Social Commerce - Innovate 11

Editor's Notes

1. Good afternoon. Thank you all for being here this afternoon. I just want to kick things off today by announcing that there are NO Facebook stats in this presentation. A few months ago, when I hastily and optimistically scribbled off a description of what I would talk about today and shot it off to the conference organizers, I fully intended to regale you all with stories of the joys and promise of social commerce, and of course, of our experience in launching the New Era Cap website. But, as often seems to happen with these things, there is a journey that one undergoes. From that first, optimistic email, through the painful process of making words and images come together on a PowerPoint screen, to the moment you finally step on stage to deliver whatever it is you’re going to deliver. Things happen. And recently, something happened to me. Something that rocked my faith has left me a sad, bitter, disillusioned shell of the social commerce evangelist I used to be. And as a consequence of that experience, I’ve changed my presentation.
2. Let me tell you what happened.
3. I belong to an all-guys book club, called the Bobos. All-guy book clubs are not the norm, and there are some things that distinguish us from other book clubs.
4. For one thing, we keep stats, a very “guy” thing to do. We have a spreadsheet of every book we’ve ever read, rated on a 100-point scale. We track who read the book, how they rated it, and who selected the book for the club.
5. One of the downsides of keeping stats is that you can track performance. Some of you may think this is a benefit, but that depends on whether you’re winning or losing. And I currently am NOT winning. The four books I’ve selected have an average rating of 65.85, which is well nearly 12 points out of first place.
6. But the trends are positive, so there is hope for me. Now, it’s my turn to pick our next book to read, and since I’m in the middle of compiling social commerce research, this seems like the perfect opportunity to put social commerce to the test. Surely, there is a way to tap my social graph and determine the reading preferences of all these guys to figure out the best book for the group. What I need is something like Facebook + Amazon.
7. Voila! Here it is. Facebook + Amazon. Although as it turns out, despite what you might suppose, the union of Facebook and Amazon is pretty worthless for making predictions about the tastes of a GROUP of people, like a book club. There’s not an easy way to assimilate the collective tastes of a group and churn out a recommendation. I can get recommendations for individuals or I can get the wisdom of the crowd, but nothing in between. So, if the two juggernauts of social and commerce respectively can’t help me find a great book club book, can we really be very far along in the evolution of social commerce? I think not. Why is that?
8. For me, social commerce begins here. It’s about using social influence in the context of retail. It’s not about technologies, platforms or widgets. It’s about social influence.
9. When I say social commerce, I’m not talking merely about using social media to drive sales. I’m talking about the integration of social media and ecommerce, and that integration usually takes one of two forms. It’s either bringing social media into the ecommerce platform, which is the strategy we employed for New Era, which I’ll talk about in a few minutes. The other form that we’re starting to see more and more of is bringing commerce to social platforms. And we’re seeing that in the rise of Facebook Fan Shops, such as Pampers. Now Pampers is not a client of ours, so I don’t have any inside knowledge, but they do seem to be one of the brands who is figuring this space out. When they launched, Pampers reportedly sold over 1000 packs in an hour.
10. In order to be able to execute either one of these strategies very well, we have to start with an understanding of the user. Who is the Social Shopper? Is it the Wet Seal fashionista? How about the New Era cap fan? What about the Pampers Mom?
11. In my digging around through the research, I came across an interesting custom segmentation study done in 2009 by MRI. The study identified two clusters of social shoppers. It basically boils down to people who actively participate in social shopping activities, which comprised about 27% of the sample, and those who used social shopping features, like ratings and reviews, but didn’t actively create them, which comprised about 14%.
12. The critical factors in that segmentation, when looking at these two groups against all others, really hinged on just three traits. The social shoppers not only read and wrote reviews, but they were brand advocates too. The Cyber Shoppers were consumers of ratings and reviews, but not producers. The other segments in the study didn’t trust or use online ratings and reviews. Because that study is a couple of years old, I went back to the MRI data this week and pulled an update.
13. I didn’t have exactly the same segmentation questions at my disposal, but I approximated it based on use and writing of reviews. What a difference two years makes! Now we have about 50% of online shoppers who use online reviews and another 21% who write them, as well as reading them. There’s also a slightly odd group of 6% who write reviews, but who don’t read them.
14. And in looking at the differences between social shoppers and the selective shoppers, there’s a pretty clear tendency for social shoppers to be younger. Which most of us would expect, I think. This may also mean that as this wave of active social shoppers matures, if they carry those behaviors with them, we may find that number of active social shoppers in older age groups increase.
15. One thing that did surprise me was that social shopping seems to be more highly correlated with lower household income, whereas middle and higher income consumers are more likely to fall into the selective shopper category.
16. Social shoppers are also more active across a whole range of social media activities than the selective shoppers. So people who leave ratings and reviews on your website, are more likely to be your fans on Facebook and to contribute content to the conversations across all sorts of social properties. One implication of this might be that the people who rate your products most highly, might be your best prospects for recruitment into your social media communities. Yesterday, Jon Kubo talked about Wetseal’s social media strategy being to get the 10% who are content contributors to provide content for the 90% who are consumers. The folks who write reviews on your site, are the best candidates for that 10%.
17. And lastly, from this MRI data, there is some important data about social influence. Social shoppers are not only more influential, but they are more influenced as well. Social influence flows both ways. The social shoppers are more influenced by celebrities, they prefer to buy things that other people approve of, they are influenced by brands more than the selective shoppers. They love to shop, and they’ll pay extra for products that fit their image. What emerges from all this data, is that these active social shoppers are substantially different from the larger group of selective shoppers. And that has implications for the way we recruit them, the way we interact with them and the tools that we provide them to try to leverage their social influence.
18. One more fascinating piece of data comes out of a study from the Stern school of business at NYU. They developed a Facebook application and measured it’s adoption, use and viral spread. They analyzed the data they captured from users to understand what underlying factors were important in generating spread. One of their findings was that the most important factor in susceptibility to social influence was your relationship status. As you move from single to engaged, your susceptibility increases. When you get married, it drops off a cliff. But when things turn complicated, your suscepibility to social influence goes through the roof.
19. And that, I think, brings us to a fundamental truth of social influence. “It’s complicated” We’ve begun to map out the basics of the social graph. We’ve established relationships and connections. And we have very crude, volumetric measures of influence, but we don’t yet have the tools to capture and leverage the variation and nuance of social relationships, which is why I don’t have a great book club recommendation app.
20. If you think about the variety of relationships and social circumstances you find yourself in, it’s very easy to begin to think of various dimensions for categorizing those experiences. For example, one obvious dimension is scale. A lot of social circumstances are small-scale--one-one-one or small groups. Some social circumstances are massive. Another incredibly important dimension of social relationships is the degree of intimacy between the people involved. Some entail a very high degree of familiarity, and a lot of social situations entail relatively little intimacy between the participants. And we could pretty easily begin to imagine where different circumstances fall in this grid. We tend to associate small scale with intimacy, but a First Date is the counter example.
21. Small scale, but at least at first, very little is known about each other by the two participants.
22. In a commercial context, the shopping-together experience entails small scale and a fairly high degree of intimacy.
23. A good dinner party of a book club might fall somewhere in the middle of both scales.
24. And then we have Fans. Massive scale. Very low bonds of intimacy between the members. But they are united in another dimension, the passion of their shared connection.
25. And it’s that additional dimension that differentiates Fans, in my mind, from Crowds, like this one. Crowds are brought together by common interest or circumstance. Fans celebrate a shared passion. That’s the biggest differentiator. Well, that and body paint.
26. And it’s at the level of crowds that MOST of our social shopping experiences seem to be aimed. Not that there’s anything wrong with crowds, per se. Leveraging the crowds pays off in performance. I have some recent data from Bazaarvoice, who tells us that the average lift they see across sites that use their ratings and reviews product is substantial. In apparel and accessories, for example, they see an average conversion life of 163% when shoppers use ratings and reviews and a 185% life in revenue. We have one client in the category who is doing significantly better than that, getting a 300% lift in conversion and a 541% lift in revenue per visitor.