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Frustration: Thy Name Is Social

September 27th, 2011

Kegley also argues that it’s not merely buying more items or spending more in total for that purchase. The power of the referral is causing consumers to be less focused on getting the best price. In short, they’re willing to pay more when coming from a Twitter or Facebook referral than when coming from other sources. (Do we have your attention now, you margin-obsessed product line managers?)

“The fact that Twitter users may be going online to share information with their social networks—not with intent to purchase—may explain the decreased frequency of shopping,” Kegley said. “But when they are inspired to purchase, spontaneity may play a role in decreased price sensitivity.”

There actually is a way to track social purchases, but it’s hard. It’s analyzing the millions of references to your products in social media and simply correlating that information with the purchases. Indeed, it’s the exact type of analysis we’re expecting to see from Wal-Mart and its April $300 million Kosmix acquisition.

(Related Story: When Choosing Customer VIPs, Is It Time To Ignore Purchase History And Focus On Social-Media Clout?)

That’s just the first step, though. It merely tells me the influences behind these sales, which we can already take a really good guess at. But doing something about this to hike sales even more—to influence the influencers, if you will—can be dangerous.

There’s the huge risk of killing the goose that laid the golden AOV. Any visible attempt to change or incentive any conduct on social media could have the disastrous impact of lessening that influence. How would you feel if a friend was praising some new HP service and you started seriously considering it—on the basis of your friend’s knowledge—and you then discovered that, although she never said anything about it, she was getting a $1,000 every time a friend of hers bought one? Would it sour that service in your mind, even though none of the facts about the service has changed? Would it decrease—nay, obliterate—any credibility you attribute to any business post from that friend forever more?

The only effective approach for businesses is to watch closely and be ready to act on organic social activity. For example, if your systems detect some strong endorsements of some new products/services, think about on-the-fly pricing changes. Do you drop prices to turn those interests into lots of quick sales? Do you increase the price, factoring in the weaker price sensitivity of people coming in from strong social referrals? It might be an early heads-up. But social sales are likely to happen too quickly—and far too unreliably—for any chain to be able to make meaningful use of that information.

Social media is a monster of an influencer, and the monster part is that it’s both huge and will punish you for any visible attempt to take advantage of it. Whoever said business life was supposed to be fair?


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