The Six Effects of Social Media For Companies

Wednesday, December 3, 2008 11:20

Posted in category e-commerce, social media, social networks

Today, I stumbled upon a posting at The Strategy Web Blog. Among others, Martin is mentioning in his article the six effects for companies, who are participating in digital conversations using social media. Those effects are:

The multiplier effect:
Social media opens access to (potential) customers as well as partners and it manifolds information acceptance and allocation for brand’s and company’s communications.

The globalization effect:
Breaking the geographic, mental and psychological distance to customers, hence, establish credible contacts to target group.

The Networking effect:
Networking between companies, customers, interested party and partners can lead to new markets – see Cluetrain manifesto “Markets are conversation”.

The quality improvement and protection effect:
The improvement of products, quality and services should not only come from internal vision of the companies but rather from the market and consumers. This way, a product development strategy would not fail on the market.

The sales funnel effect:
People buy something from other people: networking between people - through word of mouth - leads become infinite numbers of potential customers.

The “humanization” effect:
Over decades companies came across customers like an impenetrable construction, they functioned in such fix structures with little regards of humanly gestures. This art of behavior changes since social media trend surfaces: customers begin to take notice of humans behind the work and actions of companies.

The multiplier effect is one of the most crucial effects in the utilization of social media for companies. This effect in particular is one of the reasons, why companies in Germany are still having such problems in adopting social media. The communication platforms of social media can spread the news about companies and their products virally – faster, plus with wider coverage than any classical media.

Even when the following example was not coming from the world of brands’ and company’s communications, the twitter activities concerning terror attacks in Mumbai as well as the latest earthquake in Indonesia, showed how fast news travels and multiplies in social media. This multiplier effect can be a blessing and even a curse at the same time. However, marketing and communication executives should be aware of the fact, that even with or without their participation in social media, their products and companies are subjected to conversations.

Another new component Martin mentioned, the humanization effect (also explained by Brian Solis in his Social Media Manifesto) sounds actually quite plausible. This do apply in dialogs with the customers, since they are now no longer subjected to faceless anonym Call Center agent but rather to a twitter or social network profile with picture and name in it. This is the case for the U.S customers of cable entertainment, Comcast. With Frank Eliason in twitter, Comcast customers can relate more easily to the brand. Ultimately, social media does make a product / company more human and less of a black box.

I can’t agree more in terms of the effects, which have impacts on products development and sales. But I would likely put Word of Mouth into networking effect, since conversations between consumers are the crucial part, which then lead to purchase decisions. In the realm of social media, being pro consumers and actively engage in sales processes, is the ideal.

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Source: eThority

Posted by: Geoff Caplan

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