BrainTrust Query: Facebook IPO Puts Relationships at the Center of Business
Through a special arrangement, presented here for discussion is a summary of a current article from the Hanifin Loyalty blog.
With its user base reportedly reaching 845 million users globally, Facebook measurements are largely all bigger than life. Many of these users are part of the Millennial generation and have grown up accustomed to sharing detailed aspects of their daily lives with their networked friends.
Amidst the eye-popping numbers included in Faceook’s S1 filing, founder Mark Zuckerberg’s business perspective was especially interesting. He highlighted the importance of personal relationships as being "a fundamental unit of our society," and made clear that a key objective for Facebook is to help "extend people’s capacity to build and maintain relationships."
The letter went on to share Mr. Zuckerberg’s view on the future of our relationship society, that "the world’s information infrastructure should resemble the social graph — a network built from the bottom up or peer to peer, rather than the monolithic, top-down structure that has existed to date."
Reading between the lines, it seems that we’ve taken another big step away from the command and control organizational structure of the 60’s and 70’s. If Facebook has its way, we are rapidly evolving towards a wholly populist world. At first, it was "Me, Inc.," then we became "Free Agents," now it’s going to be every man or woman for his/herself. Hopefully it does not result in anarchy.
Facebook of course paints this evolutionary process in a highly positive light, pointing towards the resulting "stronger economy with more authentic businesses that build better products and services" as the result of this movement.
Ironically, the instant poll at the bottom of the article revealed 42 percent of the 1,500-odd people which had voted at that time stating they are spending less time on Facebook now than one year ago. Apparently, all of this sharing is tiring some people out.
Sharing, fatigue and anxiety may all go hand in hand as a blog posted by a Facebook employee chronicled the importance of the site to every aspect of Millennial life, but worried a bit about loss of privacy, stating that "Facebook also has made us paranoid."
How the human spirit adapts to a non-stop world of sharing is the ultimate question that will be decided over the next few years. The outcome will not only impact the market value of a more mature Facebook in the market, but also how marketing in general and social loyalty in particular evolves in the digital age.
Discussion Questions
Discussion questions: How might Facebook’s “bottom up or peer to peer” organizational structure affect retail businesses? Can Facebook deliver on connecting retailers and brands with consumers to create much sought after relationships? If so, how will retailers and brands make use of the opportunity?
Facebook is still a big question mark for retailers and brands. Estimates of the value of a consumer “liking” a company on FB have fluctuated wildly. Retailers and brands should use FB to build relationships with consumers by offering pertinent information, promotions and ongoing communication.
As with most social media, there is no guidebook of what works and what doesn’t. Retailers and brands need to test, analyze results, modify and test again.
Facebook offers large retailers the opportunity to do something that most stopped doing decades ago; namely, establish direct communications between actual customers and senior managers. They can actually listen, understand what their customers are looking for, like, don’t like, etc. Further, they have the opportunity to turn a bad situation, like a complaint, into a positive with a thoughtful response and/or action. Finally, they can get in front of what is a major trend in the upcoming Y generation, who are already beginning to replace the boomers as the primary determinant of success.
A recent article in the NY Times indicates that those 845 million users are not really users, in the sense that they can be marketed to.
Facebook is already succumbing to the pressure of being a public company by inflating its numbers. And the pressure will probably increase since there seems to be at least some Facebook fatigue.
Given that poor customer experience is endemic in the retail industry, building a link to the store associates and permitting those associates to network with each other could hold significant benefits for retailers in the future. In order to deliver on a superior customer experience, associates must feel cared for and their feedback both solicited and acted upon. If retailers are willing to not only ask associates about their experiences in store, but also to act on them, they may see significant benefits in customer AOV, annual value and retention.
Facebook has the infrastructure to permit store associates to communicate with each other in a medium they are already very accustomed to. Facebook will be just one more technology to help bridge the gap between headquarters and what is happening in the field.
I believe the biggest benefit of such a peer-to-peer relationship will be delivery in-store. I am not as big a believer in the ability of Facebook to motivate large quantities of “fans” in a way that you can see clear, measurable benefits.
Facebook has arguably already delivered by creating the platform and attracting mega data miners like Walmart. How will they make use of Facebook? By getting better and better at mining all of that juicy friends and friends-of-friends data. Bottom-up and peer-to-peer is one thing, marketing to interests and affinities rather than past purchase history is, and will continue to be, quite another.
Facebook going public is going to be a pivotal point in its history. It’s pretty clear that it has cash on hand and capital and while that’s useful, one of the big reasons for an IPO is for the stakeholders to cash out. The question is whether this is closer to the top of its value (i.e, a Groupon, which was clearly a sell when it went public) or still a nascent stage.
For retailers, Facebook is a bit of a poor-man’s CRM tool and at best a place to identify influencers, create more points of engagement, and acquire customers (and prospects) directly. While it’s great to have followers, it’s better to have directly addressable and differentiable customer relationships.
This last point is the key: at some point Facebook is going to leverage its intermediary role and either extract value from consumers, or from brands. This is a point of vulnerability for both and while we’re seeing evidence that consumer engagement is on the wane, brands and retailers are still investing in the medium.
Here we go again: guess what part of “social media” makes it not particularly suitable to business? That’s right, the “social” part; retailers — and companies in general — already have a medium for reaching out to consumers … it’s called a website; people who think they can gain something by “friending” a company, and companies who think FB is just another venue in which they can manipulate opinion, are both likely to be disappointed.
Ultimately, the big question with FB and other sites like Google, Yahoo!, etc, is whether they become nothing but a venue to cram advertising down our throats, or remain consumer-centric utilities: the former may be what investors want — what they perceive as “value” — but it’s the latter that I see as real value.
The primary way Facebook might affect retail business is through peers’ recommendations or warnings about service and products. I was warned via Facebook about a retailer’s practice of charging restocking fees if an item was returned. This made me look a little harder to find a retailer who had a better return policy. I was also warned on another purchase that a retailer was charging too much for a particular product so I looked elsewhere and saved about $250. Facebook has the power to communicate information and also has the power to act as a flame thrower. While Zuckerberg may have invented a social toy, its capabilities for informing consumers has barely been exploited, but it will become the most important function.
The “bottom-up” approach to understanding customers is certainly one that resonates well with me. For instance, at dunnhumby we talk about segmentation in this way … i.e. you create segments based on an individual level understanding of customers that you can then group “bottom-up” into segments rather than trying to apply/impose a segmentation framework across the data.
Marketing success will come from these kinds of high resolution approaches that ensure individual level relevance. However, I also think that while the “big data” challenge can potentially unlock this level of connection, in most cases it is far more likely to lead to more irrelevance as few businesses know how to do this right.
Say what you want about the channel we call Facebook. Those companies, retailers, CPGers, etc., that are driving quantifiable revenue from their well-orchestrated activity see how powerful a tool Facebook can be. Is it perfect for business? No. Can consumer sentiment, both within Facebook and outside it be identified and acted upon in near real time? You bet!
We’re talking about building the brands here. The store brands. The national brands. Whatever the case may be.
There are great examples out there today of how this is working.
There could easily be a backlash from brands and consumers alike depending on how Facebook handles its next stage of growth.
Consumers will probably continue to post opinions and recommendations of products on company and personal pages. To that extent, FB will be a valuable resource for marketers.
Brands may find that their own e-commerce environments might be a better place to drive conversations and actual purchase activity. I’m not sure that brands will race down a path to abdicate their own marketing efforts entirely to FB.
Any discussion of Facebook’s affect on retail commerce needs to include the social marketing site’s possible future as an actual locus on bona fide online shopping. Today Facebook serves as a marketing and customer service vehicle for most brands and retailers. But the company has made no secret of its desire to become a computing platform, an operating system essentially, just the same way that the web did. To realize this vision, one of the main things Facebook needs to conquer is to handle truly sensitive interactions entirely in its environment in a secure and trustworthy way. Online financial interactions (banking, securities trading, managing your retirement account, filing your taxes, etc.) and online retail are the two most obvious examples.
This isn’t a small matter. Think about the truly transformative effect that the web had on retailing and related services. Remember travel agents? The internet killed them. Remember Tower Records? The internet killed it, too. Any ever consumer-facing retail segment in the world has been completely transformed by the world wide web. Facebook is going to throw its massive resources at this problem, and forward-thinking retailers will eagerly create storefronts to try and service the 850 million of us who visit Facebook every single day (although sometimes I suspect that 800 million of us are only there to play Words with Friends… 😉
It’s already started. There is a whole cohort of startups trying to provide robust online shopping and purchasing experiences in the Facebook environment. Surely they’ll have their stumbling points, but just as surely they’ll ultimately get it right. And when they do, Facebook will become that much more important to those who wish to sell their goods and services to the masses.