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April 11, 2010

Expectation Inflation and how it works on the web

I don’t know if there is anything called expectation inflation, but there is something in the way we perceive satisfaction that makes us react to change rather than feel constantly satisfied in a non-changing environment. Think of it as three states.

  • A steady state of satisfaction that you perceive as normal
  • A small improvement to something you lack
  • A huge improvement to something you have an abundance of

Now, let us dissect these three states. For this practice I will use income, but you could think of marketing efforts, dialogue efforts in social media, and even inbound links to a website through the eyes of Google. These are general rules that come out as logic to you as soon as you start thinking of them.

Examples of expectation inflation

Let’s say you have a steady state of income. This income will establish some kind of budget behavior. If your income stays at that level it is probably quite reasonable to assume that your budget and spending will remain constant. There might be changes to the way you prioritize different goods, but the limits under which you prioritize are held constant and thus your behavior is constraint by these limitations.

Now imagine all your needs aren’t satisfied at this level of income and you get a small increase in income. This will most probably induce some kind of increase in your budget spending and it will be felt as an important change for you. You will evaluate this sense of improvement as something positive. Equally, if you for some reason would get an income cut, you would experience this as being something highly negative. You will eventually get used to this new state of income and the sense of satisfaction will turn into a sense of normality and thus not feel as improvement, rather it would be expected.

Now consider the situation where you have needs that are exceeded by your income by far. That most of your income goes into the piggy bank and you really don’t need it. Even though you might get twice the increase than the example above, you wouldn’t get twice the satisfaction. You would rather feel a lot less satisfaction. The nominal change in income was greater, but the utility at which you made use of this change was a lot smaller. You would probably not change your budget spending and thus you would be only marginally affected by the change.

The conclusion we can draw from the above is that the value of income, with regards to satisfaction,  decrease the more income you have. Thus the utility function of income has decreasing returns to scale with regards to satisfaction.

How to make use of this knowledge

Many social marketeers try to reach for the skies by contacting the super bloggers who have a lot of readers. What they do not realize is that these bloggers already have a lot of focus on them. They receive money, and they receive attention with an abundance. They do not need more of the same and so you will have to give them a HUGE effort to make them feel satisfied.

Especially if you put into perspective the comparatively minimal effort you have to make when talking to a blogger that receives hardly any attention by marketeers and other professionals. Now, you might ask yourself about what kind of utility contacting a smaller blogger would bring to your business. Well, basically, it gives you hardly nothing right away, so if you are looking for direct payback, you should go for mr expensive.

However, if you are building your brand over time, you will do a lot better if you contact the smaller bloggers who are relevant to your business rather than staring blindly at who’s hot for the moment. Not only because you will be able to work with them at a much more considerable price, but because they will feel a much greater sense of satisfaction regardless to what you offer them. And yes, there are other aspects to it as well. If you help them build their platform you will have a great leverage to launch from in the future as well, but that’s for another blog post. Now we’re talking utility and you will do a lot better with the smaller bloggers than with the bigger ones.

I would say you’ll get an increasing returns to scale on every invested dollar in a small blogger, as the rumor will spread that you are reaching out to quality rather than quantity. You engage where most interesting for your brand, not by the rule of popularity, but by the rule of focus. Perhaps those last few sentences don’t make any sense, but they will if you read later this month.

Now, apply this to other relationships than the ones you have with bloggers in the social media sphere. Your income currency now is attention and recognition. Who can you exchange your newly found currency with and get the best return on investment. Try it out, plug the numbers into a graph and calculate where your ROI hits the steady state level.

And the same goes with links and Google

Now, most SEO’s aren’t that unfamiliar to changes in the SERPs due to change in inbound links over time. I regularly play around with behavioral economics and SEO as I have some kind of sick idea about Google aiming to make their bot as close to a human as possible.

If you look at the influx of links to a website, you find that even a weak website can rank for a keyword for a while if they receive a sudden increase in link juice to the web page covering the topic. Now, if you apply it to the reasoning above, Google will only improve your rankings for that keyword if the rate of change in inbound links, increase. Thus, the acceleration of inbound links are more important for a positive ranking change.

This is nothing new, or strange, but when applied to the thought process above it could give us some key insights on where Google is taking indexing and search results. Google expects some domains to deliver highly linked content, highly qualitative content, etc. and thus ranks new posts and pages from that page at an unreasonable high serp position (even if off topic) at first. If the link influx is less than what is expected, the rankings are decreased as a result, if they are more, the ranking will increase the SERP position of that page. More importantly, if there is no change over time. Ie, the second derivative of inbound links is not positive, then the website will probably get a lesser ranking to those web pages with an accelerating influx of inbound links.

This also derives the notion that a website with a lot of links, but with no increase in the inbound link influx will get a more and more narrow serp performance, only ranking for the narrow terms that it was ranking for when having a positive (meaning accelerating) second derivative to its inbound links curve.

So, what have we learned today?

Well, I do not know if we have learned anything else than that you like stuff you have a scarcity of more than that you have an abundance of. I could go on forever reasoning about this, but please write your own reflections on the topic in your own blog posts or in the comment field as there is so much to this topic that I am falling into pieces.

Possibly related posts:
April 5, 2010

How Conformity can Work with You or Against you in Social Media

What is conformity? Well, basically it is the word that denotes the way a phenomenon blends with its surroundings. In this blog post, conformity will denote the way we as humans tend to be influenced by our surroundings in making our decisions. Those of you who are business owners considering social media, user generated content and link building, you should continue reading.

Those of you who are already a part of the online community should also continue reading cause I will talk about something that is highly important to me. Stand out. Dare to walk against the stream. Always assume that when there is a genuine feeling that there is a truth, there is almost always another truth that is contradictory, yet also correct, but from another perspective.

Business value of conformity

There are plenty of reasons to study how you can work with conformity in the way you develop your converting landing pages.

  • How should you use user reviews
  • How should you use user cases
  • How should you co-brand your products in order to always be in fashion
  • To what rules does your target group currently conform
  • In what ways are you limited by your internal conformity

Start out by watching the video below.

As you can see, group opinion has an effect on the Parietal or the Occipital brain lobe. This means that there is a possibility that you can use group opinion to actually distort the perception of a fact. This means that people don’t only imagine or are influenced by creative thought. They actually use their rational parts of the brain to evaluate your product or service in a way that is a part of the group opinion.

Business downsides of conformity

The downside for the individual is that group opinion can sometime suppress our free will. We make decisions that we would not have done otherwise. However, as it is our rational self that has negotiated with the group and with our perception of your product, we will probably feel happy with our purchase. However, the variety and diversity of products and services might be limited as a result as a sufficiently large minority can repeat their opinion enough times for it to become the perceptive truth of the majority.

It might also limit your development, and it might limit the creation of new ideas within your company. So, how do you stay away from conformity yet utilize this knowledge in order to improve your business. Well, basically you should start rewarding diversity all through the line. Then you display conformity in times of decision making, such as on a converting landing page.

So what’s the best level of conformity for your company

The simplest case of helping people conform to a group is to display a top list. The top list should contain at least two different displays. One which shows the most popular purchase and one that shows the highest rated purchase. List the highest reviews on top and the lowest on the bottom. Then show the average in an good position. This will enforce peoples decisions.

Put it in copy such as “People who bought this product felt a sense of satisfaction within 3 hours of their purchase.”. Lame example, but you get the point. Put a time limit to the decision making process. That way you induce action there and then and not a wait and see.

The Social media natives and conformity

I sense that there is a willingness to conform to the goods of social media. There are rarely any facts published in blogs or in surveys. Most of what is being posted is regurgitated opinion. Look at the eMarketer or Nielsen. They present data as though it was fact, yet most of what they present is opinions by marketing directors or user surveys. They rarely ever present any test results or conversion figures. Opinion, not action is determining most of the agenda in the social media debate.

That’s why people such as Brian Solis and Seth Godin have managed to end up on top of everyone’s mind when trying to find the answer to “why social media”. They to can conceal opinion delivered as though it is facts. Brian Solis through his endless talk about optimizations, whilst really talking about planning. Seth Godin when he talks about tribes, whilst never showing any empirical support to his opinions. And as long as it is not proven to be correct, I will continue assuming that they are wrong.

The same goes for smaller Social Media communities

In Sweden, where I am from, there are about 9 million inhabitants. About 300 000 of those people are social media consultants of some kind (opinion, not fact). Now, although that is an exaggeration, the true numbers are staggering. However, there is a high level of conformity within this subculture. There are a few voices that tend to lead the debate, and the rest regurgitate what the leaders say. I agree as well, but the “roof is very low” (a Swedish expression when it is difficult to voice a deviating opinion). I sometimes talk myself into becoming the nemesis, I want to find the hole in the argumentation.

But, as long as they stay on the road of discussing philosophy, there is no correct answer. There are only opinions. Considering I only have one set of argument skills when debating (not the best one… I get rude and angry), I have so far not engaged in trying to break the high fives going on.

However, there is a question that is burning my head from the inside out and that is “how something this new can lack variety to such an extent that almost everyone seems to know what’s right and what’s wrong”?

But then again, conformity might also be good in the beginning

Well, I might just be a negative, but there are so many reasons in which we should break out of the conformity we are currently in and join another movement, then get our followers to conform to the new set of rules of engagement. And yes there is always a reason to question the status quo, but there are also several reasons why not to question once you believe the “lone nut” is correct. Conformity as it happens. And perhaps this is exactly what it means.

Although this might sometimes break into what is seen as the uncommon and the movement towards improvement might not last, the situation in itself might lead to a break in the conformity you are currently being limited by. Dare to stand out, but more importantly, dare to follow those who stand out if you believe they are right.

Cause I am not saying that it is not okay to follow. That’s how we structure society and it would be difficult to work otherwise. All I am saying is that when the lone nut stands out, then try to separate yourself from the group for a moment to reflect on whether or not your opinion is indeed the opinion of the group or the lone nut with the idea to break the conformity.

I also want you to have a look at yourself in your current situation and think back in time what it was that convinced you that social media is the solution to world hunger (yeah.. metaphor). Was it the repetition of opinions concealed as facts, or was it your gut feeling to follow the lone nut?


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April 4, 2010

Social media is Not the Core of the Challenge it’s a Symptom

There has been a market change over the past few years. This market has been driven both in terms of supply and demand. There are huge market failures as a result and if businesses don’t figure them out, they will not be operational in a couple of years.

In my sector we talk about social media. I think we all feel that it is immensely important. However, social media is only a symptom of a changing business environment where it is no longer the output or purchases of a product that determines it’s value. Naturally, one might assume that I am talking about digital products and items such as blog posts, mp3’s and other stuff that can be copied and distributed freely. But no. I am talking about all of business.

What I am saying is that social media, or more correctly, the way we gather information and communicate through the Internet, has changed the way we evaluate situations, products and content. With content I naturally mean all that brings meaning to anything. It can be the looks of a person, a blog post online, a recipe of a delicious meal etc etc. Anything that brings something to life and gives it context.

A true World Market

The reason for this is that we can now tap into the whole world of content. When previously faced with a supply we thought that we were limited to choose from what we saw. Today we know different. The thing is. As we are able to tap into the whole world, we assume we can find EXACTLY what we want. The probability that we can find EXACTLY what we want has also dramatically increased as the social medias give way for us to find exactly what we want.

Through the unstructured societies with an extreme amount of output agents, we can use search to discover that “one in a million” has gone from impossible to a crowd of 1000 people. Naturally this falls over into our demand for common goods and our estimations on how great our life will be. Cause we are no longer satisfied with what we get, as we know we can get what we want. And that is the market shift. There is a huge demand of many different things.

An example

Let’s exemplify this. Let’s say I want to buy a book. I don’t want to buy any book out there, but I want to buy a book about “minorities and their ability to create subcultures in modern Africa”. I promise that I didn’t check if that existed. So I go to my two search engines for books. Google and Amazon.

In Google the result page gives me this however Amazon gives me nothing. I was ready to purchase something, yet the supply was handed to me for free. It is amazing. Is this a common pattern when it comes to products online? Well, yes, anything that is digitized can probably have a free product option. In this case there was only a free product available, so I couldn’t buy it even though I would have wanted to.

Now this gives people a reason to think. What if every time I search to buy something, I can find it online for free? That must change our behavior right? Otherwise we wouldn’t be where we were today if we weren’t able to adapt to a better circumstance?

I know what you’re thinking. Digital products… right… but what about cars? what about buildings? they cannot be moved across the Interwebs or distributed like a PDF document.

I agree. They can’t. But the demand for them can. Thus the supply for something that cannot adopt to the fast pace of the web is in real big trouble. What these products need to do is to make it possible for the customer that finds them, to also be able to adopt them, to change the products.

If you cannot diversify, don’t deliver the final product

If you look at recent studies on what most effect a purchase decision, it is notable to see that the possibility to customize the product is amongst the highest indicators to why we decide to buy. Clay Shirky said one cool thing in one of his lectures. He said that “A screen without a mouse, is a screen delivered incomplete”. I would like to say that, any product that I cannot change, is a product that is incomplete.

A good example of an adaptable product is the Mini Car. They have understood that they won’t be able to meet the needs of the long tail distribution of demand and supply. Thus they have given the user options to amend their product into something that they want. In the case of an office building this could also be the case if you allowed the customer to change the product into what they need. They might not pay more for it, but they won’t buy it if they can’t. Yes, your profit margins on your MAIN PRODUCT will go down, but there is light at the end of the tunnel.

The Opportunity of Waste

This opens an opportunity for companies, and that is that there is no longer any waste. Even poo is a product that can be commercialized. (You don’t think so. Ask the Germans who bought Elk poo in masses during their vacation in Sweden.) Think about your organization and production today. I am 100% sure that you are currently producing stuff that could be put to the market but that is currently being thrown away.

DON*T do that… The online market enables you to buy and sell anything, as the demand for anything is there. Now you’re thinking that this will be a very costly experience. YES it will be if you don’t adopt as a buyer as well. Why the heck to you buy from the same place you’ve bought from for the past five years? Why do you agree to an over price, knowingly, or why do you continuously find yourself accepting to get a product that you would kind of like, rather than exactly what you want?

If you buy an ad campaign, when it is done, don’t throw away the posters, the campaign website and the other campaign material. Put it to the market. IT WILL SELL!! Your posters will go to your product fans, your website will go to an SEO and your other campaign material will be used for educational purposes. This is not recycling. This is business.

I promise you that you fill find at least two new areas within your company where you can make a considerable amount of money by just putting what you consider shit, to the market.

So why is Social media the Symptom

One could argue that the above stated would give social media a position as a driver in this change that is taking place. But it wasn’t social media that started this change. It was the lack of ability for companies to adopt to the shift in demand. The demand created social media as a mean to communicate more effectively.

So it is not social medias fault that people are spending time in it, it is the lack of ability to adapt that is shifting the focus of time. This is what the music industry has learned over the past few years, and we are seeing other businesses go the same route.

Social media does not explain the market change, but the market change explains social media. That’s why social media is a symptom and the market change is the core. Now… we are now a couple of years down the line and so social media is starting to become the core of where ideas become business, however, as with AIDS.. It is not AIDS that kills us it is the cold that we’re no longer resistant to that does.

Some concluding words

A couple of weeks ago I started to develop a new economic model where demand and supply get skewed by the new market structure for demand and supply. Some of what I say above might not make any sense without the basic understanding for that model. However, I feel like I am onto something and so I need to put this to the readers of this blog to see what I am missing.

Basically my findings so far:

  • There is a new way in which demand is created
  • Commercialized Supply is falling behind
  • Social media is only a symptom, not the core of the problem
  • There is an opportunity to make money in companies that is not being taken care of properly yet
Possibly related posts:
  • Related posts on internet supply and demand
  • my class
March 28, 2010

Carles Puyol is Who You should turn to for Advice on Social Media

There is something many people don’t assume about me. I am a hard core football (soccer/european football) fan. Perhaps not in the sense that I stay loyal to one team over a life time, but in the sense that I love the game. I watch as much football as my work schedule allows me to do. Even when I work I watch football on a second screen, or listen to it whilst I am writing. Right now I have football on when writing this.

The reason I love football is not so much about the sport itself, but it is because of the players. All those intriguing characters that assemble to form a team. The culture in the different teams is truly unique although the sport is all the same. Some teams got heart, some teams got skill, some teams got both and some teams just have fun. With all successful teams the one thing I’ve found is that they have endured their spirit or culture over time.

Take Barca as an example. They’ve had players like Stoitchkov, Cruyff, Eto & Laudrup who have all been true egos. The culture however has remained one that is quite sympathetic. Perhaps it is the symbiosis with the Katalan people that make up the complete club. Barca is owned by its fans. I am unsure, but the club has been incredibly successful. So has Bayern Munich, Manchester United, Real Madrid, Inter, Ajax and many other clubs out there. What they all have in common is that they have stayed true to their idea of what football is over a long period of time.

My favorite player of all time is Carles Puyol. He is a defender, he is the guy that carries out those remarkable saves when the midfield and the forwards have not done their job properly up front. Carles looks like an 80’s rock star and he carries himself as though he was the reincarnation of Mussolini. To me, he is a hero, and if he would lead me into anything, I would probably follow.

In real life, I’ve found a couple of other people who think Carles Puyol is the best player in the world. Online I’ve found millions. And I guess somehow, this is what my post is all about. It is about my love to a game that helps me explain to myself why the clients I work for are doing the right thing when they are creating content that their fans appreciate.

In football teams they have understood this a long time ago. That’s why some teams sell even their best players as they know the spirit of the club is threatened by the mere existence of a star that walks a different path. Such was the sale of Eto from Barca to Inter. Companies that create splendid content for their website, but the content is not coherent to the business or the company core itself, well, that company do best in not publishing that content at all.

I think that we should look more at the loyalty of fooball fans when trying to assemble what we have to do in order to create loyalty for our own businesses. Every game is a game of football, yet, every game is unique. Every player has a set of skills, but they use it in a new way each game. Every game is played at a fixed time on a fixed day, yet weather conditions, audience and other exogenous factors vary every time.

The game of football has embraced this into the spirit of the game just as you should embrace the ever changing spirit of the online world into your business. You can play in a team with a fixed set of rules, but there will always be different situations where you have to adapt what you know into the given set and time in space. This is what companies have to learn when engaging in social media and this is what they must understand when building their businesses for the future.

I think a lot about my wasted years in school and how much I would have learned if I would have just been inspired to learn rather than taught what to think. I think my love for the game of football, and my infatuation with Carles Puyol is an expression of my admiration to those professionals who are able to meet every situation, regardless how new or how difficult, with a response, instantaneously. What if more businesses (cause yes, football is a business), could work the same way?

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February 21, 2010

If you Meet Expectations, You are Not Doing a Good Job

There is a change about to take place. We as humans are somehow starting to make an attempt at understanding ourselves without simplifications. We might still limit our scope, but we have at least started to look at facts and situations rather than models. Yes, some models can still be created, but a model is always merely a depiction of a perspective given a set of circumstances. What then happens in reality is never very coherent, sometimes not even when all circumstances are met.

Behavioral economics are growing in influence. This makes me glad. I am an ex-econometrics student who has always been fond in looking to the individual rather than the model. Well, I love making models, but for me a model, a strategy or a tool set is always flawed if it doesn’t continuously change.

In physics they got this point several years ago as they discovered quantum physics. In SEO, some people understand it as the way you cannot rely on static values in a world where trust is changing as the aggregate value of your links change over time, even if the total amount of inbound links do not. In economics, they have been a bit conservative and we have yet seen the move from static model to individual until now.

We as people change. Not only our physical appearance but also in the way we face the same situation two times. We aim for positive outcomes in all our choices. If we believe that a previous action was not to our satisfaction we will make a different choice the next time we are met with the same situation. Also, a positive outcome for one person is not THE positive outcome for every person. It is all relative over time and from where we start. Our expectations are dependent upon what degree of utility we currently have.

Thus, a positive outcome can in itself become a less satisfactory outcome over time which is something many of us forget when trying to communicate and get attention. We ask the same question or propose the same value proposition as we base our decisions on history. This might lead to a positive result for the person we ask the question to the first time. Second time the person makes the same choice, they the same pay off. If this payoff is not changed over time, the payoff will be expected. If the payoff is expected, then the value of the payoff decrease.

You might wonder why I write this, well, it is because these findings have huge implications on what we do as marketeers and dialogue creators.

Our behavior has to continuously change if we want the marginal value of our actions to constantly increase. What I mean by this is that we have to look past success of the past and always look to answer the same question in a new way for the future. That way we maintain the value of our efforts and get the greatest return on investment.

I will write more on this in coming weeks.

Possibly related posts:
February 2, 2010

7 Next Step Advice when Thinking Traffic to Recurring Customer

I am sometimes talking about conversion and social media. I wrote a post that I called Online Marketing Matrix a couple of months ago where I posted this model. This model works well for ME. I suspect you can use it as a starting point in your discussion about where to go next. This post will explain in further detail how I think about this model and hopefully inspire to some discussion in the comments 🙂

1. Using The Online Marketing Matrix

The model is meant to help companies visualize the next step they have to take in order to increase the revenue in their online visitors. Some reacted to this model by saying that SEO is indeed a very profitable way of making loads of money. I completely agree with that, and I feel like I have to explain the model in some further detail in order to make it make sense.

Most companies that sell something on their website should start out by trying to generate some traffic to it. If you have no customers then you probably don’t have any e-mails (if you haven’t bought or scraped them) and you most definitively don’t have any relationships with your customer base online. Thus your only option is SEO and SEM. That’s why this box is the starting point of this model.

The bottom line however is that if you learn more about your customers behavior and you use that to build relationships then you can give them offers that will be received built on that relationship. If such irrational values that trust or relationships build are added to your product, then you will also be able to increase the revenue on each sold product as it is valued more than a competitors product by the receiving customer. yey…

2. SO, what’s the next step

Well that is what this model is about. If you have high conversion, then you should probably turn to working on customer trust in order to get a lot of return customers. If you have a strong relationship with your customers then but you have problem with revenue, then you should work with making them return to the shop. (DUH… that’s a no brainer… well… are they just loyal to your brand or are they buying often? Do you have the right products for them to have a reason to buy often? etc etc.)

If you are running customized e-mail campaigns and SEO landing pages, then you should probably look to revenue and loyalization of your customers. What I mean with this is that you should probably introduce some kind of loyalty program for frequent visitors, commentators, reviewers etc.

Through increased interaction and transparency you will both make the important and active customers loyal whilst showing other customers that they can trust you as they can see the reactions other users have exerted on your stuff. So… now to some examples.

3. Increasing your Revenue through SEO

The best way to increase your revenue from SEO/SEM activities is to optimize your web pages so that the most relevant traffic reach the most relevant page. That way you will increase your volumes of traffic at the same time as you are building a highly usable website. The next step is to look at conversion. You do this by analyzing the traffic and where it drops of in the sales funnel.

4. Learning Behaviors adding e-mail to your SEO model

Well, you get some data from the keywords the visitor come to your website through, but you don’t really know that much about your customer. The best way to get some more information about who they are and what they like is to collect their e-mail address and start analyzing what links they click.

Equally you can learn this information by engaging in Social Media. That way you can analyze how different users are interacting with your content, and with each other when it comes to your products and brand.

Once you manage to establish a relationship to the user through one of these options you can also learn how they behave in given circumstances. By knowing how they behave you can also offer more relevant products which will make the customer more satisfied.

5. Increasing Revenue through customizing E-mails

When you know more about your users you can also customize your communication with them. When you do that you will see your conversion rates go through the roof. Now… don’t use this as a lame excuse to start spamming. Remember you have reached this far in building the customer relationship by keeping one type of promise. If you change the circumstances of that promise, then your customers might not like you as much anymore.

Customize with a name, or a related product, or a “people who buy, also buy”.

If the user gets what they want, you and you keep to your promise, they will also start trusting you. It is simple. If you started out doing something and people like you for it, then don’t change.

Now you might ask… well what if some continue to like it and others get bored. Well, that’s what we have the customization, win back and sign up campaigns are for :). Get to those in next weeks eMail specials 🙂 Modern e-mail tools enable you to communicate to each and every user out there and put them into different sales cycles that will autopilot a lot of your work.

6. Increasing your Revenue through Irrational economic decisions

If you have your conversion at max, then you have to focus on trust in order to help your customers understand that you deliver what you promise. This will in turn make them into returning visitors.

If you at the same time have worked with building their loyalty through customization and dialogue, you will end up in the best possible position you can. You are now in a position where you have a priority position in your customers life and you will be able to charge more for the same that your competitors are offering.

7. Taking one step back – THINK FIRST

Basically all modern website projects should start by acknowledging the limitations of your product. With this I mean you should think about how easy it is for the customer to buy the product over the web. Some things simply require an IRL experience before a purchase can be made.

Secondly, you should also carefully examine whether or not you are staffed in the proper way to make the next step. If you don’t have the proper organization for it, you will be stuck in a place you do not want to be in.

January 25, 2010

Yet Another Blog post about Social Media and Conversion

I wrote the post about 5 misconceptions about how to convert social media users and it seems as though the post was sought after. One e-mail I received about the post asked for the recipe for social media conversion. Previously I’ve written about how to convert a social media user into a buyer. What I will do in this post is to take you through ONE 5 step strategy on how to convert groups of social media users from a Facebook group or Page.

The 5 Steps:

  1. Build the infrastructure
  2. Make a buzz about it to attract a following
  3. Build trust through dialogue
  4. Crowdsource an activity
  5. Give your value proposition a social context

Oh.. yeah… if you don’t want to read the full post you can skip to the very end where I sum up the essence of this post. 🙂 This post is far from my previous post about the 5 Misconceptions, but this one aims to spark some needed discussion on the topic.

1. Build the infrastructure

There is a lot of discussion about how you should build facebook, twitter or any other kind of infrastructure around your brand. You have some choices to go through. For this example, the infrastructure will be a Facebook page or a group. When you create the group, one way to label it (generally a good advice if you want a big following) can be to create a group that falls into a desire of a user.

(If you’re a big brand, then you should probably contact someone currently running your brand group and see if you can strike a deal.)

This means that if you are selling sports shoes, you create a “we who run 1K a day” group, if you are selling second hand cars, then you probably should create a “Driving is not an experience, it’s a lifestyle” group. This is the premium way to gain many followers in a short while. The people in your group are in the target audience of whom would perhaps be interested in your kind of product, and the potential is a lot greater that they sign up to a non-branded group.

However, be aware that if you are looking at conversion to buyers as the target for your engagement in social media, then you should look at being as specific as possible with your group branding. Many times, groups such as product review groups are extremely good for conversion. These groups can have names such as “Product x’s Reviewers”. But I’ll handle this case specifically in a later post.

2. Make a buzz about it to attract a following

Badam. You have built your group or page and you need to find some people interested in your thing. First of, make sure you’re staffed so that you can actually talk to the peeps joining your group. Ie. if you have a page for runners, then make sure you will have someone who likes to talk about running that administers the activities. Remember, pretending is not for social media. You’ll eventually get exposed. (even though that eventuality might take some time to come about)

Now stick your hand into your traditional marketing bag! If you have no followers, fans or friends in the online sphere, then you can, shall and must use whatever advertising you can afford to spark your launch. (naturally you invite your personal friends first, but they will only get you so far)

Use TV if you can afford it. Use PPC through AdWords and Facebook Ads. Use radio and use PR. Start out local, start out with the employees perhaps. This step is all about how much dough you have in your briefcase. If you have a lot of money, then launch big, if you have no money, then launch softly.

Now some of you experts out there might react and say. “Well, Jesper, you haven’t said anything about the product and the post quality. Shouldn’t people try to focus on the product and the rest will follow?” Well, that’s a yes and a no. Naturally, if you want the fans to stay in the group you should probably have something to offer when they get there.

Perhaps a question, some images and a person monitoring, answering questions and discussing the purpose of the entity. However, if you have a good group or page name, then you should be set at this stage. All you need is about 1000 members. It will cost you max 500 bucks if you do it through FB-ads alone.

Yes, you should put a link, icon or some kind of entry to the FB-page from your website. Yes, you should include it in your news letter, and yes you should tell your mother to join. Where ever you can talk about being up and running, you should. But please use your uncommon sense. You don’t want to be pleading. Anyhow… onto the next chapter…

3. Build trust through dialogue

Wow, congratulations!! You’ve applied some uncommon f**kin’ sense and you are now up and rolling with your 1037 newly won fans/friends/followers/members. Now, the first two steps are pretty straight forward and can be thought out by practically anyone who puts their mind to it. This step however, is not for anyone.

Dialogue! Can you recall the last time you had a nice dialogue? How did it feel? What did you talk about? Were you sincere in the questions you asked?

I say the best way to use your Facebook page or group is to crowdsource it. In your workplace you should include the Facebook group or page into your daily routines and discussions. Then if you find a question you think the wall might be able to answer then ask them like “Hey, we were discussing here at the office and couldn’t agree on if it is ok that “spring” means “run” in Swedish. We need you to resolve this issue for us!”.

I do not mean that you should use that sentence, but I mean that you should use the “by the way, as you are a part of what we’re doing”… kind of language. It simply cannot go wrong. Even though you are the stiffest business or product out there. If you know how to take charge of casual talk, then you SHOULD.

This kind of direct dialogue, where you ask, reply and ask again is probably the best way to build trust on Facebook. The trust and the tonality is needed for what’s to come. You have to appear genuine. You HAVE to care. You have to disagree with some people and you need to behave like a person. Regardless if you are working behind the logo. If you don’t behave like, talk like and think like a person, then you’re going to run bad.

This is my opinion and it is what works for me. Naturally the above statement will induce some reactions from people who don’t agree. However, for me it has never failed. But I guess that is the essence. It also has bearing on the converting stage that we’re coming to… right about… NOW..

4. Crowdsource an activity

To convert people through social media is almost like a serve in tennis. You have to go full circle before smashing the ball. Even though your movement might be perfect you will still hit it out of bounce about one time out of ten. If you’re hitting it out of bounce more often than this you should probably change your stance and work on your technique as that is highly unprofitable.

However!! That is a metaphor taking us off the target.

If you have set up your group to a stance where you’ve built trust through talking to them, sincerely asking them questions and setting them up for the smash, then now is your time. You can identify when a group has reached this stage when they start posting stuff themselves without you asking and that people are replying to what other people are posting. To use a cheesy expression: “Then you know you’ve created a circle of trust”. LOL… but it is true.

Now it is time for you to make the kill question.

The thing now is that you should determine an activity which requires your type of product in one way or another. You should then leave one aspect open for the users to decide. They can either decide the date, a color, a place where to do it or whatever you find suitable. This might include such things as using your product in a creative way in a YouTube video or mean that people should sign up somewhere to compete against the others in the group.

It doesn’t matter what kind of activity you crowdsource. Just know that you can afford to actually make it reality. Narrow it down a lot if you have a limited budget. Depending on what feeling you’ve managed to build on the page or in the group, you will be able to offer different things. The “only on facebook” offer has almost stopped working. You really should take some help here if you cannot think of something creative that involves your product and leaves some aspect open for user crowdsorcing.

5. Give your value proposition a social context

Now. Sometime during the activity you have collected some piece of information amongst the participants. Oh, yeah… if you have done this correctly about 10-30% of your group members will join the activity.

Time for some Video right?

So, after you’ve seen this video you probably already have some idea about how to use peoples irrational behavior in order to convert some of your traffic. If you don’t, well here comes a suggestion.

If the event was successful, you now propose: “boy, that was fun, if you ever want to do that again then I’m sure I can hook you up”.

If the event was not successful, then propose: “boy, that sucked, let me find a way to compensate you somehow, the only thing I’ve are these discount checks…”

Perhaps not that obviously scheming as the last one, but you get the point. The main idea is to connect the offer to the social context which you have just experienced. Please feel free to add better examples than the one above in the comments.

But let’s be honest… this does nothing but touch the essence of social media conversion

Cause there are 1 million ways in which you can convert social media traffic. The bottom line is, however, that you have to engage the people that follows you. The key to success is your ability to place your offer in some social context you’ve experienced together with your fans/friends/followers or plan to have. You need to put your products in a social context. Even if your product is porn. If you put it in a social context then you will have success. Tupperware is the best example of this story.

Find people through standard marketing, build a relationship through dialogue, engage them through an activity, convert them through context. That’s it.

January 21, 2010

75% Wants to Change, 27% Wants to Share

I am reading the Adobe Scene 7 Viewer Study. A very interesting piece of information about what people need when making a decision to purchase something online in a few given situations. The study is quite limited to apparel, at least from what I have been able to consume this far. However, there are some data interesting enough to put into some light.

75% finds it Highly useful to be able to Alter products

75% wants to be able to alter looks, and customize their products before making a purchase. Or, they at least want the ability to do so. Also, 50% find it highly useful to have a live chat possibility with a customer support. Not surprising, 88% find customer ratings and reviews as important or helpful when making a buy online.

This is not that astonishing, it is not even surprising. It confirms that people want to be involved in making well informed decisions when they purchase stuff. These elements are the ones that help simulate an offline environment in a purchase situation. As we are used to buying stuff in an offline environment and not in an online environment. These things make sense to us, and are thus preferred when deciding to buy.

© Adobe Systems Incorporated. All rights reserved.

A Whoooooping 27% find it useful to share

One thing that is highlighted in the graph above is that “Interestingly, links to social sharing sites whereby one can share an item of interest with friends and family only came in at 27 percent.”

For me who has worked with social media for quite some time, this is not an ONLY, this is an AMAZING. In the early stages of social media integrations, only a couple of percent (about 3%) found it useful to share stuff when making purchasing decisions. About 1-2% actually did share. Four years later, this number has grown to 27 percent and we can really see the direction of this. If I would have a website where 27% would find it useful to share stuff before making decisions I would JUMP HIGH OF JOY!!

Although I have seen an increase in sharing on my own websites to about 5% of the traffic, I still couldn’t believe that 27% percent find it useful when making a decision. I mean. It is logical. It should really be higher. We all need confirmation sometimes when making decisions. But, 27% percent that find it Most Useful. Sweet… Social commerce… here we come!

I sincerely recommend you to browse through this report. You can find it from this page.

To ask questions about this study go to Adobe’s blog about it.

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December 30, 2009

Playing the Social Commerce Game

I’ve spent the past few days reading some new books I got from Amazon. They are all about social psychology/psychology and economics. Most of you don’t know this, but economics is my true kick ass drug in life. The latest book I read on the topic is about irrational decisions, or moreover, decisions that we make based on norms.

So how is this in any way related to what we do in social media and the search engines? Well it has everything to do with what we do. When it all boils down to the core of what we’re trying to achieve, we have to deal with people. If we want to make money in the process we also have to engage in some kind of economic decision making process with our users, fans, searchers or followers.

Rational vs. Irrational

In Sweden, where I’m from, the trade of being a rational individual is seen as a good characteristic in a person. This differs between cultures and the interpretation of rationality varies over time. In economic terms, rationality occurs when you make decisions based on the face value of each situation without engaging emotion, historical context etc. Basically you can describe it as if I give you 1 dollar, then you don’t ask me why I want to give it to you, you just accept. In a social context we all know that a dollar doesn’t come without some kind of reciprocal behavior in the future. Ie. If someone gives you a dollar, you might expect that they would like a similar value out of you in the future. If you are curious you might ask.

In a rational environment however, if not stated otherwise, you accept what is proposed at face value. Ie. if the person doesn’t say you have to pay them back at a later stage, then you don’t. To do so, would not be rational behavior as you would actually spend money that you didn’t have to spend.

Not as selfish as “they” want us to think

Another assumption in economics has also been that we are self indulging individuals. We make decisions out of our own self interest all the time.

The books I am reading right now takes these assumptions to the next level. They present evidence that there are loads of situations in life where we don’t make decisions out of self interest. They also say that irrational decisions sometimes become the rational path to follow.

The Social Media & SEO game

So how is this in any way related to Social Media and SEO? Well basically you need to think of your social media strategy, as well as your modern seo strategy as a set of games. You need to set the strategy that makes your game the most profitable for you. Social media is indeed about people and if you don’t recognize the shortcomings/strengths of social psychology whilst setting your strategy, then you will most definitively end up in the wrong place.

I am not saying you’ll have to hire a bunch of economists. What I am really saying is that you should go with your gut rather than trying to go with something that is far away from yourself. Then set up strategies for what you will do if your initial strategy don’t work out. Ie. you should plan for the worst and hope for the best. No one knows what works at each instance. We know some things are better than other but in order to run your shop efficiently you cannot stop questioning EVERY aspect of what you’re doing.

Always do the following:

  • Cannot stress the importance of being honest to yourself (most people lie to themselves to protect the validity of their choices. You know if you made a good decision, admit it and do something about it rather than sweep the shit under the carpet.)
  • Ask yourself what your assumptions are (I mean, “yeah, they are going to press the blue button and then fill in their name and e-mail”, what if they fill in their friends e-mail and this becomes the user generated purpose of your campaign)
  • Prepare a first action for each instance one of your assumptions would turn out to be wrong

If you don’t like what you’re selling, why you think anyone else would buy

Use existing knowledge about social interaction between people. Social psychology combined with economics can really help you. Help your users make irrational decisions by presenting your offer – their game – in a way that makes them value a certain outcome greater than another.

If you know that your game doesn’t work, ie. if you are doubting if you would choose that path of the game, then it is probably not a very good strategy. In order to make the desired strategy the best one, then you need to change the game.


You have two offers on sale. One of them give you a higher margin then the other. You cannot change the prices for either of them as this is decided by someone else. Your boss is pressuring you to deliver. If you’re presenting these two choices on a website you can use social parameters such as recommendations, user reviews to highlight the offer that gives you the best margin.

User reviews help us choose irrationally when we are faced with having to make a decision. If 104 people have thought a good is really good and this is highly visible, then it is more likely that people would buy that option in front of the other product you are putting on display.

Man… I’ll need to continue this post later as I am really tired and I feel I am making no sense. Please question me in my comments field so I’ll get back on track. Motivate me!!


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December 20, 2009

Social Media ROI and when it makes sense

ROI is a measure used to determine the efficiency of an investment, or compare investments with one another. The most simple way of determining ROI is to put up a formula such as this one:

Return on Investment

Source: Investopedia

How you can Use ROI in Social media

When I read posts such as the one by Thomas Baekdal I get seriously concerned. Especially when I look at how many shares it has got on Twitter and the lack of criticism in the comments of the post. The main problem is that most of these writers cannot determine the difference of consumption and investments.

The gain from an investment needs to be determined by the person making the investment. When you make your online marketing plan, or your online customer relations plan, or your online investor relations plan or your main online communications plan, then you need to set goals. Those goals need to be broken down into KPIs and measurable success events.

You need to think. What do you need to get the Gain you want? Then you need to look at what gives you that Gain. If you don’t know, hire a consultant that do. This differs between sectors and product. If you want this Gain to be the return of an investment you also need to have the ambition that it will grow over time.

If you need to sell fast moving services online that do not require transport but can be bought and consumed in the online environment. Then followers on a Twitter account might be such a metric you should pay notice to. However, if you work with industrial products that take time to deliver, then you probably should focus on other key metrics as the most important when looking at your choices for marketing spend. Especially if you are determining your marketing spend with ROI calculations.

To say, as Thomas does, that fans etc. is not a metric you can base an ROI calculation on is simply wrong. YOU determine what should be your Return, and then you determine what investment brings back the highest Return of that sort. The final goal in every business is to get the green, but in order to get it you need to work for it.

Marketing is not an investment

For me, marketing is not an investment at all. It is consumption. To make a distinction between the two, let me give you an example from real life:

When I buy food and clothes I do that as they make my stomach full and my butt warm. I buy them cause I need them for a specific purpose. Most likely, they will loose value from the second I pay for them until they are fully consumed. An investment is what I do when I put my money in the bank and invest in interest rates. An investment can also be buying something such as an apartment, which value will grow over time. I buy it cause I have money too and because I believe its value will increase over time.

With marketing you generally consume media, just as you consume a loaf of bread. It fits a purpose and it gives you a direct return. But just as the eaten loaf of bread gives you less utility over time (as you start getting hungry again), the consumption of media needs to be recharged as it’s value decrease from the second the ad spend was consumed by the media buy.

So when does it makes sense to measure ROI on Social media

And this is probably where you bump into most of the misconceptions of social media and ROI. People try to measure ROI on marketing activities and then compare it to the same money they put into their social media. THIS IS WRONG!

You cannot compare marketing spend with social media spend. Especially not through ROI measurements. You cannot measure ROI on traditional marketing as it is not an investment. You can measure how much you sold because of a media consumption, but as the value of that consumption goes down by the minute, it can not be seen as an investment.

Some activities in social media however CAN be seen as investments. Some activities should be seen as consumption. Consumption goes towards the marketing budget, investments goes towards the business development budget. A Facebook page or application engine is a typical investment. Just as a factory or an offline store it is a platform from which you launch products, build relationships etc. Investments in social media can also be seen as investments in a farm. If nurtured it has the ability to grow organically through the once in time planted seeds. (now you know you have to plant stuff more than once to make it effective and vary the crop, but it still has the possibility to grow by itself if you just let nature have its toll)

How to determine a Social media investment:

  1. The value of the spend is supposed to increase over time
  2. The object of the investment is a necessity for launching future activities
  3. It can grow organically
  4. The acceleration of your return slope is positive or zero (inclined line in a diagram)

constant returns diagram

How to determine Social media consumption:

  1. Your spend decrease in value once the money is spent
  2. The acceleration of your return slope is negative (sad mouth in a diagram)

sad mouth diagram

And to what should social media ROI be compared

First en foremost there is the notion that you should believe that social media is the way to build your business online. There is some of you out there who can get more value out of engaging in social media than others. Generally fast moving services that do not require delivery of a product of some physical weight, has more to gain directly. Here it is also extremely easy to measure the relationship between investment and return. Ie. HARD COLD VALUES measured by engineers.

YES there are soft values, and they do make a difference, especially when working with elastic demands for products. (ie. where price matters less and perceived value matters a lot.)

What you should compare your social media investments too are the manual costs of your sales unit and customer service. Ie. the cost of each phone call, each e-mail, each send out via snail mail etc. That is the investment you put into your existing customers. Ie. the infrastructure that carries your business. Then you should compare the Gain, minus the cost, through the cost of those investments to similar investments in social media. THAT is a true ROI calculation when it comes to social media.

Concluding these thoughts on Social media ROI

I must say Thomas post was the spark for this one. There is a lot of bull crap out there about ROI and social media but when trying to punch holes to the “myths” about ROI, then PLEASE talk about ROI and not the effect of consumption. That way we will finally be able to take the core numbers to the engineer decision makers and make some sense out of this mess.

And to those who wonder… Yes I still think a TV-ad is a REALLY good way to consume media. Yes I still think Outdoor Ads and Events have a greater wow-factor than a Facebook-application. It is the way we combine it all that makes the difference between online good and online great.



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