Referrals are the future of Social Commerce, not conversations
“Social Commerce” is a big buzz word these days. As many continue to talk about merging social media and e-commerce, there is no clear consensus as to what the main driver of social commerce will end up being. Many think its about finding ways to promote and sell products on Facebook, others think its about “group shopping”, and some think social commerce is primarily about igniting conversations.
Of the three, the most successful so far has been group shopping sites like Groupon and LivingSocial. Why? The answer is pretty simple. Group deal sites give users a clear value proposition (50-90% off something), with a clear incentive to share with friends through social media (if enough people don’t buy it, you don’t get the deal).
While it has been and will continue to be quite effective, the popularity of group shopping has distracted us from what I believe is the bigger future of social commerce: the power of the personal referral.
In “real life”, what factors help you make decisions about how to spend your money (like what restaurant to go to this weekend, which mechanic to take your car to, or just generally what to buy and where to buy it from)? You might do a Google search, but what you’d probably like to do most is ask people you trust. How do you go about doing that? Do you post a status update on Facebook asking your 500 friends where to find a great deal on designer jeans? Maybe - but for most people maybe not.
What if you could automatically ask all of your friends what to buy and where to buy it from based on their own experience, without actually taking the time to ASK?
For merchants, marketing their products online compared to marketing in the “real world” is quite different. Merchants in the real world build their reputation by providing quality products and great service to their customers, who spread the word to their friends about their experience. As the number of satisfied customers increases, the merchant’s natural word of mouth marketing presence grows along with it. This is how good companies build a brand and a loyal following.
But the e-commerce environment has primarily become a price war among both large and small merchants selling common products, and a difficult place for merchants selling unique or handmade items, struggling to find ways to acquire customers who aren’t searching for their exact product (because they don’t know it exists), and then leverage those new customers to evangelize their largely unknown brand.
Unlike the real world, the advantage of the Internet is that everything can be found and organized quickly in a structured way unavailable in the offline world. But now that our offline relationships have been enriched and expanded online (primarily because of Facebook), the two worlds now have an opportunity to merge. The merging of these two worlds means that we can use our offline relationships to effortlessly get recommendations from our friends, in a seamless and structured way.
That’s the future of social commerce, and it will be here before we know it.
Corey Kossack in an Operating Partner at Addoway, an online marketplace where people buy and sell with their friends and the merchants they trust. Corey is also Managing Partner at Game Change Ventures, a venture development firm focused on Internet startups that utilize social media.
July 28th, 2010 at 9:56 pm
Referrals are the future of Social Commerce, not conversations…
“Social Commerce” is a big buzz word these days. As many continue to talk about merging social media and e-commerce, there is no clear consensus as to what the main driver of social commerce will end up being. Many think its about finding ways to p…
August 3rd, 2010 at 10:38 am
Good stuff Corey and great to see you contributing to this excellent online resource for start ups.
August 11th, 2010 at 6:16 am
Hi Corey, I largely agree with you that referrals will be the main driving force that will transform ecommerce in the coming years. The key is to recognize that referrals come in various forms: social purchase sharing, passive sharing (i.e. solicited shopping advice), and social media mentions of products. They are all variations of referrals, which are traditionally equated to the one-way, social media spam-like broadcasting of certain products to our social graphs at large.
I would also like to remark that I have little faith in the “selling on Facebook and gaining access to 500 million consumers” trend, or more commonly known as f-commerce. Merely setting up a store on Facebook is not social commerce, which is about providing the means to consumers to help them help each other make better buying decisions. Social commerce is a consumer-centric movement. The mere fact that stores are set up on a social network does not immediately confers it the key social commerce benefits that drive sales.
I believe that the key to unlocking the value in this social commerce trend is not to sell on Facebook, definitely not, but to use Facebook in a way that drives ecommerce. We should use Facebook for what it’s good for — a communication protocol and multi-way sharing platform — and not what it’s not good for — a retail store location, where people just want to socialize and have low purchase intent. We should socialize commerce, not commercialize social (bad things happen when you over-commercialize places where people just want to have fun).
The value of Facebook lies in the people within our social graphs, who are the core creators of content and have tremendous value in giving us trusted, reliable information. To tap on the potential of this social graph, it is essential that this social graph is portable and can be integrated seamlessly into other online web experiences (e.g. online shopping, content consumption, gaming, etc.) so as to prevent disjointed web experiences. In other words, put Facebook on your website (it’s highly possible, check out how we do it here at Zuupy @ http://zuupy.com), not put your website on Facebook.
August 11th, 2010 at 7:43 am
I completely agree with you Corey. The world has changed and putting up a sign and an advertisement in the yellow pages is not enough. You have to make your presence known on the internet today via socail media outlets like Twitter and Facebook. It’s the wave of the future and if you keep up with the advances in registering content with ‘Google’ it’s just about to get a lot more interesting. If you want to beat your competitors you better be working harder than them on the web!
September 4th, 2010 at 8:59 am
i see eye to eye with, people should make more efforts to advertise their goods
April 3rd, 2011 at 9:54 pm
Excellent article and I completely agree. People will buy on the recommendation of a friend or other trusted individual at a much higher rate than almost any other form of marketing. I had been involved in business to business networking groups for a few years and saw the power of how personal referrals can have a dramatic effect on business growth.
Unfortunately, most of these groups are sub-optimal experiences and have high dropout rates over time due to a variety of factors. This led to my company’s creation of ReferralSmart.com - A truly unique, new generation Business to Business networking platform for LOCAL small businesses.
As the last poster, David, commented– “the world has changed and putting up a sign and an advertisement in the yellow pages is not enough.” It is local networking, referrals and personal recommendations that help businesses cut through the ever growing competition and reach qualified prospects that are receptive to the product or service being offered.
February 8th, 2013 at 6:45 am
Online Marketplace…
Simple marketplace where people can buy, sell and swap items or services….