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Published: February 22, 2011
 / Spring 2011 / Issue 62

 
 

The Coming Wave of “Social Apponomics”

These and other social apponomics companies enjoy benefits that elude many other businesses. They report higher sales conversion rates, reflecting the impact of customized offers, peer recommendations, and crowd-voting, as well as higher repeat purchase rates and larger average sales, the result of sophisticated database marketing and up-selling driven by personalized applications. For example, Target’s online-only consumers — many of whom use the retailer’s smartphone app that offers daily deals, store-specific promotions, and ways to share wish lists and product reviews with friends — spend on average one-and-a-half times as much as their physical store–only counterparts. Multichannel consumers using both online and offline channels spend twice as much.

In addition, customer acquisition costs are lower in the social apponomics environment, as are customer care expenses. Word-of-mouth from the online community continuously attracts new consumers, whose participation at the site elevates its best features, expanding the number of reviews, recommendations, and conversations and providing a surfeit of consumer data for the marketing machines. Meanwhile, users take over onsite troubleshooting and respond to general product questions.

Social apponomics is in its infancy. The companies that are succeeding at this approach are few and far between, and are especially innovative and forward thinking. Many of the most creative social apponomics strategies have yet to be fully developed. But even at this early stage, seven useful lessons from initial social apponomics adopters have emerged.

1. Focus on partners, not competitors. Winners should not compete with social giants like Facebook or Twitter, but rather ally with existing social media whenever possible.

2. Think local. Online solutions should be location-specific to leverage the benefits of the mobile Web, using location-based services to attract customers in the vicinity of stores where products are sold or services are offered.

3. Target each customer in multiple segments. Consumers are complex; they have identities, preferences, product histories, and social data that generate broad “cloud profiles,” and they increasingly use the same mobile devices in both their personal and business lives. Armed with the rich data available from consumers’ Web activities, companies must deftly separate the masses of information that they collect about individuals and target offers and enticements to match the specific persona that a consumer inhabits at any given time.

4. Transform pricing into a dynamic conversation. The obvious examples are sites such as Priceline.com and Kayak.com, which offer people travel deals based in part on how much they are willing to pay. But other, e-tail–oriented sites are taking this approach in more creative directions. Groupon.com offers local discount coupons determined by retailers and consumer-goods companies, among others, that go into effect only after a specific number of people have agreed to buy the product. In this way, companies can base how much they charge on a minimum sales volume, normally an unknown quantity. As a result, an e-tailer might decide to cut the price of an item by 20 percent or more, certain that the company will sell five times as many at that price as at the regular price and will improve its margins.

5. Make use of the wisdom of crowds to build more compelling Web apps and to improve customer service. Enlist users to share feedback on beta versions of applications and to be active on self-help and message boards, providing purchasing recommendations and solutions to product problems. Offer preferential rewards and status to the most involved users.

6. Humanize your company “virtually.” Allow employees to be frequent posters on social media websites in an effort to decentralize the company’s message so that it increasingly comes from the rank and file rather than only from the executive suite. Avoid giving the impression of being a command-and-control company, which is anathema to the loose-knit, unstructured, ad hoc nature of the Internet.

 
 
 
 
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