Tuesday, January 3, 2012

Social and Mobile Commerce: Not Just Another Sales Channel

Last December, I attended the 2011 MIT Innovations in Management Conference at the Massachusetts Institute of Technology (MIT). One of the lectures, about e-commerce strategy, was given by Henry Birdseye Weil, a senior lecturer at the MIT Sloan School of Management. Here is a summary of that lecture.

When most companies look at social and mobile commerce, they tend to think of it as just another sales or marketing channel, a way to generate incremental revenues. But that viewpoint underestimates the full potential of the truly revolutionary changes being brought to society by social networking and mobile technologies.

The twin forces of social networking – which almost instantaneously connects people with others who share a friendship or common personal or professional interest, independent of their geographic or political differences – and mobile technologies, which allow everyone, including kids, to connect with others while on the move, are in fact disruptive technologies that are radically changing the concept of consumer behavior and marketing. They provide increased transparency and facilitate greater commoditization.

Of course, increased transparency and greater commoditization can be a good thing or a bad thing, depending on how fast a company adopts these social and mobile commerce technologies and prepares itself for the brave new world, since these two powerful forces have the potential for lowering the barrier to entry for new innovative companies.

In fact, THE most significant thing about the "socialization" and mobilization of e-commerce is that they create very fertile grounds for innovation – and this is due largely to the amount of commoditization that these technologies foster. The phenomenon is called creative destruction: As commoditization is accelerated, the existing value chain is destroyed. This makes room for innovation, which results in de-commoditization and the creation of a new value chain.

Because of creative destruction, the market ecology becomes very different – it is more transparent, more competitive, more unforgiving. But this seemingly hostile environment can actually be advantageous, especially for the small and medium businesses, because it makes it easier for new, innovative business models to challenge the incumbents.

Increased adoption of social and mobile commerce also pushes companies to serve customers better, because as customers have gone online and physical barriers are practically erased, competition among businesses has risen to a level never seen before.

Using their smartphones, today’s consumers have much more information easily at hand. They can get product reviews or compare features and prices at the click of a button. Sometimes, they don’t even have to search. News travels at the speed of light through blogs and social networks. Reputations are easier to build nowadays – they are also easier to lose or destroy.

One thing that online businesses should keep in mind is that a great number of their target clientele depend much on their smartphones not just for making online purchases but also for making online purchase decisions. Tools and sites such as GoodGuide and Svpply provide trusted information to a crowd that has grown largely untrusting.

GoodGuide allows users to find products with the highest and lowest ratings for health and safety, environment friendliness, and social responsibility. Svpply shows you what products were chosen by people who are like you and whom you like, based on your Twitter and Facebook connections.

By properly positioning themselves in sites and tools such as these, companies can penetrate their target markets quickly and build their brands at a speed that has been seldom seen in the past. In a setting such as this, it is no longer just about being the first or the biggest. Even small and medium companies can quickly build a reputation among consumers. It is now a matter of who can serve the customer better.

This is the true impact of mobile technologies and social networking on businesses. Social and Mobile Commerce are not just new channels for sales and marketing, they change the rules, opening the playing field to innovative new companies which effectively use information and personalization and serve the need of immediacy.

Yash Talreja, Principal, the Technology Gurus.

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