Social Media Assets in a Downturn
13th November 2008
Bruce Temkin describes the two paths that businesses can take in hard times:
1. Manage their way through it In this approach, executive teams react to market conditions by making widespread cuts in an attempt to maintain short-term profitability targets. After the recession lifts, these firms will often need to rebuild their employee and customer relationships. 2. Lead their way out of it In this approach, executives intensify their company’s focus on the long-term purpose of the firm and make targeted cuts in areas that are not core to that purpose. After the recession lifts, these firms are set for a quick shift into growth mode.
Of course, defining the "non-negotiable purpose of the firm" is brought into very sharp focus in recessionary times. This is the real acid-test of the company mission statement. The doubts begin to surface. "How close do we really need to be to customers and how much will it cost?" "How much Is the customer experience really a differentiator for us?"
A timely reminder of Jack Welch's quote:
"An organisations ability to learn (about customers) and to translate that learning into action rapidly is the utlimate competitive advantage."
In the case of social media, the business case can be surprisingly resilient, compared to other channels in the marketing mix.
Josh Bernoff describes a strategic approach to measurement of social applications in a downturn. In particular, he urges us to think in terms of assets, not campaigns. Your online community, blog, ambassador program - will, if successful, be growing in value and utility over time.
From what we have seen happening with our clients over the past two years - I would strongly endorse this approach.
Consider the following for your business case:
Discounts vs reasons to buy
Consumers need strong(er) reasons to buy in a downturn. The reflex action of traditional marketing campaigns is to discount prices, but this can have larger implications for your brand. Experience with ratings and review products such as BazaarVoice is that customers are often pursuaded by the relevant and credible word of mouth by people like them. They have a new excuse to buy.
Discounts aren’t as important when they find a product, service or experience that is a “must-have” based on the reviews they read. Customers feel confident making a purchase when they read reviews, answers and experiences from others.
Quickest path to insight
Our experience with online communities is that having an "always-on" group of passionate consumers is an asset of considerable (quantifiable) value. Got one of those intractable marketing questions - ask the community!
Now this may not sit well with research purists (& we are not advocating the replacement of sound market research...) but consider the practical benefits. You will know the answer within 24-48 hours - often with samples in the thousands. The focus group suddenly looks like a slow&costly solution that doesn't always scale and uses "professional" participants with little connection to the brand!
And by the way, I am not talking a simple fixed response survey. The real value in "asking the community" is to have open ended questions where customer generated ideas are presented back to the community for voting and ranking. This way the most popular and important ideas rise to the top - all within the 24-48 hours.
Maintaining and growing innovation
Innovation is, of course, a soft target in a downturn. So if your business is reliant on a steady stream of product development and innovation (and arguably, who isn't?) what more cost-effective way could their be in asking your online community or involving external talent in the innovation process. See Wikinomics and The Wisdom of Crowds for inspiration here.
Customers supporting customers - scales
I have talked about economies of scale in relation to customer support previously. Dell reduced their online customer moderation and support from a headcount of 30 to 5 over a period of years - and against a backdrop of ever-increasing community numbers and particpation! At first this seems counter-intuitive - until you consider that: well considered responses by the customer service reps can be read by everyone in the community and responses by a small percentage of "embedded" customers become a significant contribution to the overall customer support effort.
User generated content - scales
Genuine customer-generated content brings new customers to your site while converting the ones who are already there. And promotions that include this type of content tend to increase average order value – no mean feat in hard times. And much like the customer support customer example - the investment in user generated content scales very well. Increasing customer generated content begets customers and more customer generated content - with a relatively fixed level of overhead costs.
Low cost of failure
OK, OK... not one for the official business case! But just between you and I, many social media initiatives are relatively cheap and the results quickly known. Provided care is taken with reputational risk this means that failure (or success!) can slip under the radar until forgiveness must be asked for.
The bottom-line - in an economic downturn, with shrinking budgets and a retreat to "core purpose" - have the asset value in your social media applications identified well ahead of time!
