Recent research from Google suggests that social media may become a double-edged sword for brands. While social media sites may be excellent platforms for promoting sales, they can also position a brand as a source of deals and discounts. This positioning can erode a brand’s pricing power by conditioning customers to shop on price rather than intrinsic brand value.
In other words, unless a brand takes care in how it develops its social media community, it may lose in strategic pricing power what it gains in immediate promotional power. I say “may” because the data is far from complete at this time. But it’s data that points in a definite direction.
Retaining pricing power is crucial for brands
Social media provides enormous value to its users while offering low-cost and effective communications and promotional opportunities for brands. (For typical examples see here). For brands, the critical task is to develop a productive social media strategy that deepens brand engagement and experience while maintaining price premiums. I previously discussed this issue in a post on a Razorfish social media study conducted in 2009. Razorfish found that roughly 40% of brand “fans” and “followers” of Twitter and Facebook were looking for deals. My takeaway from the Razorfish study was that a brand may risk becoming a “brand of deals” if it is constantly linked to deals, or to the expectation of deals. The brand’s pricing power may be reduced accordingly.
Google finds that a brand’s “friends” on social media often want deals
Google released partial data from its research on Facebook, the 800-lb. gorilla of social media sites (and, we should note, a prime Google competitor). Google’s data indicates that the single largest segment (25%) of those who “friend” a brand on Facebook do so in order to receive discounts, deals and other types of special offers. In my view, this may perfectly acceptable if a brand needs constant promotions to attract customers. However, a brand that is not in the business of hot offers and blowout sales may find that this “deal ethos” on social media sites reduces its leverage as a brand of exclusive qualities. You cannot be a high-rent brand with a low-rent strategy.
A chart of Google’s findings
Below is a chart from the findings that Google presented:
For the consumers who do friend your brand, what are they looking for? Discounts!
A brand’s social media pages can become virtual coupons
Google’s data seems to confirm the Razorfish findings that a significant portion of a brand’s social media followers is shopping on price. These followers may treat a brand’s social media presence as a source of deals and discounts, as if the brand suddenly appeared in an outlet mall, offering an equivalent outlet mall experience. The brand may get more traffic and social graph referrals, but it’s traffic that can put price pressure on the brand if the prevailing ethos of fans is “let’s get a deal.” Fundamentally, brands are the deal; they don’t have to make deals. And once every competitor rolls out their social media shingle, deal shopping between brands will be easy. Strategically, the brand’s ability to command a price premium may be compromised.
Two causes of why this may be happening
I can envision two causes for why the deal ethos suggested by this data may be developing on social media sites. The first is that many companies envision social media as the ultimate advertising and PR platform–low cost, viral and high impact–and have consequently flooded their social media pages with sales pitches, deals and promotions. These companies want sales, not a strategic brand community. They gladly create a deal ethos, perhaps because their brands are little more than a sales ploy to begin with. They target fans and followers with pitches, and their “fans” target them with the expectation of deals.
The second reason is that the minimalist designs and capabilities of social media sites generally resemble bare-bones discount sites. The brand is a tenant on social media sites, with a cookie-cutter store front. In such formats, it’s hard for brands to create exclusive brand experiences. Brands that lack strategic brand vision and a community sensibility (as many do) may adopt a social media default mode of persistent promotion—just to fill up the space.
Current social media sites may homogenize brands
A further thought: It seems to me that in their current formats social media sites can exert a significant power to homogenize brands. They can (inadvertently) reduce brands to a lowest common denominator (e.g., Facebook page or Twitter account) that fits the social media scene. We wind up with brands stripped down for the convenience of social media sites themselves. If you look at how the brands express themselves in a fixed social media format you can sometimes glimpse a frightening similarity, as if two very different brands in the real world behave virtually the same in the social media world. Is this what your brand wants?