Archive for August, 2010

The True Cost of “Free” Social Transactions

August 26th, 2010

This week I had a conversation with another LinkedIn Group leader that I wanted to share —our conversation puts the challenges of social media marketing front and center.

We were discussing how the amount of noise has increased within social media networks and that there is a lot of junk out there on, for example, LinkedIn groups. She was frustrated with the amount of spammers posting advertisement and she felt she had to continuously monitor the group to make sure the interactions were professional and relevant.

I told her that the real cost of social transactions was shifting from sellers to buyers.

What does this mean?

If you think about it, we don’t really bother to consider the true cost of our time on Facebook, LinkedIn, Twitter, industry forums and communities, blogs, etc. Beyond the value that you get from sharing with friends and colleagues (my wife posts baby pictures up on Facebook for far-away family and friends) there is a lot of stuff that sucks time away that may not only be useless but actually a true waste of time.  Beyond slightly amusing posts my friends share…. do I really need to wade through that and the 50 other meaningless announcements on my Facebook home page to find the one nugget that is worth it?

Furthermore, how many LinkedIn group posts are a blatant sales pitch, job request, and link bait to visit your website before I tune out your group?  How many SPAM emails do I have to delete on a daily basis to keep my inbox clear for my real work? BTW – I delete pretty much everything that doesn’t have a person sending and personally addressed to me. Email marketing doesn’t really work with me. Probably most people are feeling the same way.

There is no question that there is a fundamental shift occurring on the web.   The cost of information distribution is shifting to the consumer from the distributor –social media is accelerating this. Facebook is free to post and to read. However, it costs some time to post, but it is taking a huge cost of time to filter the amount of information to read that “right” post.

Now, this may sound esoteric, but think about this on an enterprise level and from a productivity perspective. The amount of emails, posts, articles, powerpoints, etc. and you realize:

  1. We are overwhelmed with information
  2. It is costly, in terms of productivity, for our employees
  3. Social media is contributing to the problem of noise
  4. We don’t have good information filters to help our organizations yet
  5. Social marketing if done correctly, can help with the problem in that we can use “trusted sources” to credential and filter information
  6. The costs will continue to rise in terms of productivity if we don’t begin to focus on the problem.
  7. Customers actually pay a transaction cost for your marketing.
  8. The currency they use is their attention. Considering how busy many executives are, spending 10 seconds reading your email is a costly time consumer when you consider how many emails they get on a daily basis
  9. If your marketing transaction costs are too high because it isn’t relevant, timely, focused, and credentialed; you negatively impact your relationship
  10. Customers are reacting to the “hidden” costs. Companies that are SPAMMING them are losing attention and actually losing brand equity.

So, what is the solution?

The paradigm shift that needs to be made in order to capture what is going on in the market, leverage the opportunity that social brings, and accommodate the practical lens of the executive, today’s professionals need to think about customer engagement in terms of “cost of attention” instead of “cost of customer acquisition.” With this new perspective, then focus your social business transactions to provide:

  • High quality
  • High value
  • High integrity

This will increase the customer’s perception of your importance, lower the noise in the market, and will translate to the bottom line in terms of financial transactions.  We are all trying to discuss and navigate through the speed of social, but not many are taking account the paradigm shifts necessary to help make social relevant to the enterprise.  I hope this blog post is a step in that direction.  Would welcome your thoughts.

Is Your Best Customer an Educated Customer?

August 18th, 2010
Seemingly simple question, but one with huge implications in a socially-transparent world. I have worked for some folks over the years who were “nice guys” until they got in a room with a potential customer and turned into sharks. Their belief was that they needed to close the customer as soon as possible and with as much margin as possible.

Forget value-based pricing, it was “Caveat Emptor” or buyer-beware pricing. Their best customer was an uneducated client who didn’t understand the value of the offering. They preyed off of the buyers ignorance.

As any of us who run businesses know, it is a struggle to find the right balance between customer and company needs in a relationship. Customers do not really appreciate martyrdom when you cannot deliver at a ludicrously low price. Some buyers look for predatory deals on their own side as well. At the end of the day, win-lose negotiating means someone loses.

I have always believed in win-win relationships with customers. My belief is that you operate as if the client has all of the available information and you treat them respectfully as an educated buyer with all of the benefits in the negotiation and represent their interests even if they cannot. Integrity is not bought or sold, it is earned. Sometimes at great cost and sacrifice. And it is always constantly challenged.

I have also always believed that you can “win” with integrity and that eventually those who practice predatory business practices will be exposed.

Social media has the opportunity to profoundly impact market transparency. My sincere hope is that it will be easier for buyers to get a more “accurate” picture of the value of the offering and the integrity of the provider. Markets become more efficient with better information so I believe that the ability to check references, get self-educated, and validate product claims will make markets more efficient and reduce the ability for “bad actors” to operate.

I think those who believe in “an educated buyer” are already participating in social media for the right reasons. The “give to get” model of providing thought leadership and market education has helped many. Not sure yet that it is affecting market behavior on a macro-level, but I am always hopeful.