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The dirty truth about Facebook commerce

Charles Nicholls
The dirty truth about Facebook commerce Charles Nicholls

What is social commerce?

Social commerce can be thought of simply as the intersection between social media and e-commerce. Think of it as how you can use social media to drive consumer interactions and engagement as part of the process of selling.

Techniques span everything from simply having a Facebook page that drives traffic to your website, social plugins (such as the Facebook "like" buttons and social logins), user-contributed reviews on your e-commerce site, Facebook-specific promotions, and full-blown Facebook stores.

The dirty truth about Facebook commerce

How brands can use social commerce

There's a lot of experimentation going on as brand marketers explore the new frontiers of social commerce. At times, it feels like the Wild West -- a frantic race to unlock hidden gold buried somewhere in Facebook. Experimentation is good -- after all, if we can find new ways to leverage the Facebook powerhouse to do more than drive traffic, then there's definitely gold to be discovered.

With all this frantic activity, it's worth looking again at how customers buy, why they don't, and the role that social media plays in loyalty and driving conversions. Loyalty is important because it drives profitability -- repeat customers are many times more profitable than new ones. And loyalty principles are inherent to social media success; even if loyalty is a slightly old-fashioned term, there are many lessons that can be applied to social media.

A recent PwC research paper sheds new light on what we already know: When consumers were asked to rank factors that influence purchase decisions, they were driven by price and their experience with a brand over all else. PwC notes that long-term relationships were formed by friendly, helpful service and the people behind it. This can be thought of simply as the "brand experience." Loyalty programs rank last.

The "brand experience" is the user's perception of the brand, while interacting across channels and spanning experiences that define the relationship, especially when things go wrong.

While this research confirms what we already suspected, it does shed new light on how we should view social commerce, as many social programs are focused on building the "social channel," rather than using social to serve customers better.

Many brands have social media teams focused on decoding the social media formula. These separate teams are reminiscent of the early days of e-commerce, when many companies set up a group focused on how to make e-commerce work. This resulted in stovepipes, in which e-commerce was separated from the rest of the business, and then needed to be re-integrated as it became clear that e-commerce was not a business in its own right, but a channel that needed to be integrated with all other channels. In time, I suspect that we will view social media in the same way, as a communication and engagement platform that needs to be integral to the rest of the business, rather than standalone. Social media will be key in shaping the brand experience, but will do so in conjunction with all the other channels and not as a channel in its own right.

I'm sure that some will take issue with this -- if you're selling a service that enables brands to offer Facebook storefronts (f-commerce), then this is heresy. But my perspective is different. I look at what the data tell us about how, why, and where customers want to buy.

In the light of this, let's consider five home truths about social commerce.

Most customers go to Facebook to hang out, not shop

A recent Booz and Company survey showed that 73 percent of customers would not shop on Facebook, citing privacy concerns. While this may be a factor, the big challenge for Facebook is that, while it may have lots of traffic, people don't go there to shop. Sucharita Mulpuru, an analyst at Forrester Research, puts this best when referring to selling on Facebook: "It's like trying to sell stuff to people while they're hanging out with their friends at the bar."

There have been a string of recent Facebook store front closures including GameStop, Gap Inc., J.C. Penney, and Nordstrom. What this illustrates is that Facebook storefronts are not a mainstream play. Why replicate your e-commerce store on Facebook? It just doesn't make sense to have a subset of your products, displayed with smaller images, on less real estate, simply because it's on Facebook.

However, for some sectors, such as music, travel, entertainment, and games, Facebook storefronts can make sense. Equally, launching new products with a microsite on Facebook can help to create buzz, and testing new products and ideas amongst your fans targets a captive audience. These types of engagements work best where there is an inherent social play to the business. For example, if a consumer is thinking about booking concert tickets, it may make sense to be able to share and socialize the idea among their friends.

However, when you compare successful Facebook commerce stores with their e-commerce equivalents, the more effective channel is really obvious. Take a look at these two Lady Gaga stores:

It's pretty clear that the official web store has a much richer experience, bigger selection, and more compelling content than the Facebook store.

Many Facebook promotions do not provide incremental sales lift

Promotions and contests are great for creating extra buzz around a brand and can make Facebook a really fun place to hang out. These tools undoubtedly give customers what they want -- the No. 1 reason why consumers follow brands is to get special offers and promotions. Contests can generate a sense of community and directly drive engagement. But when promotions are used to drive traffic to a Facebook storefront, often there's little or no incremental value.

You can use exclusive incentives to get people to shop on Facebook, but sooner or later, you need to ask yourself whether this makes sense. This goes back to the channel question: Why give away margin just to try and make a sale on Facebook, when customers can already shop on a full e-commerce site? Often, the same promotions can be used to drive traffic to your e-commerce store just as effectively, in which the buyer will most likely spend more than they would on Facebook. So far, there's little evidence that Facebook storefronts are additive and create incremental sales beyond sectors that are inherently social, such as music, travel, entertainment, and games.

Net promotions can drive engagement and give customers what they want, but you must make them cross-channel. Social media is about engagement and developing a rich brand experience, not selling.

Most e-commerce sites pay lip service to making shopping social

Let's think about how people shop. It's rare that a consumer stumbles on a new site and buys straight off. What's much more likely is that it takes multiple visits to a site, and possibly multiple touches across channels, before the customer is ready to buy.

Imagine that Mary is looking for a new cocktail dress. She will probably peruse multiple sites for options. She will probably visit her local mall. Maybe, she builds a short list of possibilities, each with their advantages and disadvantages. Most likely, she will discuss it with friends and get their take.

But few e-commerce sites make it easy for Mary to research alternatives, while she is in the process of deciding. Sure, if Mary is shopping only at Macy's, then she can compare Macy's selection easily. But in reality, Mary's choices will likely be much broader than Macy's alone.

This is where social networks like Pinterest become an intuitive part of the purchase process, making it easy for Mary to capture these options and pin them, and in doing so, to share them on Facebook or Twitter. For many, shopping is about deciding between alternatives, usually on different sites. It's an inherently social process of researching and sharing, but e-commerce sites don't recognize this. The big opportunity is to build these capabilities into the shopping process -- to make e-commerce more social.

Today, this is in its infancy. The Facebook Social Graph enables you to build in knowledge about your visitors, their likes, their friendships, and personal information, such as birthdays and email addresses.

You can start by leveraging Facebook Login, which enables consumers to log in to e-commerce sites using their Facebook ID. At the same time, the consumer gives the brand access to profile information about them and access to lists of friends.

Customers are more cross channel than merchants

The PwC study showed how important the brand experience is, and social media is a key part of today's brand experience. That means that brands need to be ready to respond to questions, accept criticism, and interact with customers via social media irrespective of the channel. Social media is inherently cross-channel, at least in the eyes of the customer.

Customers expect service to be channel neutral, and in many cases social media will flush out problems that would never have been raised in stores. How you respond to these problems will define your brand experience and are often moments of truth for customers. Unfortunately, many customer service responses on Facebook today are lame platitudes, rather than real service.

Favored status is granted to those retailers that can deliver consistent reliable service across channels. Nail this, and you will win loyal fans that will concentrate their spend with your brand.

Engagement counts, not fans

Having a million fans or "likes" doesn't count for much if ultimately they joined just to get access to a special piece of content or a special promotion. While membership promotions seem to be in fashion at the moment, let's take a step back and question their value beyond boosting the number of "likes."

For example, checkout this promotion by McAfee: A 20 percent discount on my antivirus subscription is an attractive offer, and "liking" McAfee on Facebook is so easy to do that many will take the offer.

But with this kind of promotion, you need to ask yourself what is really being achieved. A fan secured through an incentive-driven "like" isn't a real fan -- there's no commitment to the brand. It's just a meaningless mouse click given in return for a discount. The company's new fan is unlikely to engage with McAfee on Facebook or even visit the page.

The second question is whether this leads to an increase in sales. There is some evidence that when a consumer follows a brand, they are more likely to purchase brand products. However, where the "like" has been incentive-driven, this is significantly different than a spontaneous follow. In fact, the follow may be considered a signal of intent, but the key is that the consumer drives it, not the brand.

Of course, in the McAfee example, offering a 20 percent discount will boost sales, but in this case, there is a real cost. McAfee is effectively giving an $8 discount for each "like." Is each "like" worth $8? Maybe McAfee was planning a 20 percent promotion anyway and decided to boost "likes" at the same time -- that makes more sense than buying "likes."

Social commerce has proven to be a tougher nut to crack than many people imagined. In reality, it is in its infancy, and we are experimenting with ways that we can leverage the intersection between shopping and social. Facebook has become an incredibly important place to interact with customers, win fans, extend the brand, and drive buzz and excitement. However, despite a few exceptions, Facebook is not a channel to market in its own right.

Thinking about how you can leverage social across all channels is undoubtedly the right route. Consider how you can make shopping inherently more social, rather than cannibalizing sales from other channels by merely promoting a different storefront.

Charles Nicholls is CEO and founder of SeeWhy Software .

On Twitter? Follow iMedia Connection at @iMediaTweet.

"Grunge paper on wooden wall" image via Shutterstock.


to leave comments.

Commenter: june swatzell

2012, May 03

That makes sense.