Social media has become popular as a communication channel for companies partly because of its low barriers to entry, along with its popularity among target customers. Social media channels are free to enter, but associated costs and problems become apparent later. That is also one of the reasons why the return on investment is hard to measure. Click here to download a PDF of the article published by Marketing Management.
Many customers today depend on their smartphones heavily for local shopping decisions. As of January 2012, 29% of U.S. consumers own an iPad or an e-reader and 46% own a smart phone. Some retailers have stepped in to cater to this trend by providing personal touches using technology rather than humans. As Apple
pushes into the retail industry, retailers are responding by offering iPad stations for consumers to research and
compare the products they are shopping for. Nordstrom has found itself surprised to find that customers are using its app inside its store to do research. It introduced the app to help customers shop online and order online while they were watching television. Based on my research using Social Media, customers have become disappointed with customer service and salespeople that are not knowledgeable about products. They have also become extremely comfortable with doing their own research online, interacting with computers that seem more knowledgeable than the salespeople at stores. Many of these customers do not want to be approached by a salesperson, however they all would like to find one when needed. That is not the case as many of their experiences and my own illustrate. I was at Orchard Supply Store over the weekend looking for a particular Hibiscus plant. First of all it was difficult to locate someone to help me. Finally when I did, all the person could do was to say he does not know what color the flower was going to be. I finally took out my iphone to do my research.
Young and old, have both become accustomed to having their smartphones and tablets answer their questions through web pages and customer commentaries. Many also still like to experience the touch and feel of products. Retail stores are in fact becoming the showroom for many products that are bought online. The things that will help them survive are:
1. Providing smart technology that is currently helping better than salespeople
2. Recognizing that they are acting as showrooms for their Manufacturer’s products and asking the Manufacturer for a higher fee to stock in return for offering the product at the same price as the online price
3. Changing the product in some way so direct comparison is made more difficult for the consumer
4. Having a few salespeople that are knowledgeable, trained, and ready to help when needed as a way to differentiate
5. Train salespeople to arm themselves with online intelligence on products so they can counter negative, biased, or inaccurate reviews. Equip them with ipads if they cannot answer the question themselves. An in-store app on products is another way to help customers, whether it is used by the customers or the salespeople or just placed within the stores as help stations.
6. Loyalty awards for repeat purchases. Even membership cards that gives them discounts and free shipping on
Zappos is an online store. However, it does not have shoddy customer service. Its customer service is always
accessible on the phone for questions without being put on hold. Based on all the negative comments about unhelpful and ignorant salespeople at retail, it seems that retail could use investing in a few good accessible salespeople as a differentiator. After all Apple stores did make retailing cool using its cool products, great looking store focused on design, and knowledgeable and helpful salespeople (although that has received mixed reviews). Use technology itself to help customers let salespeople know that they are needed. After all what use is location based technology if you cannot locate a salesperson when needed within a store. With point of purchase payment systems such as Square attached to an iPad, scannable coupons on cell phones, the role of salespeople as mere cashiers is also getting moot. Similar to how social media is being used to connect consumers and give them something of value that represents the brand personality, brick and mortar retailers need to find their own way to connect with their customers through the feeling of community. For brands like Nike, it has been through the online communities it has built around sports categories such as running. For bookstores, its the story reading or author signing events. Wholefoods does a wonderful job both online and offline in personifying its brand around the themes of sustainability, organic and local focus, and demanding a higher price for its products. All retail stores need the equivalent of these events to build their brand around such events that are useful to their customers. I have yet to see a clothing retail store partner with a fashion show or a designer. These are things that online stores can emulate (or already do through reviews) but cannot come close to as in a live setting.
Recently, a New York Times Columnist, Tim Egan, wrote an article titled “Please Stop Sharing,” in which he lamented the proclivity to over-share the banal and trivial on Social Networks and the negative consequences of saying something that lives forever in cyberspace. What was interesting was the number and variety of comments it generated. I examined 113 of those comments that were available online (as of December 16, 2011) doing a content and sentiment analysis. The results reveal there are at least five different segments based on perceptions of Social Networks, with a sizable segment of non-users that see Social Networks as unproductive, degenerate, or encroaching on privacy. More details about each of the segments and implications for Marketers follow.
The readers commenting could be segmented into five different groups as shown in the Figure below. There are those who defended over-sharing as not banal but as freedom of speech, or as what makes life. This constituted 16% of the sample of commenters. Here I could identify a couple of different segments. There was a second group of users of social networks that I term “Pragmatists,” who saw the benefits of social networks and felt it was up to you how you used it or how you reacted to the banal, trivial, or “over-sharing.” There was a larger segment of non-users of social networks. These constituted those who had tried it and decided it was not for them and those who did not want to use it. Again this group could be segmented into those who would not use it because they were concerned about privacy (Privacy aware). The second segment of non-users felt that social networks were either unproductive or represented degeneration of social and cultural values.
For more details and marketing recommendations, please click on my full article published at MarketingProfs.com – “Meh! Not Everyone ‘s Into Social Networks.”
- I have always admired Netflix for its attention to detail when it came to pleasing its customers. Yet, despite being so customer oriented, recently Netflix took a double turn changing its pricing and offerings and becoming the household and Saturday Night Live joke of the year. Our analysis shows that a different strategy could have increased Netflix’s revenues without alienating its current customer base.
Netflix’s New Pricing
In July 2011, Netflix changed its pricing from $ 7.99 a month for unlimited streaming and DVD rentals to a choice of options as follows:
- o $7.99 for unlimited 1 DVD (DVDs only plan) a month
- o $11.99 for unlimited 2 DVDs (DVDs only plan) a month
- o $7.99 for unlimited streaming only a month
- o $15.98 for unlimited streaming and DVDs a month
At the time of the announcement, Netflix had 24.59 million subscribers in the U.S. Since the unpopular announcement, the company has lost almost a million subscribers and now stands at 23.79 million subscribers domestically. After the pricing changes, it has 21.45 million subscribed for streaming and 13.93 million subscribed for DVDs. That reflects the current preference for streaming while there is still an existing need among its customers for DVDs.
What to learn from Netflix’s mistake about Pricing and Strategy
As Hasting recently suggested, streaming is where the future is with consumers shifting to broadband and mobile devices. Operational costs are also less for streaming, presumably since there are no handling and mailing costs. Assuming that Netflix wanted its customers to move to the streaming only format or a way to get people to switch in such a way as to increase its profits and revenues, this is what Netflix should have done.
The first mistake Netflix made was in not having differentiated pricing when it started offering streaming as an option to DVD rentals. The possibility of customers opting for the hybrid option is because of lack of availability of their choices in both formats and not because they would like to receive their movies both as a DVD and in streaming. After all, who would not want the convenience of streaming their choice of movie when they want it as opposed to planning ahead for a DVD to watch.
Research shows that consumers are predictably irrational and need to feel that they are making a better choice and getting a better return. This does not happen when a clearly inferior option is priced the same as the somewhat superior option. Netflix ‘s thinking that maybe it should reduce the price on its streaming only option is likely to leave money on the table. Your pricing strategy should always include an inferior decoy or an unwanted option. Netflix currently thinks that its unwanted option is DVDs and its preferred option is streaming only.
What Netflix should have done is to make an offer that is attractive and is the company’s preferred option while making the customer feel happy that they were getting a good deal. This typically would happen when you offer an inferior choice (which also coincides with the company’s least preferred option strategically, in this case the DVDs only option). This needed to be coupled with an attractive choice that makes the customer feel that they are getting a really good deal for the price paid (For Netflix this would translate into the DVD+Streaming option).
In an alternative scenario, Netflix could have offered a different pricing alternative as follows:
- o Unlimited DVD only per month at $7.99 (least attractive for customer, least attractive for Netflix strategically
- o Unlimited streaming plus DVD at $11.99 a month (most attractive to consumer and OK option for Netflix)
- o Unlimited Streaming Only at $14.99 a month (Not as attractive to consumer, most attractive to Netflix)
Our analysis shows that this hypothetical scenario with an inferior decoy would have increased Netflix’s revenues without alienating its base. The problem with Netflix’s current new pricing is that its decoy does not appear inferior as it does in this alternative scenario. The decoy is the option that Netflix really does not want. Ideally, Netflix would like to see more customers switch to streaming and have its revenues and profits increase. Ideally, customers would like the streaming option to DVD. However, they have constraints – not enough choices from Netflix, or not streaming ready at home.
The fact is that the most desirable option for Netflix today should be subscribers subscribing to both. Eventually we know that we will all switch to the streaming only option given the choice of content and easy broadband to TV access. By forcing consumers to switch to a less preferred option in terms of value (pricing wise, content wise, or a combination thereof), Netflix made a mistake. It is only a matter of time before its DVD only base and its combination base switch to the streaming only option. Netflix would be wise to consider this when pricing for the future. For more detailed analysis, you can request a report here.
Facebook, LinkedIn, and Twitter User Demographics and Behavior: Who Are They And How Engaged Are They?
Facebook dominates in usage, but user demographics, usage, and behavior on the three different social networking sites differ, with implications for Marketers.
Facebook is the pre-dominant social networking platform when seen by different measures today. At least three different reports recently point to its popularity compared to Twitter and LinkedIn on various measures. GooglePlus, at this point with limited introduction, is not considered here. Each of the reports discussed here provides in totality a more complete picture of users of the three social networking sites.
Social Networking has become a fabric of people’s online social lives. According to a recent survey (April/May 2011) of U.S. adult Internet users by Pew Internet, 65% of U.S. adult internet users now say that they use social networking sites compared to 34% in 2008. Facebook dominates the Social Networking space with 92% of those who say they use social networking sites using it. Only 18% report using LinkedIn and 13% use Twitter.
According to data from Nielsen (Figure 1), Facebook is the envy of the industry in the amount of time spent on it, with Americans spending 55 billion minutes on its site in May 2011, compared to almost less than half that time on Google/YouTube taken together followed by Yahoo in third place. What is remarkable is the huge difference between the first and second Web properties in terms of the number of minutes spent on the site.
Facebook has also become the preferred social networking site for people interacting with their favorite brands. Most people have at least 2-4 favorite brands that they interact with regularly on Facebook as opposed to other social networking sites according to a recent article by Mashable.com.
Facebook appears very popular on various measures including frequency of usage compared to LinkedIn and Twitter (See Figure 2). Fifty-two percent of Facebook users engage with the platform daily, much more than users of LinkedIn and Twitter.
However, there are stark demographic and behavioral differences among users of the different social networking sites. These differences call for different ways to use each of these platforms for Marketing. More details can be found in the accompanying free report upon request.