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Thursday, February 3, 2011

Social Commerce - Why Is it Important to Your Business?

Social commerce refers to e-commerce which occurs within the framework of social influence – i.e. people influencing others' buying decision using the power of internet and social networks.

The term “Social Commerce” was first used by Yahoo in 2005 and referred to product reviews and ratings posted by actual buyers, rather than expert reviewers. However, in 2011, the term Social commerce primarily refers to such a social influence exerted by use of Social networks, is where people who are strangers to us are nevertheless able to influence what we buy.

However, reviews and ratings – especially for low-volume products – can be easily rigged. Also, recommendations by people who are strangers to us are not as effective as recommendations from people we actually know and trust.

The public’s rapid adoption of social networking platforms such as Facebook, LinkedIN, and Twitter – where people constantly let others know what they are currently engaged in – has allowed social commerce to develop a whole new dimension.

Today there are more than 550 million active members on Facebook, and there are more than a million small groups and businesses operating there as well. LinkedIN has more than 80 million professionals in 150 industries that connect from around the world. YouTube, which has evolved from a video sharing site to a social network, has more than 70 million registered users, and there are more than 100 million tweets a day on twitter.

With such a large group of people using Facebook, there is a tremendous opportunity for product and service providers to utilize the power of people to promote and sell the providers’ products and services effectively and inexpensively.

This emerging trend, however, requires sellers to connect to people as individuals, not as firms.

To effectively use social networks for commerce, sellers need to foster the participation of satisfied buyers and potential customers by enabling them to recommend, browse, view, review, and even buy products within the purview of the social networking sites.

For instance, Zappos shoe store shoes greatly expanded it sales and built a solid reputation by effectively using social networks. It has now become one of the biggest online shoe stores and has a substantial following on Twitter. Disney used the members of their fan page and Facebook groups to successfully market “Toy Story 3”: people who bought tickets on the networking site suggested to their friends to do the same. Dell had a revenue of over $3 Million in Sales via Twitter whereas the sales of Blendtec soared by more than 700% after they used a series of online videos as a part of their social media marketing strategy

Of course, on the flip side, the viral nature of social networking can work against a company or a brand. The most famous example of this is perhaps the posting of the video “United Breaks Guitar” by Dave Carrol, a singer and a customer of the United Airlines Limited (UAL) whose guitar was allegedly mal-handled by United personnel. On the date of this writing, it has been viewed more than 9.9 million times on YouTube creating a brand nightmare for the United Airlines.

Social commerce is viral marketing at its best. People prefer to listen to the voice of someone they know closely, such as a friend or an acquaintance, over the corporate marketers and professional critics. To be effectively used, Social commerce requires building a friendly and trustworthy relationship with and among customers. If effectively used, Social commerce can very effectively augment other sales channels, optimize return on investment (ROI) and, at the same time, builds a trusting relationship with the clients; thus guaranteeing an open road to building the company’s profile as a well-established brand.

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