AFG Venture Group Dispatches

Corporate advisory and consultancy in Australia, South East Asia and India.

Social Networking as a Means to Enhance Your Business

by Ms Kim Anderson, CEO, The Reading Room

We live in a connected world. The internet has changed the way in which we conduct every aspect of our lives. We are now connected to each other, anywhere, anytime, 24 hours a day, 7 days a week, 365 days of the year. Being connected has changed the way we travel, the way we do business, the way we communicate, the way we shop, the way we meet people, and the way we transact.

While on the whole this has made our lives easier and perhaps more flexible, the speed at which we now live has created some downsides. We are now bombarded with information, instantaneously; newsletters, updates and invitations now overwhelm our emails to the point we are now slaves to our inbox, checking our phones, iPads, constantly, and being tweeted and poked 24 hours per day.

Email has become the burden of our lives – the “In tray” on our back.

“Being connected” these days is an integral part of your business, and it’s not just about having a website or enabling online access to your customer’s accounts. If you are providing these services you are doing the bare minimum for your customers. If on the other hand you are providing your customers with the opportunity to connect not to you but with each other, and in turn providing connections to and with the enterprises you invest in, you are well on the way to creating a networked environment, a community, more commonly referred to these days as a social network, from which both you and your members will reap the rewards.

Using social networking tools to create a community is key to being connected. It is easy to dismiss these kinds of tools as being about the eGeneration. It’s easy to dismiss Social Networks as being about socialising not working – about play not business. The very worst thing you can do is see it as just another form of marketing to engage in a one-to-many conversation. Dismissing community and connectedness through social networking tools is not only choosing to neglect your next generation of customers, but it is ignoring the very key to growing your business.

There is no doubt that there is a great deal of hype about social networking and it’s potential to replace your current marketing initiatives, a way to establish new brands overnight. So many companies are diligently establishing presences on Facebook, Twitter, LinkedIn and other social networking sites without a clue as to why or how they can benefit. For many the true value of social networks remains unclear, and while eMarketers and agencies tout them as tremendous enablers and amplifiers of word of mouth, few consumer companies have unlocked this potential.

This is because jumping on the bandwagon is not about creating a page on Facebook for your brand, setting up a Twitter account or sending out the occasional eLetter with updates on your company. The fundamental most important aspect of social networking is the community and the tools they provide to connect with each other, not the sites themselves, and the way in which businesses use these tools to create a community that can extend your brand, reinforce your key benefits (not messages) and provide a way for your customers to market your brand through word of mouth.

What are these tools and why is word of mouth through a social network on the internet so different?
Social networking is not just for the young. More than 70% of mum’s are on Facebook, and the average age of a School Mum is 40+. (Telstra State of the Nation Report, 2009.)

Secondly, in the US in 2009, 35-54 year old users of Facebook grew from 16.6% to 29% and 18-24 year olds dropped from 40.8% to 25.3% (, 2010).

In Australia, the 55+ age group visits shopping and classified sites more than any other segment; they account for 26% of visits vs.12% for 18-24 year olds. And 60% of 65 years and older have used the internet in the last 12 months. This number increases significantly to 90% for 60-64 yrs and 97% for 40-49 yrs (Sensis 2009 e-Business Report & Denis Masseni).

The sceptics say Social Networking is just another way of saying “word of mouth” and to some extent they are right. Or at least they are right in saying that it is their customer doing the marketing for them and that this is not new. In a study conducted by Soup and Keller Fay (an American brand expert) Australians mention a brand about 68 times a week. This number escalates to 81 times a week for those aged between 18 and 29. Men by the way mention brands only one time less than women, 67 per times per week.

According to a study by Mindshare/Soup, in 2007, Word of Mouth is the most trusted marketing channel available to advertisers. Telstra, Optus and Coles, topped the most talked about word of mouth brands, followed by Apple. Not surprisingly this can be good and bad. Apple shot to the top when negative comments were stripped out.

Word of Mouth in the traditional sense is about “I recommend to you a product’ – it could be Vegemite, or a financial product. You in turn tell someone else. There is nothing new about this. But in many ways it is very time inefficient and this is why.

Firstly, it takes time to get the word out. How long did it take to tell you? What information was distorted or missed out in the intervening time and telling? Did the person conveying the message, do so in a way that the supplier would see as reflecting key messages. For example, “I signed up with XYZ Financial Group. The fees are pretty low and the returns are pretty good. It’s a no brainer”. My friend is talking to another friend and says “my friend joined XYZ Financial Group and there are no fees and the returns are guaranteed”.

We all know how this works. Sometimes it is safer to choose traditional advertising for your brand, and purchase your key messages through advertising, rather than have your key messages mashed into unrealistic expectations and client disappointment.

This is where social networks and social networking tools have changed everything. Word of mouth generated by social networks is a form of marketing that must be earned—unlike traditional advertising, which can be purchased.

When you think of word of mouth as media, it becomes a form of content, and businesses can apply tried-and-true content-management practices and metrics to it.

Traditional marketers often don’t get Social Media because it has not evolved from traditional marketing practices which focus on key messages about Brand and Brand Awareness, for example, Nike “Just do it”, CBA’s “Which Bank?” or St George Bank’s “Big Enough Small enough”.

Social media has evolved from entertainment, via the young. It’s the reason why companies have struggled to come to grips with its use. Its lack of structure, greater transparency and entertainment base is doing in marketer’s minds. Brand control was the old mantra which has been replaced with ‘being part of the conversation’. The single biggest change is that Word of Mouth takes place as part of real time conversations and the key message is distributed in real time and is of value to those receiving it and for those who go looking for it.

The reason those companies are racing in to create Twitter accounts and Facebook pages is because this is where these key messages are created and transferred in real time, one-by-one, instantaneously and directly without the time delays that are so much part of the past traditional verbal exchanges. The referrer is often a real user of the product, not an actor, has applied value to your product and can provide others with information that is most importantly not distorted or “lost in translation”.

In the new world, consumers are given tools to participate in these conversations. It is the tools that enable these conversations that are the key to marketing using social networks.

What are these tools? First and foremost it is a share tool. I have to be able to share product information
easily in real time. Forwarding by email is critical or being able to embed the information in my email, my Facebook wall, my Twitter page, or my blog. Sending information for some is akin to sending traffic away, but sharing content is fundamental to viral marketing. Most content is shared by embedding features in widgets. These are small mini apps that give you a taste of the product.

Second, I have to be able to rate the product. I also need to be able to see how others rated the product. Seeing how you rate a product is all about understanding how consumers feel about your product. If they don’t rate it highly you need to know so you can address this. It’s hard to face this kind of direct feedback but if you are smart and flexible you’ll listen and respond.

Thirdly I have to be able to recommend this product to others easily and quickly. This means being able to type in a member name or email address and press send. Sharing and recommending content is a little different and learning how to use them is key. Sharing is relative to you. I use this product, this is who I am. It might not be right for you but it tells you about me.

Recommending is going to the next step and effectively endorsing the product at no cost to the brand owner! Understanding how these two work together and differently is key to ensuring you don’t start spamming people. To make this clear on our site, you can share what you are currently consuming which tells others about you. You can also recommend what you are consuming which is to say you have used the product and would recommend it to others.

Fourthly, you have to be able to comment on the product. If you can’t add your comments and other’s then you cannot start a conversation. Again, you might not like what you read but if you value market research and you are flexible this is a key way to finesse your product.

Finally, and what is key in the use of all these tools it that you have to have complete transparency. If you want to say something bad, you can, and you won’t be punished. My comment will not be removed, but hopefully responded to positively and proactively. Perhaps this is the reason many companies shy away from being involved in Social Networking sites. Consumers will not only tell you what is right with your product, but what is wrong with it. And there is an expectation for you to address the issue.

This level of transparency has other demands. And increasingly consumers are becoming more and more understanding about the data you collect, not only about them but other consumers. This is where companies need to start treating customers as part of their community.

Let me give you an example. Recently, I wanted to know how “green” our household was. Each quarter I get a statement outlining how much electricity I used compared to last year, and other steps I can take to lower my carbon footprint. Now I found this very helpful, but I wanted to know more. How did I compare with others in the street, in my suburb and nationally? What were the three single biggest contributors to my consumption? Now, I know that the company has this data; if they send me mine then they send everyone else theirs. What is the average, and how can I do better?

It won’t surprise you to know I didn’t get very far in my questioning. And yet it is this kind of conversation that consumers now want to be able to have with the enterprises with whom they do business, particularly post GFC. Such a conversation would create a community of environmentally concerned customers who may well reduce their spend with the company but my remain more loyal in an increasingly competitive marketplace.

It is this kind of transparency that commercial entities must respond to. In this new world testimonials are no longer useful unless they can be validated. Pictures of actors on the front of brochures declaring how the product has worked for them need to be replaced with real time conversations about the benefits of doing business with you and most importantly with the tools that enable constructive and useful feedback.
Feedback conversations are not easy. But this is what being connected is all about. It takes real guts to listen to what your consumers are saying about you and address it. And while you might think they are not always right their comments are still valid.

A commitment to being connected means a commitment to creating high-quality interactions and conversations. This means responding to your community of users through constant monitoring 24 X 7,
not five days a week between 9 and 5pm – no gimmicks, and no old marketing tricks. It also means more planning, better understanding of your customer base, and the creation of online communities that provide tools to empower your consumer, enable them to transact with you online, and to enter into meaningful dialog about your product.

The basic laws of consumer behaviour still apply in social networks. Companies can take full advantage of social networks as powerful notification tools, alerting Users to sales or promotions. But companies too must be mindful that these emails, alerts and Tweets are valuable to the consumer and must be designed to generate action that is either a purchase or a virtual word-of-mouth extension to other possible customers. They cannot be junk mail, but rather legitimate content objects—actual pieces of media that we want the initial recipients to distribute to their friends.

This is why brands are flocking to social network sites, because they provide the tools that enable them to engage in these conversations without having to build all the applications themselves.

Acquiring a customer in this way means your cost of acquisition can be reduced significantly. Rewarding customers for introducing other customers to your product could be the most significant and most successful part of your marketing strategy.

About the Author

Kim Anderson is founder and CEO of a global community of readers for the sale and discussion of eBooks. She is also a Fellow of Senate of The University of Sydney since 2004, a non-executive Director of and a non-executive Director of the STW Group.

Kim’s career spans a wide range of media development including book, magazine and newspaper publishing, online media, mobile and free to air television including digital and interactive formats.

Originally based in Sydney as Non-fiction Publisher for HarperCollins, Kim has worked for a variety of book publisher and Newspaper proprietors, including John Fairfax and Sons, Prentice Hall, Grolier and Kevin Weldon and Associates. In 1993 she was posted to New York to set up a new media vision for HarperCollins worldwide working closely with 20th Century Fox, News Electronic Data and other news subsidiaries. In 1995 she returned and joined PBL to create Australia’s number one online portal She was responsible for the brand, content and operating strategies and role out. In 2000 Kim transferred to the Nine Network, before becoming CEO of Southern Star Entertainment in 2004.