Ecommerce and online retail are very, very competitive – some even say saturated. New entrants into the market would quickly realize that, while barriers-to-entry are low, barriers-to-scale and barriers-to-growth can feel insurmountable sometimes. The main problem is usually the lack of brand awareness and visibility: how can retailers get the attention of consumers when they can compete with the big guys on neither price nor strength of brand?

We have always believed that the best way to learn how to market a new business is to ask ourselves, “Of all the new businesses that I have heard of recently, how did I hear of them?” For us at Zuupy, the answer is not Google AdWords. We all know how financially suicidal it can become for new entrants to “invest” in the complex search marketing channel without proper knowledge and experience on how to optimize campaigns. The answer is usually something more organic, more grassroots-driven, as this is one of only few practical marketing tactics that a young business with limited resources can utilize.

From our experience, here are some tactics that we have seen worked:

1. Run fun contests/sweepstakes (e.g. EyeBuyDirect.com, BridesVillage.com)
Contests can be very engaging and relevant to a consumer who may not be ready to buy from a particular retailer. Young businesses know that any contact with potential customers is an opportunity to engage and build trust with them. Plus, contests – in which consumers stand to benefit for free – are more shareworthy than products and online stores. Contests are less likely to be perceived as spam on Facebook, Twitter, and even in emails, because of the potential upside of freebies and, failing that, excitement.

2. Do charity, not guilt marketing (e.g. UK2.net, CauseOn.com)
Putting aside possible ethical issues, running promotions in the name of charity – done tastefully – would usually give a reputational boost to a new business. An actionable plan is to have a “Groupon for charity” where your business only donates whatever pledged revenue or profit if a specific number of people have committed to participating in a promotion (a la CauseOn.com) or, for less friction, if a specific number of people have shared the promotion on Facebook, say, by clicking a Like button (minor plug: see how we are solving this problem for SMB online retailers). People are more predisposed to helping out in their favorite causes than supporting commercial entities in general. Also, explore cause marketing.

3. Create unique, value-added content (e.g. OKCupid.com, GetElastic.com)
Undoubtedly, many new businesses are already churning out content at an alarming rate and then promoting said content on Twitter and Facebook, so how does one stand out in a sea of noise? The key is to produce content that is different, preferably with value-added insight. When people consume content, they want to learn something. If we expect them to read our content instead of our competitors’, we have to give them insights that only we can provide (or provide better) than our competitors. Original data is one ingredient in creating unique content; another is a well-substantiated contrarian point of view. The risk, however, is that we might become a content hub known and trusted only for the quality of our content (and not the quality of our brand, products, customer service, etc.), thus the key lies in relating said content to our commercial offering without overtly selling.

4. Build a native community, not Facebook Likes (e.g. Bodybuilding.com, CozyCot.com,)
Garnering advocates and enthusiasts who are passionate about your niche and encouraging them to foster a community is hard. While the road may be hard and long, the potential upside is enormous. People are drawn more towards communities, because it can be very rewarding to interact with like-minded people. Bodybuilding.com is very successful with this strategy. What about Facebook Pages? Do they amount to communities? The problem with Facebook Pages is a lack of control. Consumers are quick to click on their notification boxes and may not be necessarily keen to engage with strangers in a realm filled with real-life friends.

The fact is that consumers are not prejudiced against new businesses; they just need a unique reason to pay attention to said businesses. For new businesses, getting a sale should not be the main goal of their marketing strategy in the earliest stages. The main goal should be engagement, i.e. getting people to care about their businesses first. Big brands have an easier time engaging their potential customers because of compelling social proof and their ability to create buzz via wasteful ubiquity. For the rest of us, we have to rely on other more subtle means with potential for word-of-mouth marketing to engage and connect to our potential customers.

We have in the past stated that infusing social into commerce makes more sense than vice-versa. Recently, Ethan Beard, director of the Facebook Developer Network, suggested that Facebook storefronts are a “pretty small piece” of the “burgeoning area of social commerce.” Also, many retailers have said that Facebook storefronts are negligible, according to Sucharita Mulpuru of Forrester Research, Inc. (source).

At the risk of reiterating what we have already said, the biggest problem with selling on Facebook is that it is frowned upon by consumers. Consumers are already bombarded by multiple marketing messages almost everywhere in the day; Facebook serves as the escapist online platform for people to interact and socialize with their friends. Any overt selling is bound to put people off. Next, even if consumers are somewhat interested in the offering or brand, it is unlikely that a miniature storefront within the confines of Facebook and sporting all the technical limitations brought about by Facebook’s development environment can create a user-friendly shopping environment that maximizes buying satisfaction. Facebook is simply not built for shopping, especially with the major distraction called the top navigation bar.

At Zuupy, we do not see merit in the idea of creating an all-in-one brand HQ within Facebook that takes care of everything from promotions to point-of-sale transactions. There clearly is value in using Facebook for limited purposes, such as customer care and direct marketing, but the larger value still lies in manipulating Facebook for use on third-party websites and online stores. In fact, this is also what Facebook wants, at least according to Ethan Beard.

As social commerce is in its infancy, it remains to be seen if selling on Facebook can be a sustainable distribution point for retailers. Our core philosophy remains the same since our inception: the trend is social commerce, not commercial social.

It is arguable that people on the internet can be relied upon to deliver information, help, or advice without expectation of any immediate benefit. A distressed teenage girl can post anonymously on a niche teen forum, and dozens of like-minded teenagers will chip in with their advice and experiences. A photographer participating in a voting-based competition can tweet about it and easily garner people to vote for her. Software developers routinely write complex open-source software that is released to the public for free. Therefore, to doubt the existence of digital altruism is unreasonable at best.

I propose that there is immense potential in tapping on the phenomenon of digital altruism to sell more products online. What if, instead of doing research for others or even making micro-donations, consumers on the internet are mobilized to share, review, and humanize brands and products? There is already proof that there exists such energy; the remaining piece of puzzle is to align consumer motivation with business objectives. Of course, many tools already exist to try to get people to become volunteer marketers (e.g. social media sharing buttons, email a friend features, etc.), but how many of those tools actually succeed in making people share and refer stuff to their friends?

Many retailers and sellers alike are accustomed to incentivizing their existing customers to refer products to their friends for discounts, gifts, and other benefits of financial value. I have previously argued that this method is unsustainable. Providing goodies for sharing will encourage spam, and people in the sharer’s network are also unlikely to be happy to know that the sharer is profiting from them. The preferred approach is to unleash this digital altruism via provision of non-financial benefits that are compelling enough to drive action.

Compared to businesses, consumers are less rational and likely to engage in things that do not offer financial returns (or their equivalents). Consumers already commonly discuss products and brands offline, usually with specific non-financial purposes or motives. A sports enthusiast may go on incessantly about the different brands of sports merchandise to show expertise, while an adolescent may talk about a certain brand of electronics with her friends to gather advice and experiences. Even a child asking her parents to buy a particular brand of breakfast cereal is referencing a specific brand and indirectly promoting it. These are common daily scenarios involving brands and products that serve as marketing efforts for the respective businesses, albeit on a small scale.

Business should thus focus on replicating these scenarios online based on a real-life model of how consumers discuss products and brands offline. By providing the necessary infrastructure and education, there is tremendous promise that consumers will begin to behave as in real life. Back to the social media sharing buttons example, how can we improve usage rate, what can be done better? The answer may just simply lie in messaging. “Share this product” alone is not compelling – too vague and possibly desensitizing when seen often enough. “Tell one friend about this item who would absolutely love it” and “Hint someone close to you to buy this item for you” are more specific and compelling calls-to-action that mimic real-life scenarios. Another example is product reviews: “Write a review” sounds like work, a losing proposition for the consumer. What about “Tell us about your experiences with this product and see what others think?”

There are two important reasons not to neglect to leverage on digital altruism in the context of ecommerce. First, the magic of using existing customers and brand loyalists for marketing is that it depresses customer acquisition cost to near-zero, if businesses can somehow find a way to facilitate occurrences that are already happening offline online. Second, any communication done online is scalable using platforms like social media and blogs. While offline conversations are shared among a few people, online conversations can theoretically be accessed by millions of people many times over at anytime and anywhere.

Indeed, this mindset has been our guiding principle in building our social commerce product. Our take on monetizing digital altruism is encapsulated by our software, what is your take?

The concept of leveraging on existing customers and advocates to drive online retail sales has been explored extensively in the application of recommendation/cross-selling algorithms, social media sharing tools, onsite consumer reviews, and wish-lists as well as recent innovations, such as the Facebook’s Like button. With cross-selling specifically, shoppers can gain access to starting points or suggested items for consideration, removing some cognitive costs and mental barriers-to-buy. Introducing the “social” aspect into cross-selling provides a credible basis for the cross-sell and thus creates trust, in that the source of endorsement is people within the shoppers’ social circle.

Prior to the introduction of open social network APIs (application programming interfaces), to leverage on an existing customer base’s personal identities to drive sales has been difficult, involving painful registration processes and additional headaches about remembering yet another username and password. However, Facebook’s introduction of its Open Graph API has now enabled online retailers and content publishers on the web to socialize their offerings with simple integrations, which, on the consumer’s end, means one-click functionalities (the Like button being the most prominent).

At Zuupy, we have been exploring the possibilities of taking portable social identities to the next level with deep two-way integration with Facebook, social cross-selling features, and facilitating product and brand conversations that drive conversions. Social cross-selling is the overarching objective of what we do – a new paradigm that centers on creating conversations to optimize the sales funnel and accelerate sales cycles, instead of the traditional social media paradigm of using conversations to create “engagement” or “brand awareness.” Below are some suggestions on how you can leverage Facebook’s new API to create dramatically-enhanced shopping experiences using instant personalization:

1. Leverage on product recommendations
Putting social media sharing buttons on a product page and then hoping for healthy, sustainable word-of-mouth marketing activity to happen is negligent at best. With Facebook’s Open Graph API, the opportunity to capture these product recommendations, as well as the valuable comments and advice attached to the recommendations, and display them on the storefront is increasingly obvious. Archiving user-generated content for mass consumption is one of the easiest ways to provide social proof; besides, the more content is accumulated on the retail store, the more SEO and research/purchase planning value said retail store holds.

2. Encourage social purchase sharing
Attaching buyer identities to specific products is powerful, because a purchase is unequivocal in conveying social endorsement: the buyer has actually paid money for the product. Furthermore, the purchaser is more likely to have first-hand knowledge about the product than a non-purchaser. In a way, purchase sharing holds greater substance than mere product recommendations or Likes. The limitations of social purchase sharing are two-fold: privacy and the critical mass issue. Most consumers are unlikely to want to share their purchases, and, even if they do, possibly none of the people in our social circle (the people whose references we trust) happens to have shopped in a given online store, resulting in a dearth of data. However, with social media norms going mainstream, it is expected that consumers will be more open to sharing their purchases and shopping destinations, which in turn would attract their friends to said destinations to make and share their own purchases.

3. Enable solicited social reviews
Ratings and reviews are first-generation social commerce tools that are used to provide social proof and credibility for a certain product or online store. The opportunity offered by Facebook’s Open Graph API is to infuse greater trust, targeting, and contextual relevance into the process: allowing reviews to be requested for from someone known and trusted, instead of showing random reviews from anonymous writers whose knowledge, background, and motive are likely to be questionable. Requesting a review from within one’s social graph also solves the contextual relevance and targeting issue. Unsolicited product reviews are likely to be seen as obtrusive or abrupt, especially on social networks where the prevailing purpose is to socialize.

Of course, these social cross-selling suggestions should be applied in the context of ordinary cross-selling good practices. With social media going mainstream and becoming increasingly open, online retailers can expect that the opportunities to socialize the storefront to increase over time. Notable merchants are already taking bold steps in socializing their stores (here and here), so what are the rest of us waiting for?

For the most part, Facebook has been a great tool for brands and retailers who want to gain direct access to and interact with their customers, advocates, and fans. Initially, Facebook Groups and Pages were used as a listening/communication platform, enabling businesses to engage their fan base to build trust and rapport, if not to obtain actionable market insights. Very quickly, Facebook was then used as a marketing platform (via Facebook Groups and Pages), a customer service platform, and now, with retail storefronts on Facebook, a sales platform. The impact of Facebook on the online retail landscape is undeniably growing.

The rapid growth in popularity of Facebook among brands and retailers can be easily explained. The idea is simple: every brand and retailer out there wanted to leverage on Facebook’s so-called 500 million active users, who all happen to be in one place and accessible without any direct or incremental financial cost. The free lunch, so to speak, is an illusion, of course. What brands and retailers are not paying for in cold hard cash is paid for in their ceding of control and power. Inevitably, consumers will treat the Facebook Pages of brands and retailers as their online headquarters, their default online presence, since most operations (e.g. sales, offers, discounts, customer care, feedback, etc.) are carried out on Facebook Pages anyway. Furthermore, Facebook offers a “human touch” that most ecommerce websites lack. In other words, the ecommerce website is becoming increasingly irrelevant.

Clearly, this phenomenon gives Facebook a lot of power over brands and retailers, which is exactly the way Mark Zuckerberg likes it. Will Facebook abuse its position? Possibly. Facebook does not need retailers as much as it needs advertisers. The retailers who merely operate Facebook Pages but do not double as advertisers seem to be of less value. With brands and retailers becoming more and more reliant on Facebook for customer acquisition, it also allows for some very good blackmailing opportunities by Facebook, e.g. having to pay to remove competitors' ads on the Facebook page.

With bargaining power on its side, Facebook can also change its Terms of Service unpredictably, creating business consequences of staggering proportions. Facebook, after all, owes no legal obligation to maintain a stable commercial environment for a bunch of squatters whose aim is to leech off of its users. Just as Google can remove a website from its search index as it pleases, Facebook can also disable a Page on its platform as it pleases.

While the idea of tapping on a consumer platform that is growing as rapidly as Facebook may be smart, the specific method of outsourcing virtually every major operation to Facebook may be bordering on recklessness. There are many ways to use Facebook for business, but the Facebook Page should never be treated as the primary online presence for businesses.

The internet – and social and crowdsourcing in particular – has always amazed me. When mobilized, people on the internet can really be a powerful constructive force, sometimes exceeding the capabilities of the most intricate and advanced technologies. A lot of tasks that used to be difficult and/or costly to accomplish via technology are increasingly made possible due to social and crowdsourcing. In ecommerce, social and crowdsourcing enable contextually-relevant shopping recommendations, ratings and reviews, reputation gauging, deal-finding, group buying, etc. We have indeed approached a point where crowds and people are scalable, feasible for business use at a low cost, and I believe that we are just seeing the tip of the iceberg.

Yet, not too long ago, human-powered endeavors used to be viewed with derision. “Human-powered” reeks of physical work, expensive overheads, and inefficiency, and is very much against the spirit of the Industrial Revolution that preached mechanization over manual labor. However, the internet has enabled the mass mobilization of humans to achieve remarkable things. For instance, posting a “need help” thread in a heavily-trafficked forum (e.g. fashion forum, personal development forum, programming forum) would very quickly result in many responses from other visitors, some of which are highly actionable. Also, allowing the crowd to flag, upvote, or downvote content on content-based websites has been way more effective than appointing “moderators” to curate content.

My opinion is that, in large numbers, people can be highly scalable and efficient. The fact that humans have abilities of judgment, wisdom, and common sense, and machines do not, also makes it remiss to not tap on this growing trend to drive business. The concepts of “the wisdom of the crowds” and “collective intelligence” have never been more relevant than today. There are many social- or crowdsourcing-based services today that can be adapted for use in ecommerce to “automate” various business functions:

1. On-demand, scalable manpower services (e.g. Amazon Mechanical Turk)
Amazon Mechanical Turk still amazes me today. For basically a pittance, businesses can gain access to a large pool of workers to perform manual, mind-numbing work at a very low cost, avoiding the expensive overheads commonly-associated with manpower. I am not sure if Amazon is the first to create a service for scalable, on-demand manpower, but they seem to be getting it right. Adapted for ecommerce, think of the potential of leveraging on visitors for content creation, rewarding visitors with free yet seemingly-coveted tokens like achievement badges (a la Foursquare) and reputation points (a la vBulletin’s reputation system). Undeniably, high volumes of highly-relevant content are the key to search engine optimization and inbound marketing.

2. Q&A services (e.g. Quora, Aardvark, Stack Overflow)
Contrary to what we usually see in real life, people on the internet are surprisingly obliging and helpful, without the need for any tangible incentive whatsoever. Perhaps people do need outlets to demonstrate their expertise, share their experiences, and gain recognition, or, less cynically, people are simply helpful by nature, and this helpfulness is less visible in real life. The opportunity for ecommerce lies in porting this culture over to the storefront, allowing for C2C assistance, customer service, and support. Such a move would conceivably be valuable in reducing customer service costs.

3. Services using collaborative filtering (e.g. YouTube, Reddit, Digg)
The problem with user-generated content is that just about anyone can publish something out there, resulting in information overload, a low signal-to-noise ratio, and general spam. Services that thrive on user-generated content have obviously grappled with these problems and come up with a brilliant solution: use the crowd against the crowd. Ecommerce websites that have a ton of content (e.g. reviews, recommendations, customer feedback) can benefit from simply letting other visitors upkeep their own leisure space. For instance, Amazon’s “Was this review helpful to you?” feature can be really, well, helpful in helping to maintain the quality of content.

4. Plain old social networking websites (e.g. Twitter, Facebook)
Something that algorithms have not been able to do more effectively than humans is recommendations. The problem is not that machines are faulty or inferior; given the right data and methodologies, I believe that machines can achieve remarkable results in modeling what we would and would not like. The problem is that we are fundamentally distrustful of machines, thus we hold them to an irrationally-high standard – receiving just one irrelevant recommendation would almost surely make us lose our trust in machines forever (just talk to companies who work with sentiment analysis). Conversely, humans are treated as fallible creatures, yet it is their judgment and connection with us that illuminate the recommendations, reaching out to us to at least give a damn. We have all read articles and watched videos recommended by our friends that we would not have otherwise consumed. The way to exploit this situation is easy: replace content with products and deals and let social work its magic.

Although social and crowdsourcing are pretty much mainstream concepts nowadays, their application in ecommerce seems to be peculiarly limited. I believe that ecommerce is a mature industry ripe for disruption; my belief is that social and mobile will be the primary disruptive forces that will change ecommerce and move it away from the mail-order-like affair that it is today. With regard to social commerce in particular, the obvious way to leverage on it is to give shoppers a benefit to participate and be engaged, and the benefit does not even need to cost money. The key seems to be making whatever we want shoppers to do part of their online shopping culture – their way of life – so that it would not even feel like work to them.

Of course, my aim is not to be prescriptive but merely provide one perspective on how to make the most of this opportunity. What is your perspective on this issue?

“Social” is a mainstream concept nowadays that is unfortunately often equated to simply setting up profile pages on Facebook and Twitter and then engaging brand enthusiasts and critics on said platforms. Interaction with brand influencers is an integral part of a social media strategy, but another vital aspect of a social media strategy, namely onsite social commerce, is frequently overlooked. Most retailers dabble in social media with the intention to, at least in part, drive visitors or leads to their website. Leaving a website or landing page unoptimized for the social media demographic is likely to lead to frustrated customer expectations (if we must, we should blame Facebook for setting the social standards). The transplantation of visitors from their native social space into a commercial, non-social space would easily result in a disjointed customer experience. Put simply, the non-social nature of most ecommerce websites today cripples customer experience.

Here are some arguments for not neglecting onsite social commerce:

Onsite social commerce provides authentic social proof to significantly increase buying confidence and drive action. Social proof is undeniably the most effective way to build a reputation for your brand; you need to have customers to get customers. No matter how informative your copy is or how helpful your in-store assistance is (even if it is powered by, say, state-of-the-art live chat technologies), you are biased and, by definition, have diametrically-opposed interests vis-à-vis your customers. One-way information provided by retailers will never reach the credibility threshold required to convert a large proportion of prospects into (repeat) buyers. Customers always want to feel that they are making good purchase decisions, and it is natural instinct for them to constantly find reasons not to buy from you. Engaging customers in what frequently and practically turns out to be an argument is senseless. Letting customers know that 100 customers have bought item X, or that 3 personal friends have recommended item Y to their friends, is not.

By definition, onsite social commerce mitigates the cognitive costs associated with shopping. Contrary to common belief, shopping is not entirely a fun and leisurely activity, as significant consideration has to be invested in selecting, researching, and evaluating products or services. The worst-case scenario is where a potential customer arrives at a storefront by chance or with only a vague idea of what to buy and has no starting point whatsoever. Traditional ecommerce optimization wisdom would tell us to tout the “most popular” products anonymously (i.e. without saying who exactly bought it) or deploy a recommendation engine powered by complex algorithms to suggest potentially-relevant products. Yet onsite social commerce, especially if based on the social graph, solves this problem perfectly, answering competently the what, who, when, why, and even how of online shopping via trusted references from friends or other like-minded customers.

Increasingly, the only practical tactic to achieve scalable, organic growth is to leverage on onsite social commerce activities. My take is that the social media revolution, particularly the aspects of crowdsourcing and collaborative filtering, if leveraged well, can be immensely useful in fulfilling the functions of customer service, marketing, and sales, leading to significant cost reduction. Organic search engine traffic and Page rank used to be the Holy Grail of the past; now, it has become viral marketing, word-of-mouth marketing, and social media karma/following. In fact, there have been talks that Facebook could very well replace Google in what the latter does best: search. With regard to word-of-mouth marketing, I have always believed that the best place to start is a retailer’s website, immediately after a sale, when sentiments and customer willingness are likely to be at their highest point.

Further, an environment that supports onsite social commerce is one of the best ways to increase onsite engagement and create a buying mood. Engagement happens when customers are genuinely immersed in a retailer’s offering, e.g. due to its unique value or exceptional customer experience, not when they encounter talking live persons, ostentatious Flash animations, cute cartoons, witty 404 messages, or live chat widgets on a retailer’s website. Compelling content and a smooth, facilitated user experience are the core ingredients that make up a truly engaging shopping environment. If time spent on website is any measure of engagement, there is already clear proof that social in general wins at the engagement game.

Onsite social commerce is one of the few feasible methods to support sustainable, continuous feedback creation and obtain actionable market insights. Even if there is controversy that feedback acquisition need not necessarily happen onsite and can happen on other platforms such as UserVoice and Get Satisfaction, there is comparatively less controversy surrounding the claim that social media is one of the most effective channels to obtain customer feedback. However, cultivating an active, vociferous community onsite leads to greater control for the retailer and allows for the cultivation of a more centralized community ground, as the community tends to drift towards wherever they can gain the most direct access to the brands themselves.

Lastly, onsite social commerce answers the essential question of ROI. Social media is now an important aspect of any consumer web business, but the only way to fuel continued investment in it is to have a compelling business case – justifiable, measurable results. Unlike many social media marketing activities, onsite social commerce is thoroughly measurable and tied to sales; simple A/B split testing would enable ROI calculation.

As the social media phenomenon continues to grow from a want to a need, retailers will increasingly need to cater to the requirements of this new, rapidly expanding demographic. The supporting technologies are emerging to fill up the newly-created voids; the remaining piece of puzzle is still awareness among businesses and coherent, workable strategies to exploit the opportunity.

Note: This article is a follow-up post to a previous article, 5 Reasons that Social Recommendations Don’t Work.

We all know that word-of-mouth marketing is king. Yet few of us realize that word-of-mouth marketing can only be facilitated at most and not engineered from the ground up. If even possible, the only way to “engineer” word-of-mouth marketing, specifically the viral type, is to have a really, really compelling offering. That is all there is to it. We all know, after all, how hard it is to sell a poor product. Customers are not a voluntary sales force, and they only care about sharing good content or products to win some social capital for themselves. Customers only care about making their own lives better.

Retailers especially are fond of placing social media sharing features on their websites, hoping to piggyback on the high value of social endorsements and to reach out to friends within the social graph. The problem is that 1) people rarely share, and, 2) even if they do, their friends rarely care. Clearly, sharing is not caring when the offering stinks.

Of course, the more simplistic-minded of retailers take the low referral rate as an invitation to “over-facilitate” the social recommendation and referral process by introducing incentives. “Refer a customer and get discounts/freebies for yourself” is the basic idea. At first glance, it looks like a reasonable, win-win proposition for retailers: get a new customer, and keep an existing customer happier than he would have otherwise been.

I think that it is a terrible idea, from both an ethical as well as a business point of view, for three reasons:

Incentives encourage people to recommend unworthy things, diluting their own personal authority. Freebies can cloud the minds of even the most rational, sincere people (and I do not mean “rational” as in economics), because it puts them in a position of conflict of interest. When tangible rewards are involved, the intention of sharing is no longer to help, to sustain friendships, but to manipulate people for personal gain. People can sense insincerity from miles away. When people see that someone is “sharing” products more often than usual, people avoid the barrage of marketing spam and accord less respect to said person. I have an (aptly-called) ex-friend like that.

Incentives merely shift the bottleneck from the sharing stage to the caring stage. It is not difficult to see how incentives would make people share more, but it is harder to see how sharing more would necessarily cause others to take notice. In other words, incentives are not a panacea to the problem of low click-through rates commonly associated with social media. Incentives do not answer the questions of purchase intent and targeting.

Activities based on exploitation of personal relationships are simply unsustainable. The last but most important issue is that of ethics. Incentivized referrers are, in a way, the new multi-level marketers, and they will predictably have the same level of success, or lack thereof, as their manipulative, self-serving counterparts. No one likes to be monetized, feel swindled, or feel taken advantage of in the most opportunistic ways. Perhaps all incentivized referrals should be disclosed, in the same manner that bloggers are mandated, by law, to disclose their paid endorsements.

My opinion is that those who want to generate word of mouth should not try to hack the process but should merely provide the infrastructure to make recommendations and referrals more convenient. Let customers be and not confuse them with incentives, even if it drives action. Social behavior and interactions are more complex than marketers would like to think; it ultimately pays more to just focus on the offering.

I came across an article on social selling a few days ago that derided the concept of selling on social networking websites. I fundamentally agree with the author; selling on social media platforms is irrelevant at best and invasive at worst. Still, Facebook storefront solution providers, such as Payvment, Alvenda, and a truckload of other so-called f-commerce vendors, continue to woo online retailers with the prospect of maximum exposure and access to Facebook's 500-million strong user base.

Payvment argues, “If you have to send a customer to another location to make a purchase, you are more likely to lose the sale. Payvment transforms your Facebook page from a marketing platform to a sales platform, instantly enabling you to generate more revenue and gain new long term customers.”

The assumption behind this claim is that people go to social networking websites to shop or conduct product research in the first place. The fact is that, while purchase intent is perhaps the most important factor affecting conversion rates, most consumers with purchase intent are rarely found on social networking websites. In 2010 Social Shopping Study conducted by PowerReviews and the e-tailing group, only 5% of consumers conduct product research on social networking websites (3% use Facebook while 2% use Twitter) – that is 1 in 20 consumers, for perspective’s sake. Conversely, 57% start with a search engine query and 38% start on a manufacturer’s or retailer’s website. If the statistics are accurate, setting up a Facebook store only panders to the needs of 3% of the consumers with purchase intent.

Commercializing Social

The problem with Facebook stores is not that they are technologically green but that they are predicated on illusions: imagining purchase intent where there is none and taking advantage of Facebook’s and Twitter’s heavy foot traffic when really there is no advantage whatsoever to be taken. The hypothetical situation of selling irrelevant products in a social setting illustrates the extreme conflict between consumer intent and vendors’ perception of consumer intent. In a social setting, people are seeking specific sensory experiences (e.g. the relaxing feeling of socializing in a bar and the adrenaline rush in an amusement park), and anything contextually irrelevant is likely to be perceived as a distraction, an obstruction to whatever experience consumers are seeking.

Unless the goods on sale are complementary to the experience sought after by consumers (e.g. selling ice-cream at a fun fair), the idea of selling where people are having fun, in real life or otherwise, is likely to be met with limited success. Another related reason for its limited success – apart from the misperception of consumer intent – is that retailers neglect to factor in the cognitive costs associated with shopping. Evaluating product quality, assessing product-need fit, comparing prices, and making choices are all mentally-expensive tasks that would naturally be avoided, unless there is underlying purchase intent.

Trying to create purchase intent where there is none is difficult but not impossible (I believe that they call that “demand generation”), but trying to create purchase intent and harness it to close a sale, all at one go, approaches the realm of Sisyphean tasks. The only example in which f-commerce might be useful is where purchase intent suddenly arises in the course of socializing (e.g. a boy is reminded of his girlfriend’s birthday via a Facebook reminder and suddenly needs to buy some flowers – perhaps this is why 1-800 Flowers exists on Facebook). Consider, however, that 1-800 Flowers is an early adopter when it comes to web technology, having set up its first online website in 1992. They probably know what they are doing... or not.

Socializing Commerce

What about introducing the social aspect into ecommerce? Is infusing the social graph into the shopping occasion a distraction, an obstruction to the shopping experience sought after by consumers? I believe that flipping the relationship between social and commerce brings about an opposite effect. Providing a social experience where consumers shop and giving consumers access to advice, experiences, and even the mere company of friends make the social aspect facilitative and supportive of the shopping process.

Obviously, people can be a distraction too, an attention-consuming entity that detracts from the core offering. However, social is fluid; people are fluid. Creating an environment where consumers are encouraged to share product knowledge with and seek trusted information from each other is likely to augment the shopping experience more than anything else.

At its core, the phenomenon of social selling reflects a fundamental misunderstanding of the mechanics of social media, possibly due in part to the infancy of social media and the breakneck speed at which it is evolving. Social media is not for selling, period. Social media is for conversations, engagement, and brand building. If that statement sets off a “where is the ROI in that” knee-jerk response, consider that there is more than one aspect to social media ROI besides the financial, at least according to Augie Ray of Forrester Research.

Ultimately, brands and retailers should use social media for what it is really suited to do. Only then can brands and retailers harness and truly benefit from the immense value of social media, instead of forcing unrealistic expectations upon it and then facing inevitable disappointment.

It is often claimed that ratings and reviews are increasingly losing appeal among online retailers in favor of more trendy, state-of-the-art ecommerce applications that tap on the “social graph” to deliver “instant personalization.” Trust is often cited as one of the primary reasons that ratings and reviews are becoming less relevant – there is limited value in anecdotes and numerical ratings from anonymous reviewers, whose authenticity cannot be verified. Furthermore, just like customer testimonials, consumer reviews are almost always cherry-picked to favor positive reviews. Ratings and reviews vendors, such as Bazaarvoice and PowerReviews, allow online retailers to moderate user-generated content as they wish.

However, even if we eliminate the trust issue, they suffer from another important drawback: reliability. At the risk of unduly dwelling into semantics, there is a subtle but important distinction between trust and reliability. The former relates to honesty and integrity (“Do you mean what you say?”), while the latter relates to usefulness and value (“Even if you mean what you say, do you know what you are talking about?”).

Consider the following arguments against the reliability of ratings and reviews:

By design, reviewers are chosen from an unrepresentative sample, resulting in selection bias. Ordinarily, there is no incentive to write reviews; the process is cumbersome, the effort required is onerous, and there is no instant gratification or reward. The only people who would normally write reviews are those motivated by emotional or irrational reactions so extreme that they warrant a public sharing of experiences. Consumers are more motivated to share their opinions on things that they find extremely good or bad, and they avoid broadcasting banal and uninteresting trivia. For a consumer doing purchase planning, however, this polar distribution of reviews is unhelpful because mediocre reviews (which are also important information) are underrepresented. Worst of all, the remaining sample of reviews is often not a product of objectivity, rationality, and good consumer sense.

The typical consumer is not unaffected by the bandwagon effect. Herd instinct is a prevalent, subconscious trait. It gives people a sense of certainty and safety to know that whatever they do or say has some sort of alignment with prevalent practice. Thus, if consumers are given the liberty to view what others have said in their ratings and reviews (which they are), they are likely to be swayed by others, despite originally having divergent views, especially if others are perceived to be more well-reasoned or convincing in their views (i.e. authority bias). This is a common crowdsourcing pitfall: we are heavily influenced by the behavior of the crowd. Even if we usually avoid the majority view, we cannot be sure that we are not subconsciously or deliberately acting against the majority’s behavior in an attempt to artificially differentiate ourselves.

Consumers suffer from choice-supportive bias and post-purchase rationalization. Consumers are prone to justifying purchase decisions even though they may realize that the decisions were poor. This behavior is not surprising, since acknowledging the imprudence or redundancy of a purchase implies that one is an incompetent and/or irrational shopper. Such post-purchase rationalization is further magnified if the purchase was in fact well-researched, expensive, or stubbornly made against the advice of others. People often want to think that sunk cost – especially if it is great – has some sort of benefit or intangible reward. Some examples include pursuing expensive degrees, going on mediocre premium holidays, and buying overpriced clothes.

Reviewers may be in a position of conflict of interest. Online retailers commonly solicit reviews from their customers to help kick-start or encourage content creation on their websites. Keeping in mind the original lack of incentive to write reviews, online retailers remedy the situation by offering discounts, coupons, and special offers to entice participation (a practice adopted from how businesses conduct focus groups perhaps). As a result, reviewers are bestowed with the moral obligation to say favorable things using thesaurus-level, meticulously-manicured language. The resultant artificial form of communication is likely to be abhorred by consumers looking for genuine data points to guide their purchase decision-making process.

At its root, the concept of ratings and reviews has fundamental structural issues, due in part to technological limitations and commercial reasons. Ratings and reviews are an integral, consumerist component of the purchase decision-making process; their purpose is to provide consumers with adequate, trusted, and reliable information. They have not been the perfect solution but have perhaps been the best we have so far. Now, with the prevalence of portable social identities, mobile internet, and broadband internet, perhaps it is timely to adopt a new paradigm, a new strategy that incorporates a more targeted, meaningful “social” element to drive consumerism.

Of course, new social commerce solutions are not foolproof. However, given the vast potential of social commerce, it is ultimately not a poor decision to explore how it can possibly transform consumer experience, multiply sales, and build brand loyalty.

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