Rise of Social Commerce: Lora Cecere, Altimeter Group

Lora Cecere, Partner, Altimeter Group

4/8/2011

In the last five years, the consumer goods industry has continued to consolidate. Why? Manufacturers are trying to gain power to have more muscle with retailers and improve global presence. Mergers and acquisitions have redefined the landscape with Kraft/Cadbury and Unilever/Alberto Culver as recent examples. So how does a mid-market company compete? The rise of social commerce gives mid-market companies a new opportunity to build a relationship directly with the shopper and manage the long tail of the supply chain more easily. These five success factors raise the odds of success:

1. Social Must Precede Commerce. Social commerce — the use of social technologies to enhance and define the shopping experience — is a new channel. It is also an exciting new way to build a direct relationship with the shopper. However, it is only successful if social precedes commerce and the manufacturer builds a relationship with the shopper. It should not be seen as an extension of advertising or e-commerce.

2. Be Where the Action Is. To be successful, consider presence in four social mediums: Twitter (customer service and listening), Facebook (direct connection with fans), YouTube (product advocacy/usage tips) and LinkedIn (for human resource purposes). It is more than just an f-word (f-commerce that is) and must be tightly aligned with e-commerce strategies, but it is not e-commerce.

3. It is about the Relationship, Not the Technology. While it is easy to get caught up in the technology (so many great new offerings), at the end of the day, it is about building and enhancing the relationship. Use the right technology to enable your relationship.

4. It Must Improve the Shopping Experience. The effort should only be considered if it improves the relationship. So many companies fall in the trap of being enamored with new and cool technologies. It is a great time to redesign the experience. Consider the use of syndicated reviews from companies, like Bazzarvoice and PowerReviews, video content from companies like EXPOTV, and location-based marketing and couponing from companies like Groupon, Shopkick and GetSatisfaction.

5. Be Open. Be Genuine. Be Active. While traditional channels are about message control, in the social channels, the power shifts to the buyer. It is all about being open, genuine and actively participating in the dialogue. This is a major change management issue. Most companies want their employees locked behind the firewall, and have not trained personnel to build and retain relationships with the buyer through social techniques.

So, while e-commerce had barriers for manufacturers to directly sell to customers, social channels are less threatening than traditional retail channels and offer a new opportunity for product launch. Small companies can compete in new ways, but only if they know and follow the rules.