Getting a sharper picture of social media’s influence

New research shows that buzz plays a greater role than previously thought in getting consumers to buy and that the pool of the most effective influencers is largely untapped.

Over the past decade, marketers have increasingly turned to social-media networks like Facebook and Twitter to create buzz around their products. But what impact do tweets and other recommendations have on sales, and how can companies get a bigger return on their investments in these important channels?

To get a clearer view, we examined the purchase decisions of 20,000 European consumers, across 30 product areas and more than 100 brands, in 2013 and 2014. Respondents were asked how significantly social media influenced their decision journeys and about instances when they themselves recommended products.1 The research compiled social and demographic information, as well as data on social interactions on Facebook, Twitter, and other social networks. The data gathered cover a range of decision-journey touch points leading up to purchases, as well as social activities after purchase. We found that the impact of social media on buying decisions is greater than previously estimated and growing fast, but that its influence varies significantly across product categories. Moreover, only a small slice of social influencers are creating the buzz.

A growing importance

Social recommendations induced an average of 26 percent of purchases across all product categories, according to our data. That’s substantially higher than the 10 to 15 percent others have estimated.2 SeeConnected Marketing: The Viral, Buzz and Word of Mouth Revolution, edited by Justin Kirby and Paul Marsden, Oxford, UK: Butterworth-Heinemann, 2006. For the 30 product categories we studied, roughly two-thirds of the impact was direct; that is, recommendations played a critical role at the point of purchase. The remaining third was indirect: social media had an effect at earlier decision-journey touch points—for example, when a recommendation created initial awareness of a product or interactions with friends or other influencers helped consumers to compare product attributes or to evaluate higher-value features. We found that in 2014, consumers made 10 percent more purchases on the back of social-media recommendations than they had in 2013.

Nuances are essential

Consumers, we found, access social media to very different degrees in different product categories. At the low end, only about 15 percent of our respondents reported using social media in choosing utility services. For other categories, such as travel, investment services, and over-the-counter drugs, 40 to 50 percent of consumers looked to social recommendations.

Product categories tend to have their own discrete groups of influencers. Our data showed that the overlap of recommenders between any two consumer categories was very small—a maximum of 15 percent for any two pairs of products we analyzed. Timing matters as well: a first-time purchaser, for example, is roughly 50 percent more likely to turn to social media than a repeat buyer.

While the role of digital influence is expanding, the analog world remains important. Among the more than 100 brands we studied, about half of the recommendations were made offline—in person or by phone. Offline conversations were up to 40 percent more likely than digital interactions to influence purchase decisions of products such as insurance or utilities.

Power influencers and the long tail

Our research shows that a small number of active influencers accounted for a disproportionate share of total recommendations (exhibit). These power users are even more significant for product categories such as shoes and clothing: 5 percent of the recommenders accounted for 45 percent of the social influence generated.

Exhibit

Navigating in a changing environment

As companies look to maximize returns from their social strategies, they can both encourage would-be customers to engage in more social interactions and inspire more influencers to express enthusiasm for their products.

On the demand side, our research suggests that online articles written by journalists prompt consumers to seek out social media to further inform purchases (and that public-relations spending to generate such articles may be a worthwhile investment). Consumers who use search engines to gain some initial knowledge of a product are also more likely to tune in to social media before a purchase. Companies that spend effectively on search-engine optimization (to move their product mentions to the top of search results) can expect to benefit from a greater social-media impact, as well.

Television advertising, by contrast, tends to act as a substitute for social media rather than complementing it. Relatively few customers were prompted to seek out social influences after viewing a TV spot.3 Interestingly, this contrasts with consumers’ use of social media to comment on TV-show episodes. See “Living social: How second screens are helping TV make fans,” Nielsen, August 4, 2014, nielsen.com.

On the supply side, prompting the long tail of less active influencers may require creativity and a greater use of data analytics. Our research found, paradoxically, that if companies allowed endorsements only, they generated a less strong response than companies that invited any sort of comment. Positive remarks were three times more numerous than negative ones, and some companies demonstrated that they could turn negative vibes to their advantage by responding quickly.

Other companies are amplifying positive noise by making the recommenders’ data “speak.” Through machine learning and the application of advanced analytics to recommenders’ profiles, they obtain a granular understanding of product preferences and purchasing behavior. That analysis becomes a key input into sophisticated recommendation engines that identify potential customers and send them messages such as “purchasers like you bought this appliance” at key points along the decision journey. These engines are highly effective at converting customers,4 Others have estimated that these engines are responsible for more than 50 percent of purchases or viewer activity at digital leaders such as Amazon and Netflix. See JP Mangalindan, “Amazon’s recommendation secret,” Fortune, July 30, 2012, fortune.com; and Tom Vanderbilt, “The science behind the Netflix algorithms that decide what you’ll watch next,” Wired, August 7, 2013, wired.com. though with an important caveat: the influence the engines generate can be as much as 75 percent lower if messages aren’t highly personalized and targeted.

The pathways of social influence are shifting constantly. Looking ahead, better mobile devices and more robust social applications will make it even easier to share experiences about products and services. Companies can’t afford to fall behind this powerful curve.

About the author

Jacques Bughin is a director in McKinsey’s Brussels office.

 

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Game Over For Gamification? | CMO.com

Game Over For Gamification?

Date: October 24, 2012
Author: Esther Shein , Contributing Writer , CMO.com

It’s no secret that people love the thrill of a contest. Whether it’s scoring double rewards points for purchasing NFL-licensed apparel at Sports Authority, or being entered into a trip sweepstakes for liking the neighborhood grocery store on Facebook, game-based offers are seemingly everywhere consumers click.

Yes, gamification–using incentives to change behaviors–is still alive and well, even though the hype has died down, industry observers say. Applying gaming mechanics, like leader boards or badges, is even used in the workforce to incent salespeople or get employees to meet deadlines, said Charlene Li, partner and founder of the Altimeter Group.

“Where gamification comes in is it takes something that isn’t inherently a game and throws mechanics on top of that,’’ Li told CMO.com. “Because we make it fun and engaging, you actually learn something, and because of that you’re changing behavior.” The idea of using game mechanics has been around for a long time, but when it’s used to interact with people on Web sites, gamification takes on a very different look and feel, she said, because you can drive engagement in these areas.

“Gamification is really just the tip of iceberg; it’s the first widespread application of game mechanics, but by no means the last or most powerful,” said Michael Hugos, a former CIO and author of Using Game Mechanics to Build a Better Business (O’Reilly Media, October 2012). “We live in a world where everything changes all the time, and game-like models allow employees to play the game instead of waiting around and being told what to do.”

In a business context, Hugos believes gamification can be used to improve output and productivity with three characteristics: visibility, so that everyone can see what’s going on; the authority to take action, like in a game; and having a substantive stake in the outcome.

The concept received a lot of attention in 2010 and 2011, in particular, Li said, because that’s when marketers began to realize if they put points and leader boards on top of an ad or Web page, it would be easy to gamify their interactions with people. “The psychic rewards of gaining points or beating your best are where you can get intrinsic value, but it’s amplified if you can share that success with other people,” Li said. It’s no doubt a marketer’s dream to get people to spread the word and influence the advocacy side of things like ads and create loyalty, so they will come back and visit a site.

For example, a customer might buy a certain product from a retailer and receive points for writing a review. “You earn points based on your behavior with that company that can show you more and more layers of something inside the site you wouldn’t normally see,’’ Li said. “They might add up to a leader board that might show who has earned the most points in a day, and there’s that competition or personal benefit that I might get a discount at the end of day.”

Social media, not surprisingly, is a strong component of gamification, Hugo and Li both point out. “There’s a part of gamification that is not just game mechanics, but social mechanics, because of your ability to compete with someone,” Li said. “So, basically, you put leader boards on top of things that normally wouldn’t have a game component to it to encourage people and engage them to do something they wouldn’t normally do.

Employee Motivation
Gamification can be successful within any industry where educational awareness has to happen. For example, banking and gamification don’t sound synonymous, but a company called BankersLab has developed gamification software to deliver training for bankers. Typically bankers rely on historical data and economic trends to design lending strategies, such as mortgages, loans, or credit cards, said Gail Galuppo, chief operating officer at BankersLab, in an interview with CMO.com. The software, which costs $48,000 for an annual license for up to 90 people, uses scenarios to challenge players to develop strategies based on research and trends that may one day affect their businesses.

She said they use a complex calculation engine that allows players to test their knowledge of the credit lending market. The products contain four modules that require players to interact with data, interpret trends, understand changing market conditions, and build strategies that will be calculated and presented over a 24-month period, Galuppo said. Each player is given three test runs and one final strategy design per module. The winning team is the one that achieves the greatest improvement in financial and customer outcomes for their mock bank.

Hugos recalls that when he was CIO of a paper company, there was always stress around the holidays to deliver enough red cups with a holiday theme on them. “When we tried to run [the supply chain] through traditional methods when all these people had to be told what to do because they couldn’t see what was going on, it was a very sluggish, bureaucratic operation.”

One holiday season the company challenged by Starbucks, one of its largest customers, to cut excess holiday inventory by 50 percent. At the same time, the company was in the midst of renegotiating a three-year contract with the coffee chain. So Hugo set up an information system, pulled data out of his company’s inventory system, and posted it on an internal site so everyone in the external supply chain would have visibility ahead of time on what was needed. “When a large group of informed individuals had a stake in the outcome we could come to a consensus early,” Hugos said. By Starbucks’ admission, he said, they met the challenge and ultimately decided to continue the same approach year-round.

“A game can be described as something that has four traits: goal, rules, a feedback system, and. . .enthusiastic participation,’’ Hugos said. “If you have those four elements, you have a game. So I introduced those elements.” His company already had the goal of getting its contract renewed, and by introducing a feedback mechanism, it sparked people’s incentive to engage, and they interacted with other companies. Ultimately, he said, “Our interactions went from defensive to collaborative.”

http://m.cmo.com/gaming/game-over-gamification

The Social Era …

The Social Era Is More Than Social Media

By Nilofer Merchant
September 24, 2012

The 11 definitive social-era rules that allow both people and institutions to thrive.

Things we once considered opposing forces–doing right by people and delivering results, collaborating and keeping focus, having a social purpose and making money–are really not in opposition. They never have been. But we need a more sophisticated approach to understand business models where making a profit doesn’t mean losing purpose, community, and connection. Finding the right balance among them is key. We will find that balance as we shape new constructs for business models, strategies, and leadership. What we can create will be rich in many senses of the word.

Here are the social-era rules that allow both people and institutions to thrive:

1. Connections create value.

The social era will reward those organizations that realize they don’t create value all by themselves. If the industrial era was about building things, the social era is about connecting things, people, and ideas. Networks of connected people with shared interests and goals create ways that can produce returns for any company that serves their needs.

2. Power in community.

Power used to come largely through and from big institutions. Today power can and does come from connected individuals in community. Power can come from the way you work with others, such as one party offering a platform to the multitude of creators. When community invests in an idea, it also co-owns its success. Instead of trying to achieve scale by all by yourself, we have a new way to have scale: scale can be in, with, and through community.

3. Collaboration > control.

Organizations that “let go at the top”–forsaking proprietary claims and avoiding hierarchy–are agile, flexible, and poised to leap from opportunity to opportunity, sacrificing short-term payoffs for long-term prosperity. No longer can management espouse the notion that good ideas can come from everywhere, while actually pursuing a practice in which direction is owned by a few. Instead of centralized decisions, there is distributed input, decision making, and distributed ownership.

4. Celebrate onlyness.

The foundational element starts with celebrating each human and, more specifically, something I’ve termed onlyness. Onlyness is that thing that only one particular person can bring to a situation. It includes the skills, passions, and purpose of each human. Each of us is standing in a spot that no one else occupies. That unique point of view is born of our accumulated experience, perspective, and vision. Without this tenet of celebrating onlyness, we allow ourselves to be simply cogs in a machine–dispensable and undervalued.

5. Allow all talent.

“Doing work” no longer requires a badge and a title within a centralized organization. Anyone–without preapproval or vetting or criteria–will create and contribute. And this fundamental shift changes how any organization creates value, and how many individuals gather together. This talent inclusion–across ages, genders, cultures, sexual orientation–is essential for solving new problems as well as for finding new solutions to old problems. Be the one to enable that connected individual in your enterprise, through systems and leadership, and you win.

6. Consumers become co-creators.

More and more companies embrace consumers as “co-creation” partners in their innovation efforts, instead of as buyers at the end of a value chain. Consumers, traditionally considered as value exchangers or extractors, are now seen as a source of value creation and competitive advantage. This collaboration shares power between the participants as we start to recognize value creation as an act of exchange, not simply a one-way transaction. As an exchange, all parties need to do it sustainably as each must have equilibrium to stay viable.

7. Mistakes can build trust.

Reach and connection in the social era start to be understood as a relationship similar to falling in love, following an arc of romance, struggle, commitment, and co-creation. These are not easily controlled by one party over the other but are a process of coming together. And the relationship gains strength from trying new things and the resulting failures, for it is in the process of making mistakes–and the ensuing forgiveness–that resilience develops.

8. Learn. Unlearn. (Repeat.)

Adaptability is central to how organizations and people thrive in the social era. In psychological language, the key to adaptability and personal growth is resilience. In biology, the equivalent term for adaptive skills is plasticity. In the social era, the term to use is flexibility. Instead of viewing strategy as a set end point, it becomes a horizon to aim for. Instead of asking employees to each simply man their own oar, we must encourage their capacity to navigate as conditions shift. Instead of perfection and getting it right the first time, innovation can be continuous.

9. Bank on openness.

Protecting intellectual property allows a company to keep its edge, to erect barriers to entry from competitors, to establish entirely new markets. At least, it used to. Then along came the social era, with its networks through which open, connected ideas became powerful, even catalytic. It’s the difference between holding our ideas in a tight, closed fist or holding out our hand, open to what happens next.

10. Social purpose unleashes ownership.

The social object that unites people isn’t a company or a product; the social object that most unites people is a shared value or purpose. Money motivates neither the best people nor the best in people. Purpose does. When people know the purpose of an organization, they don’t need to check in or get permission to take the next step; they can just do it. Nonprofits have leveraged the power of people and purpose for years. But business hasn’t been able to see the upside of purpose. With social purpose, alignment happens without coordination costs.

11. (There are no answers.)

Don’t assume any set of rules is fully baked. Accept that your job is to stay alert to what happens next to figure out what assumptions need to be tuned. Listen, learn, adapt.

Let’s dive in.

The CMO’s Guide to Pinterest

The CMO’s Guide to Pinterest

February 16th, 2012     by ddeal    

Pinterest is a lot more than a shiny new tool to help you decorate your home – it’s a platform for marketers to build connected brands in visually compelling ways. In a  newly published point of view, The CMO’s Guide to Pinterest, my iCrossing colleague Sarah Kuntsal discusses how brands ranging from Real Simple to Nordstrom are thriving with Pinterest.

As Kuntsal asserts, any marketing executive who cares about creating close customer relationships and driving sales needs to take a close look at Pinterest. Although Pinterest is new, the social bookmarking tool has already attracted a loyal base of subscribers. The site is especially popular with female and arts/crafts enthusiasts between the ages of 25 and 44 – and this audience is highly engaged on Pinterest, which is a reason why major brands are taking notice.

According to Kuntsal, brands using Pinterest are realizing substantial increases in referral traffic. Real Simple reports that at times, Pinterest has even bested referrals from Facebook.

The CMO’s Guide to Pinterest provides brief case studies on how Real Simple, Nordstrom, and Lands’ End Canvas have generated brand love on Pinterest. The report offers six Pinterest best practices for your own brand, such as integrating Pinterest into your content calendar.

Pinterest continues to generate no shortage of attention. Other examples related to Kuntsal’s white paper include this Quora thread about brands on Pinterest, a recent TechCrunch article, and Brands, Businesses, and Blogs on Pinterest.

Social Media Strategists Grow Up

Complements of David Armano, Edelman & Information Visualization Strategiest!

Social Media Strategists Grow Up
Report: Career Path of the Corporate Social Strategist: Be Proactive or Become Social Media Help Desk
View more documents from Jeremiah Owyang.
Edelman colleague Steve Rubel and I (*David Armano were interviewed with a host of other active practitioners for Altimeter’s latest report on the state of social strategists and to some degree social business in general. Here are a few findings that I thought were interesting as well as a few personal opinions that I have on the findings based on personal experience.

Social Strategists come from a digital or marketing background.
While social media is an emerging technology set, most Social Strategists are already seasoned in digital technologies or marketing. Hiring managers sought 6 years in digital or marketing and 3 years experience in social media.

My Take
I believe this is accurate as the initial wave of social media has been pounced on primarily by marketers who are conditioned to react to the fickle behaviors of consumers especially in the digital space who seem to change user behavior as easily as one would change a shirt. The next several waves will likely see professionals with mixed backgrounds ranging from customer service, to public relations to even HR. But I believe the common denominator will be a proficiency in human to human interaction vs. one way communication.

They act more like program managers and resources for the whole corporation.
In our analysis of 50 LinkedIn profiles of current Social Strategists and job descriptions, we found these common job responsibilities:

Screen shot 2010-11-14 at 1.54.25 PM

My Take
You know that the field is still in in its infancy despite signs of early maturity by the focus on evangelizing initiatives and figuring out measurement vs. implementation of policies and processes which is still low in relationship. Expect this to shift over the next few years as initiatives become integrated and implementation becomes more common across organizations.

Screen shot 2010-11-14 at 1.58.46 PM

Their programs are organized into a “Hub and Spoke” formation. The culture of a company directly influences how they develop their organizational formation.
My Take
I also recommend “hub and spoke” organizational structures, but there is another dimension to this structure:

Centers of Excellence:
Centers of excellence typically reside within the “hub” of the structure and are responsible for cross discipline education, infrastructure (such as policy) and knowledge/best practice sharing across the organization.

Core Teams:

High Level Structure

Once an organization has it’s policies and general infrastructure in place, the “center” or hub begins to serve a different purpose. A core team exists primarily to act as a group of “internal consultants” actively working with teams that exist at either the brand or product level where channel strategy and implementation take place. The core team still loops in to a multi-disciplinary committee so that essential practices can be incorporated into initiatives that occur across the entire organization.

There are some really great findings in the analysis and the document is worth previewing and downloading if you are working in this space or thinking about it. The overall theme? Social media adoption for organizations is still in its infancy but growing up rapidly.

The Social Planning Framework v.1.0

The Social Planning Framework v.1.0

This could be my Jerry Maguire moment. Putting my neck on the line and saying, I don’t agree with alot of what goes on within the social media industry. There is a lack of clarity in what we do, even though we tell clients to be open and transparent. There is a lack of rigid and reliable understanding of effectiveness, with little use of the genuine meaning of effectiveness e.g. business, campaign, advertising ROI.
It also feels like the planning side of things is covert, meetings I have been in have talked about “complicated tools”, “dark arts” and some clients I am close to refer to it as “smoke and mirrors”. They also complain of agencies putting the same outreach blogs and partners sites on their plans everytime.

In the aim of being open, I thought I would share something which I have called The Social Planning Framework v1.0. 1.0 because I want people to feedback on it, to make it collaborative. To be honest, alot of people might not view it as completely groundbreaking, but groundbreaking isn’t always best. Some people may think it is basic, but for me it feels like the right framework to build a social plan from. Its based on a number of things which I have found interesting and relevant, others which I have simply found frustrating.

None of it is based on traditional social media theory and if you look at books like “Business Model Generation” you might find some very similar traits. It is effectively a business planning model but with a social twist. I think we need more of this sort of thing; planning frameworks and social tools which create a long-term credibility around the industry. Something which I believe we are in danger of losing if we don’t continue to prove ourselves, demonstrate our brilliant planning capabilities, and stop that “close our eyes and hope” mentality which alot of clients talk about.

Social Media Metrics 101

by: Randy F. Price

Our clients, potential customers and the brands they represent continue to challenge the notion of social media marketing. I believe this is a good thing, keeps us on our toes. There is an ongoing discussion (similar to the internet and web marketing circa 1999) relative to Social Media Marketing’s (SMM) significance in the marketing mix, ROI and about which department, agency or functional team is best qualified to manage this new hybrid of  market research, CRM, PR/Outreach,word of mouth and advocacy marketing vehicle, channel or platform. . Take your pick of definitions du jour. Oh, and if you didn’t partake of this month’s survey, please do, love to get your take. But I digress. http://social-arc.com/blog/

Here is the logic flow of a presentation recently made to a billion dollar company that asked about the engagement value of social media marketing.

Customer Behavior

The research shows that consumers who research options online are social media participants and by the way that channel yielded the highest number of applicants (lead generation). Customers (current or potential) trust “someone like themselves” to the tune of 68% (vs. 30%, radical change in 2 short years) as reported by Edelman.

Economic Impact Black SLide

Research from London School of Economics and Bain Consulting documented that the brands with the most recommendations online in its category grow 2.5 times the category average. This key research is the fundamental underpinning of the Net Promoter Score systems.Clearly the goal (at least one of the most significant ones) of social media marketing is to inspire and lead positive conversations, engagements and ultimately recommendations.

These “discussions” also impact search results especially if accompanied by a relevant link, and not mention the straight forward approach of providing  compelling call to action, measurement and optimization analysis.

When you look at the share of voice  (actual social media mentions or conversations) split out by competitors, correlated against  social media spending,, it strongly indicates (and validates)  impact.

Spending is not the only criteria, compelling content is also critical. And of course, determining if those conversations achieved the desired result is important and should be defined upfront.

It should go without saying that benchmarking and optimizing should always be a key performance goal and a fundamental objective of any SMM initiative. If you believe, as we do, that this is just the beginning of a new interactive and truly 1-to-1 dialogue with your customers, then establishing real empirical metric targets for success measurement is critical.

To be clear, ultimately sales is the goal. However, building a model that allows for evolutionary precision as well as a variety of key performance indicators  which take into account how the social media tactics you are using are impacting your business objective is always part of the roadmap to success with any innovative approach.

Being a fan of K.D. Paine, I found this podcast interview with her to be spot on and does an excellent job of articulating the symbiotic relationship between objective and key performance metrics.