Recession paves the way for rise of “social commerce”
New shopper emerges using power of social networks
The recession has led to the rise of a new “social commerce” consumer who shops in a different way and requires flexible responses from businesses.
Lora Cecere, a partner at US advisory form The Altimeter, said these new consumers are changing the way interact with brands.
They use the power of the social network, shop with friends, share recommendations, and actively engage in dialogue with brand owners on how they want to be served.
With the rise of social commerce, Cecere says brands have new opportunities to anticipate, personalize and energize the shopping experience.
A report on social commerce from Altimeter found that the biggest barriers to such opportunities are enterprise processes that are designed to broad-brush markets, push big-brand messages, and serve markets through conventional channels.
Cecere says: “The shopper has fundamentally changed [post-recession] and wants a new buying experience. Trust in big brands is low. Consumers want confidence in what they buy from their friends, and insight from their community. Pioneers are driving this change. In our qualitative interviews, on average this change consists of five people in interactive marketing, armed with an array of technologies.
“In 2011, this will spread into an enterprise initiative to know the digital consumer. The change will enable new ways to sense and shape demand, and build a more powerful relationship with the buyer. As a result, in 2011, 90% of companies surveyed will increase funding for social commerce initiatives by 8%. This represents net new spending by the line of business.”
Cecere says that this evolution of social commerce (s-commerce) goes back to the birth of e-commerce 10 years ago. At that time, e-commerce represented both a new channel and a new way of communicating brand promise to a shopper. The change was pervasive, and it rewrote the relationship between company and consumer.
“Social commerce is analogous,” says Cecere. “It is both a new channel and a new way of doing business.
“Three years ago, the action shifted to mobile. Again, it was both a new channel, and a new way to promote brands and redefine the customer experience. The handheld device has fundamentally changed shopping patterns; it has enabled consumers to shop anytime and anywhere.”
According to Nielsen, 30% of shoppers have smartphones, with predictions of 50% adoption by 2011. Of the companies interviewed in Altimeter’s qualitative survey, 40% were actively involved in m-commerce strategies today.
Altimeter says it sees this evolution happening in four phases:
– Today, most brands are getting engaged in the first phase of social commerce (‘Let’s Be Social’) where it’s all about getting social at a minimal level.
– Dissatisfaction with superficial interactions will drive people to the second phase of social commerce to drive a dialogue (‘Enlightened Engagement’).
– In the third phase, Store of the Community, shoppers give input and have the opportunity to shape products, promotions, and offers. This outside-in value chain empowers the digital shopper to own the experience and enables brand owners to better serve micro-markets.
– The fourth and most mature phase of the social commerce framework – where convergence will catalyze a complete redesign of the shopping experience – is a phenomenon tagged ‘Frictionless Commerce’.
Industry sub-segments (such as apparel retail, consumer packaged goods, financial services, travel and entertainment) are moving at different rates and on different paths: each is using industry-specific social technologies and processes.
However, while each industry has different tactics, Altimeter says they are all moving forward through these four distinct phases to build a closer relationship and increase brand presence with shoppers through the use of new technologies.
“It is a journey, not a destination,” said Cecere, “but one that we think is worth taking.”
Based on its research Altimeter makes four recommendations regarding social commerce:
* More effective couponing. Companies deploying social couponing methods got a 5% lift on paper coupons, a 25% lift on electronic coupons and a 100% lift on social coupons. The story is higher conversion with less cost.
* Larger market baskets. A social commerce technology company powers both e-commerce and social commerce fan pages on Facebook. The market basket is 15% greater for the social commerce shopping experience.
* Direct dialogue on new product launch. The Facebook Like button is now used by 50,000 Facebook sites. This feature enables feedback and quick assessment for new product launch, new positioning and promotions.
* Improved customer service. 62% of the companies surveyed for the report have active Twitter and Facebook customer service agents engaging in direct dialogue with the shopper. For the 70% of these companies with more mature processes, this feedback is shared weekly with research and development teams.