While social media sites such as Facebook and Twitter have great potential to build brand relationships, brands must carefully manage their participation on such sites to maintain brand price premiums. Recent research suggests that social media sites have the potential to erode brand pricing by cultivating a customer focus on “deals.” When you’re a brand of “deals,” your prices have only one way to go: down.
The potential danger: brands reduced to “deals”
The research data I refer to is in a recent Razorfish study: FEED: The 2009 Razorfish Digital Brand Experience Report. The Razorfish study found that the largest single driver for brand relationships on social media sites was “access to exclusive deals or offers.” It was not customer passion for the brand, brand values, or brand experience. As Razorfish puts it: “Largely, it’s about deals—pure and simple.”
In its analysis, Razorfish wasn’t too concerned with this outcome, but I think brands should be. Building a large brand following geared to shop on price can be counterproductive for a brand—unless the brand is a brand of deals and discounts to begin with.
Quoting from the FEED study:
The Language of Love for Brands? Deals.
Clearly consumers are doing more with brands today than simply “receiving messages.” Many social pundits would say that this is a new form of “dialogue” with brands. But if that’s so, the subject of that “dialogue” surprises. Based on our research, it’s not so much about some type of “shared passion” for a brand’s values. Largely, it’s about deals—pure and simple
Of those who follow a brand on Twitter, 44% say access to exclusive deals is the main reason. This is also true for those who “friended” a brand on Facebook or MySpace, where 37% cite access to exclusive deals or offers as their main reason. [My emphasis]
Creating deal-seekers instead of customers
If roughly 40% of your social media “fans,” “friends” or “followers” link to your brand because they’re interested in deals, chances are they are shopping on price. If you’re a brand of deals, discounts and promotions that’s fine, if not flat-out wonderful. But if your brand strategy is to lead your market and command price premiums through brand qualities unique to you, then a significant part of your social media following may be working against you. Instead of creating customers, your foray into social media may be creating legions of deal seekers aiming to push your prices lower.
A deal experience or a brand experience?
Are you in business to offer a deal experience, or a brand experience?
Social media sites are often touted as sales channels, and many companies use their Facebook and Twitter accounts for dedicated push marketing, pumping out a steady stream of promotions to fans and followers. They amass as many followers as possible, then let loose a fire hose of blowout deals, loss leaders, high volumes, upselling and add-ons to squeeze a profit at the end of the day. Their actions contribute to the deal-finding ethos of social media sites. They condition followers (and their friends) to look for deals.
If your brand strategy aims for higher margins based on premium pricing, you may want to distance yourself from vendors boasting super hot deals at rock-bottom prices. Their world is not your world. You offer a brand experience, not a deal experience. You wouldn’t locate your flagship store next to a used car lot, or in an outlet mall.
Using social media to support premium pricing
Even with the above caveats I would still argue that social media technology is an outstanding way to build brands and drive price premiums. All it needs is the right strategy. While the Razorfish study identified “deals” as the No. 1 social media brand driver, it also had some interesting results in other categories. Let’s look at some numbers for Twitter/Facebook (rounded up) on why people follow a brand:
— I am a current customer 24%/33%
— Entertaining or interesting content 23%/18%
— Other people I know are fans of the brand 6%/6%
— Service, support or product news 4%/5%
If these numbers are representative, there’s a huge task ahead for brands to actively engage customers on social media sites in ways that bolster premium pricing. Brands can work creative wonders with content, service and support, but these currently total less than 30%. These should be brand strengths, part of a brand’s core attributes. They need to rank much higher to support price premiums.
Brand strategy options for social media
If a key brand goal is to maintain premium pricing, how should a brand approach social media sites? It’s a given that a brand needs to listen to what its customers are saying, engage them in the spirit of the brand, provide information, quickly answer questions and squash malignant rumors. What else?
I would suggest three options:
1. Use social media to build strategic customer relationships
Determine where you are leading your customers and use social media to advance your mission. Align your social media participation with your intended brand journey. This entails a strategic view and a focus on creating customers beyond the reach of your competitors. In this effort your customers are allies, not “consumers.” And yes, this is a strategy of maintaining—if not growing—price premiums.
2. Consider moving social media inside the brand
Carefully manage your participation on social media sites like Twitter and Facebook. These are effectively co-branding sites. On their sites you merge your brand with theirs. Is this what you want? They may not add that much value to your brand, especially if their prevailing ethos is “deals.” Strategically, your brand may be better off if it brings social media elements inside the brand itself. As an example, look at Burberry’s Art of the Trench. Burberry leveraged its Facebook presence into a Burberry social media site, where the Burberry brand calls the shots.
In other words, your Twitter or Facebook page is not a destination. It’s a portal into your brand.
3. Develop personal brand applications
A personal brand application (PBA) on a smartphone can be a far stronger brand builder for premium pricing than waltzing with the masses on social media sites. The PBA is personal, portable and persistent. And it’s all you, 24/7, as close to the customer as a second skin. Some reference links:
Bottom line: think outside the social media box
On social media sites, all brands tend to look the same, and act the same. That cannot help premium pricing. Apple, a highly profitable brand with tremendous loyalty and cachet, and $30 billion in cash, has a very limited social media presence. Ask yourself, “Why?”.