Perspective Matt Anderson Joe Sims Jerell Price Jennifer Brusa

Turning “Like” to “Buy” Emerges as a Commerce Channel Contact Information

Berlin Düsseldorf New York Dr. Florian Gröne Roman Friedrich Fabian Seelbach Senior Associate Partner Senior Associate +49-30-88705-844 +49-211-3890-165 +1-212-551-6073 [email protected] [email protected] [email protected]

Chicago Frankfurt San Francisco Jennifer Brusa Olaf Acker Jerell Price Associate Partner Principal +1-312-578-4550 +49-69-97167-453 +1-415-263-3764 [email protected] [email protected] [email protected]

Dallas Hong Kong São Paulo Joe Sims Edward Tse Fernando Fernandes Partner Senior Partner Partner +1-214-712-6636 +852-3650-6100 +55-11-5501-6222 [email protected] [email protected] [email protected]

Dubai Houston Vienna Karim Sabbagh Matt Anderson Klaus Hölbling Partner Partner Partner +971-4-390-0260 +1-713-650-4142 +43-1-518-22-907 [email protected] [email protected] [email protected]

Booz & Company EXECUTIVE As consumers around the globe spend more time on social SUMMARY media of all kinds, it is inevitable that some of their posts and comments relate to what they are going to do at the mall and what products they like. Many consumer-oriented companies have already responded to this shift by setting up Facebook fan pages or Twitter feeds. These can be great ways of engag- ing with and influencing customers, especially since the individuals on a social networking site are usually connected to other individuals whom they trust and respect. So, in the best case, a company that has something appealing to sell can, through an initiative involving social media, provide an impe- tus far superior to traditional advertising—recommendations from the most influential people of all, the prospective buyer’s friends and family.

But company influence through social from the unique characteristics of groups and traditional marketing social media, including the oppor- models is stopping well short of the tunity to get quick feedback from emerging opportunity. For many multiple friends and family members. customer segments, shopping in the physical world has always been The market for social commerce has social: I can go to the store with been embryonic to date, but that will you and put an item in your shop- change over the next five years as ping basket, saying “This is perfect companies race to establish stores, for you.” Now, some companies are pushing up social commerce revenues using social media in a similar way: as sixfold, to US$30 billion globally. a place where they can transact busi- As this growth surge happens, social ness with their customers and where commerce will take its place alongside customers can shop with each other. stores, telesales, and the more tradi- E-commerce is coming of age. These tional Web to emerge as a significant trendsetting companies are focused sales channel in its own right. on products and services that benefit

Booz & Company 1 Social media has revolutionized companies, it is also handing them THE IMPACT OF the way people communicate and an opportunity. Retail, consumer SOCIAL MEDIA maintain relationships. Globally, electronics, and media companies Internet users now spend more than are among the many types of ON CONSUMER four and a half hours per week on organizations that have followed BEHAV IOR social networking sites, more time consumers into the social arena, than they spend on e-mail.1 There is creating Facebook fan pages, sending a public quality to how communica- microblog messages, and building tion happens on social networks— communities. A 2010 presentation people are, to use the Facebook by Shop.org said that 68 percent analogy, sharing their thoughts on of North American business-to- “a wall” for others to see. As more consumer (B2C) companies have and more of what people think and acquired at least some customers do ends up getting communicated on through Facebook.3 these new-age bulletin boards, it is inevitable that social networks will Lead generation—the ubiquitous start to affect what consumers buy “likes” of Facebook—will not be the and how they shop. In a way that has most important activity for long, never before been true, consumers however. The next phase will go are determining which products and beyond mere communication and services succeed and are shaping the influencing. Consumers will transact messaging. Underlining this point, commerce inside social networks— Altimeter Group says there is now selecting products, adding their a fifth “P”—people—to add to the selections to shopping carts, and traditional four “Ps” of market- completing purchases through pay- ing (product, price, placement, and ment with credit cards and points. promotion).2 As they do so, the era of social com- merce will commence in earnest. If the new medium of social networks is creating challenges for

Consumers will transact commerce— from selecting products to completing purchases through payment with credit cards and points—inside social networks.

2 Booz & Company EARLY directly into its Facebook fan page, The innovations in social commerce allowing consumers to make quick are happening globally. Hyves, the DEVELOPMENTS purchases without having to leave most popular social networking site IN SOCIAL Facebook. The company has also in the Netherlands, has developed a used Facebook as a component of payment system that allows users to COMMERCE its Mother’s Day campaign and transfer as much as €150 (US$201) has plans to integrate with other to other users to pay for goods Facebook features such as birthday available within the Hyves payment calendars and group gifting. It isn’t system. The Hyves site, which has hard to imagine a company like more than 10 million accounts, 1-800-Flowers taking advantage of has also created a consumer-to- Companies that are pursuing social other social networking features, consumer marketplace called Supply commerce regard it as a distinct such as a person’s likes and dislikes & Demand that is analogous to channel underpinned by a significant about colors, to help gift givers Craigslist, allowing members to post new aspect of consumer behavior. decide which bouquets to send. items for sale. This new channel represents the merger of e-commerce and social Facebook isn’t the only social How ready are consumers to buy media, as transactions are actually network on which commerce is products through social media? A performed within the platform rather happening. Many companies, for 2010 survey by Booz & Company than at the retailer’s e-commerce instance, have used Twitter to sell of consumers who spend at least one site. While social commerce is still their products. As of late 2009, Dell hour a month on social networking nascent, there are some notable Outlet had already sold $6.5 million sites and who have bought at least examples of companies that are in products through its Twitter feed;4 one product online in the last year innovating in this area. airlines such as AirTran Airways provides some insight. Twenty- have also used Twitter to sell seven percent of respondents said For instance, 1-800-Flowers, a floral discounted tickets. Since November they would be willing to purchase retailer that has ridden a history of 2010, users of Apple’s Ping physical goods through social channel innovation to a national recommender have been using tweets networking sites. Moreover, 10 presence with more than $700 (Twitter’s 140-character posts) percent said their buying through million in revenue, now has a fully to send song previews and iTunes social networking sites will be functioning Facebook store. It has purchase links to their followers.5 incremental to other buying they embedded its e-commerce platform do—that is, they will end up buying

Booz & Company 3 more physical goods overall. (The as companies find ways to embed (see Exhibit 1). This estimate is 73 percent who said they would their e-commerce engines within only for hard goods—electronics, not purchase goods through social social media, the market for social apparel, movie tickets, and the like. networking sites largely cited commerce will skyrocket, helped Services are equally promising for concerns related to security and in part by new models for buying social commerce—the online storage privacy, two areas that many big and by the availability of products company seeking new customers, social networking sites are already developed specifically for social the wireless company offering working to improve.) networking sites. an upgrade, the cable television company providing downloads or These emerging attitudes make it By 2015, the dollar volume of streamed versions of old episodes. unlikely that social commerce—a goods sold through social media Companies like these will have cousin, after all, of the more should rise sixfold, to $30 billion multibillion-dollar opportunities too. familiar e-commerce—will face from $5 billion this year, according hurdles related to its newness. And to Booz & Company estimates

Exhibit 1 Booz & Company Estimate of Social Commerce Market Size (2010-2015; in US$ Billions)

$30

+56% $14 U.S. $20

$9 $14

$9 $5 $16 Rest of $3 $5 $12 the World $1 $8 $6 $4

2010 2011 2012 2013 2014 2015

Note: Numbers might not add up because of rounding. Source: Forrester Research; GP Bullhound; Euromonitor; Booz & Company analysis

4 Booz & Company WHERE SOCIAL Companies see opportunities to use doing anything at all in this area (see social commerce at every moment Exhibit 2). Many companies in China COMMERCE CAN along the path to purchase—aware- are in some way using or planning HAVE AN IMPACT ness, consideration, conversion, and to use Tencent QQ (Facebook is still loyalty and service—and also to mea- prohibited by government authori- sure the success of their efforts. ties) to create awareness of their products; most Brazilian companies Awareness are looking for ways to use , a To date, most companies’ social social networking service operated by commerce activities have focused on Google. In the U.S., many compa- branding and user-generated content nies are past the looking stage; as of in support of existing marketing the end of 2009, approximately 69 initiatives. This is the topmost part percent of U.S. retailers had social of the marketing funnel—the level of network pages, 54 percent used simple awareness—and it would be microblogging sites such as Twitter, hard to find a sizable B2C company and 58 percent published customer anywhere in the world that isn’t ratings and reviews.6 Most of this

Exhibit 2 Typical Social Activities in Each Stage of Marketing Funnel

MARKETING FUNNEL TYPICAL ACTIVITIES WHAT SOCIAL MEDIA ENABLES

Branding - New environment for promoting broader brand

Awareness Content Creation - Forum for new social/viral content (often user-generated)

e

Traffic Generation - Additional ways to drive traffic to own site or presence erienc

p Engagement - New microsites/widgets/apps to engage potential customers Consideration Innovation/Ideation - Proactive customer engagement in product/service innovation

Customer Ex

n Lead Generation - New mechanisms for targeting and incentivizing potential customers

Commo Purchase Decision - Additional e-commerce channel Conversion - Unique buying propositions - Purchases as syndicated social content Loyalty/Advocacy - Deeper connection with customers after sale - Activation of brand loyalists to market/sell on your behalf Loyalty/Service After-Sale Service - Additional mechanism for community-based support

Measurement - Rich sociographic data set for effective real-time social targeting

Source: Booz & Company

Booz & Company 5 early activity, however, has been incremental revenue, and repeat social network called iPartment to decentralized and uncoordinated, business—and thus more accurately promote the opening of a new retail making it impossible for companies measure ROI. The key for companies location in Shanghai. Through the to accurately assess their ROI from will be understanding how to use promotion, the site’s users, mostly these efforts. social media in each of these stages. affluent Chinese women creating virtual apartments, entered contests At least for the moment, awareness Consideration and sent coupons for free Starbucks seems to have limited value in actu- Many companies have already started products to their connections. ally spurring social commerce. In efforts in the area of consideration, Booz & Company’s 2010 survey, 71 mainly in the form of applications Savings.com also put a social spin on percent of social networking users that entice customers to leave the the age-old coupon concept. The cou- said their “liking” a company on social network site and move to the pons it posts to its site are voted up, Facebook would have no impact on companies’ own websites. Companies commented on, or shared via Twitter, their propensity to buy from that can and should do more in the con- Facebook, Digg, Reddit, Delicious, or company. sideration stage, principally in two plain old e-mail. areas: generating leads and generat- Social commerce will almost certainly ing new ideas. Generation of new ideas can be have the biggest impact at the lower enhanced through the use of com- end of the funnel, in the consid- Leads can be enhanced significantly munities. Dell’s IdeaStorm has been eration, conversion, and loyalty by developing new mechanisms particularly effective at eliciting ideas and service stages. These are areas for targeting, data gathering, and from users—what might, in this where it is possible to establish clear motivating potential customers. For context, be called social ideation. metrics—including conversion rates, instance, Starbucks used a Chinese Thousands of ideas have been sub-

Social commerce will have the biggest impact in the consideration, conversion, and loyalty and service stages of the client relationship.

6 Booz & Company mitted through the site, and several runway where site visitors can put loyalty and give customers a chance hundred have been implemented. The together outfits to share with their to advocate on behalf of the brand. well of ideas is more reliable because friends or to present to the com- Social commerce introduces the pos- it originates with customers. munity to be voted on. A pair of sibility of multiple new touch points friends shopping at Wet Seal can use after a purchase. These touch points Conversion a service powered by Sesh.com to can have many benefits, including This is where social commerce will view the same product pages, chat in reducing churn. have its biggest impact—providing real time, and use a drawing tool to unique buying propositions for notate or highlight products they are For example, when a user “Likes” customers and new touch points for considering. a brand on Facebook, he or she can companies. become part of a community that Social commerce is also ideal for receives special incentives, promo- Group buying and group gifting facilitating conversion in other areas. tions, or early access to new prod- are good examples of new buying Take the example of music concerts, ucts. And in the future, the “Like” propositions. Social platforms can which for many urban consumers are button (notwithstanding its casual conveniently bring together family a popular way to spend time. Many use today) could become the one- and friends to contribute to a gift for fans would be more likely to attend click way to join a loyalty card a specified recipient. Facebook appli- an event if they knew their friends system. Social loyalty platforms cations such as TheBigGift.net and would accompany them, and if the will have the advantage of allowing websites such as eDivvy.com provide process of inviting friends and buying customers to exchange points in a a simple platform for users to set up tickets jointly were more seamless. A socially based marketplace. group gifting and handle the logistics site called Eventbrite allows for just of collecting money, sending remind- that sort of group planning through Measurement ers, and sending the gift. Twitter and Facebook. Eventbrite While ongoing measurement is not does not yet allow for sales directly actually part of the marketing funnel, Social shopping is another example through social media sites, but that it is a critical way for companies to of a unique buying proposition and may change. gauge the success of their initiatives. is particularly relevant for fashion- Social commerce will marry multiple related products. A study published Developments like group gifting, types of data—purchase, behavioral, by eMarketer.com showed that 81 social shopping, and ticket buying and demographic—to form socio- percent of teenage girls use their provide a small glimpse of what is graphic data that tracks not only friends and peers as a source of trend in store. They are the equivalent of what individuals buy but what their information and 45 percent seek the selling its first book and friends buy. Sociographic data is opinions of those same groups when eBay its first collectible in 1995. collected in real time as customers purchasing clothing or footwear.7 Much more is coming. browse, recommend, buy, and rate products. This gives companies the Wet Seal, a popular retailer serving Loyalty and Service chance to influence behavior along teen girls, has developed a virtual After a sale, companies want to build the entire purchase path.

Booz & Company 7 GETTING fund an innovation group focusing projects, and sociographic data to on social media. Many companies map out different social commerce STARTED: FOUR don’t have the expertise they need to strategies to get a sense of what their IMPERATIVES design, test, and run social commerce customers will see, how they will projects and will need to add new respond, and what they like best. capabilities. Surveys and other forms of primary customer research can be instrumen- Imperative 2: Develop a strategy tal in identifying needs and assessing for getting the data you need. What how a company is viewed vis-à-vis its would a company most like to know competitors. Together, this informa- For most companies, social com- about social media? Is it what the tion can help determine what the cus- merce represents a new channel, with market is saying about the company tomer base wants and how a social much to learn and master. There are itself and its competitors’ brands commerce strategy should evolve to four imperatives that every company and practices, or is it that a cus- deliver it. should keep in mind. tomer prospect is in the market and likely to buy in the next 24 hours? Imperative 4: Integrate social Imperative 1: Jump in soon and Companies should develop a “wish commerce into an overall multi- learn by doing. It is usually a good list” of information and then seg- channel strategy. As social commerce idea to study a new opportunity ment it by how hard it is to get. At becomes a bigger part of the overall closely, but given the fast pace at that point, they can identify partners sales mix, it is important to under- which social commerce is evolving, or vendors that can provide it. The stand its position in the company’s companies must be willing to learn key is to have an easy-to-use, flexible broader multi-channel strategy, and while doing. They should place some platform for collecting and using in particular to determine the impact targeted bets, particularly in the data. After all, the types and sources social commerce will have on other areas of consideration, conversion, of data that companies need are channels. It is especially important and loyalty and service. The ones likely to change quickly. that the social channel not be treated that can do so should start an actual as a one-off program, but rather be store in a social networking service Imperative 3: Define what the supported and integrated from both where they’re doing transactions. customer experience should be. a resource and an organizational The ones that can’t go that far should Companies should use tests, pilot perspective.

8 Booz & Company Endnotes

1 “More Time Spent on Social Media Than E-Mail Worldwide,” 5 “Twitter Links Users to Apple Music Social Network,” eMarketer.com, November 4, 2010. www.emarketer.com/Article. Reuters, November 11, 2010. www.reuters.com/article/ aspx?R=1008025 idUSTRE6A A46R20101111

2 Lora Cecere, Altimeter Group, “Pioneers on the Move: Rise 6 Sucharita Mulpuru, Forrester Research, “TechRadar for of Social Commerce,” November 1, 2010. www.altimetergroup. eBusiness and Channel Strategy Professionals: Social com/2010/11/pioneers-on-the-move-rise-of-social-commerce. Commerce, Q1 2010,” February 25, 2010. www.forrester.com/ html rb/Research/techradar%26trade%3B_for_ebusiness_and_ channel_strategy_professionals/q/id/56069/t/2 3 ”The Future of Shopping,” Resource Interactive, 2010 Shop.org Annual Summit. www.resourceinteractive.com/#2 7 “How to Influence Teen Girls Online,” eMarketer. com, November 17, 2010. www.emarketer.com/Article. 4 Adam Ostrow, “Dell Rides Twitter to $6.5 Million in Sales,” aspx?R=1008048 Mashable.com, December 8, 2009. www.mashable. com/2009/12/08/dell-twitter-sales/

CONCLUSION which to build their social commerce About the Authors capabilities as the platform evolves. As always, learning what doesn’t Matt Anderson is a partner with Booz & Company based in Houston. work will be as important as learn- He specializes in digital innovation ing what does. and value chain disruption, Web 2.0, social networking, applications and Each step along the path to pur- e-commerce, growth strategies, and chase—generating awareness, entic- multi-channel marketing for clients in Now that social networking has ing customers to buy, and cultivating consumer electronics and high-tech become embedded in the fabric of their loyalty—presents its own industries. everyday life for millions of consum- opportunities. Companies should be Joe Sims is a Booz & Company ers globally, companies are keen to considering targeted efforts all along partner based in Dallas. He is an find ways to leverage these online this path, while integrating social industry-recognized leader in digital relationships for commercial gain. commerce as part of an overarching convergence, including telecommuni- Social network sites promise to be multi-channel strategy. Developing cations strategy, wireless broadband the next generation of e-commerce an integrated and comprehensive and Internet services, and next gen- engines and are moving rapidly strategy for gathering customer data eration applications and cloud-based in that direction. Marketers and and mining it for insights, imagining services. Joe has served numerous strategists are smart to feel a sense new methods for customers to decide enterprise clients in healthcare, finan- cial services, transportation, manu- of urgency in understanding and and buy together, and building a facturing, energy exploration and experimenting with direct commerce compelling customer experience will production, higher education, and within these platforms; early movers be essential to succeed in this new federal, state and local government. will have a solid foundation on era of socially powered commerce. Jerell Price is a principal with Booz & Company based in San Francisco. He specializes in growth strategies, go-to-market strategies, and sales/marketing effectiveness for companies in the high-tech, retail, and consumer products industries.

Jennifer Brusa is an associate with Booz & Company based in Chicago. She concentrates on strategic growth initiatives and technological enable- ment of commerce for consumer and high-tech clients.

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