bit.ly/dqgLu7) is an article about small business owners who said that Facebook had been a total waste of time and these owners had stayed with the technology, in some cases, for two years. The article talks about how much effort and time these businesses put into developing content for their accounts daily and how frustrated the owners were. It might be painful to hear this and hard to swallow but the reason for the lack of success can be boiled down to operator error. Almost two years ago author Clara Shih (The Facebook Era) plainly showed that Facebook and other forms of social media are good at keeping tabs on acquaintances the people we know casually or through a mutual association just the kind of people who could be called customers. Our best friends might interact with us through social media but they also email, pick up the phone or eat and drink with us. The difference is huge because the sum of all those interactions is bi-lateral communication in which we give information but we also get information. The problem with using Facebook or any other outbound social media exclusively is that when used this way it is no more revolutionary than a dumb direct mail blast and we all know how well that works. To be effective at using social media you need a social media strategy that incorporates both the outbound messaging that we love as well as ways that prompt user or customer input. It is the input that makes social media valuable and it is seeking input that we seem to have trouble with. Perhaps this reflects the incessant marketers need to justify their existence to the CFO. The usual approach is to heap up some statistics like the size of the base you market to, the number of impressions and similar things. We consider that real work but when it comes to asking open-ended questions to come up with a good idea that had been hidden and that we can use to refine products and messaging we dont see the same value. The ratio of inbound social media use to outbound should approximate the 80/20 rule. The preponderance of effort should be on listening and understanding or as Stephen Covey said in Rule 5 of The Seven Habits of Highly Effective People, Seek first to understand then to be understood. Your messaging should be so chock full of knowledge and information that the recipient is compelled to act and that doesnt happen if youre spending a couple of hours a day just trying to dream up something relevant to say.
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Now that we are getting over the phase in the social media bubble when we think its the answer to every affliction known to humankind, perhaps we can begin the process of understanding its uses better. Social media is a rich toolbox with many interesting and effective gadgets and knowing which ones to use and when is more than half the battle. Conclusions When planning a social marketing strategy, its important to understand what social media does well and play to its strengths. This starts with internalizing the difference between inbound and outbound media and leverage the three aspects of crowd wisdom diversity, independence and decentralization. Information from social media will give you the ability to have frequent, highquality and above all low cost conversations with your customers. From these interactions you will be able to derive insights into your customers behaviors and needs and you will be able to respond with pin-point accuracy. Our research shows that companies that have instituted bi-directional customer communications like this have been more successful in the market and they represent some of the best known brands in the world. The large number of social media and social sites available on the Internet make keeping tabs on the social graph a challenge. But new technologies such as those from Awareness Networks are making it possible even for small organizations to take control of their social presence to produce consistent and engaging content. The alternative is to adopt social media but to use it as a broadcast tool similar to email or direct mail. Many companies are doing this but with mixed results. The companies that gain the most from the revolution in social media will be those that seek and find the best practices for leveraging this powerful new tool set.

Beagle Research Group, LLC 264 Greenbrook Drive Stoughton, MA 02072 781-297-0066 www.BeagleResearch.com Denis@BeagleResearch.com

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