The new rules of social commerceAugust 13, 2012: 11:22 AM ET
The social media phenomenon is transforming the way companies connect with and make money from customers. It's a disruptive process.
By Gavin Michael, contributor
FORTUNE -- Facebook's IPO and subsequent stock market performance continues to be widely reported. What has attracted less coverage is that it soon will be dropping Facebook Credits in favor of local currency pricing -- a vital step towards offering full-service payment functionality online. A clearer signpost to the reality of "social sales" -- financial transactions taking place within a social site -- is hard to imagine.
Most companies' early efforts with social have been the equivalent of "brochureware" (just as they were on the internet back in the 1990s). And although levels of sophistication are growing -- Dell's (DELL) $6 million-plus in sales via Twitter, for example -- most social commerce experiments have a long way to go. All too often, when shoppers on a retailer's social pages are ready to buy, they're sent elsewhere to complete the transaction, disrupting what should be a seamless experience.
The goal is to enable and sustain integrated conversations with consumers across all channels – social and otherwise – establishing the mutually rewarding relationships that drive social sales. So how to get there?
The first step is to recognize that while social moves many of the factors influencing product awareness and demand beyond providers' control (and into the C2C space), the buzz of social conversation is also a great competitive advantage. One well-known car manufacturer understands this. The company monitors consumers on social media to learn their criticisms in real-time -- and acts on them at speed, instead of waiting for the next product-launch cycle. In one recent example, the company used analysis of customer feedback on social networks to corroborate evidence of dissatisfaction with the comfort of seats in one of its vehicles, before introducing new seats to future models.
Social also plays a key role in moving consumers from awareness to consideration. Some 90% of consumers trust peer recommendations (just 14% trust advertisements)* and businesses can start to realize value through participation in these peer-to-peer conversations. The key objective is to help create social capital and increase social connections between potential customers and those within their networks who are naturally inclined to recommend specific products.
Next, investigate how social can be used to compress the sales cycle so shoppers can move rapidly (and entirely digitally) from awareness to recommendation to purchase. Companies that can control that journey, creating easier and faster trips down the marketing funnel to the digital mall, will lower sales and marketing costs and boost sales volumes.
Shopping has always been a social phenomenon. Social amps up the experience, making the whole process of consideration, selection and purchase more interactive -- and more fun. Getting it right, and making it easy, opens a powerful new tool for businesses… the ability to enable impulse buys in a digital world.
Ultimately, companies need to see social commerce as integral to the way in which they communicate and transact with consumers. This means developing a coherent social strategy, acknowledging social's role at each stage of the marketing funnel and understanding where it intersects with e-commerce and physical environments. It can often coincide -- in-store, for example, where social platforms can be used to educate shoppers and close transactions.
Social commerce needs to become an "and," not an "or." Marketers will benefit from mastering social media and managing social tools. It's no longer about creating a single, central, industrialized e-commerce site to serve every possible function. Now, it's all about common tools and strategies deployed across multiple sites, apps, platforms and fora to give targeted customers specific and rich experiences.
This will call for agile efforts that evolve to match consumers' changing needs. Powerful analytic tools will play a vital role, helping marketers to understand what forms of marketing work best in particular social environments, as well as enabling them to analyze granular data and develop optimized solutions that sustain relevance to customers.
Social sales are happening already. And they'll soon become much more sophisticated – and far-reaching. Commonwealth Bank of Australia, for example, recently announced its plans to enable banking services through Facebook. And public service delivery in the social space cannot be far behind.
Social consumers are still up for grabs, but not for long. Many leading businesses are starting to "get" the rules of the game -- with the frontrunners increasing their investments in social platforms and social design mechanics so they can manage consumer interactions across all communication channels.
What the C-suite can do now:
- Introduce a clear top-down stance that defines the priority of social initiatives.
- Launch a "consumer interaction" inventory to capture how consumers interact with your organization.
- Survey your company to understand how it uses social and compare this with best practices.
- Identify and assess tools and players in the social space.
- Study the best practices of social's early adopters.
- Prepare for "social listening." Figure out what conversations your consumers are already having about your company (and where). Start participating in those conversations (no selling allowed!).
- Create better experiences for consumers by utilizing new social channels in combination with existing digital and physical commerce channels.
- Identify, foster, and support advocates among your consumers.
- Identify meaningful metrics for tracking social's success.
- Enable closer relationships between Marketing and Technology functions.
*Source -  NielsenWire, "Global Advertising: Consumers Trust Real Friends and Virtual Strangers the Most," July 7, 2009; Larry Weber, Marketing to the Social Web, John Wiley & Sons, 2007.