Social Commerce – Making your purchases public?

Recently, I came across a new trend – social commerce – where more and more businesses are providing discounts and other incentives to its customers in exchange for publicizing their purchases online. Social Commerce is the intersection of social media activity and eCommerce where sharing leads to real dollars. I learned of this phenomenon for the first time through an online shopping website Gilt.com. When I logged in on to the website using my iPad, Gilt offered me a discount to download their app and asked me for permission to make my purchases visible to my friends on facebook (Gilt promised some exceptions, however, gifts and intimates purchased would be excluded). At first, I thought: “What a genius marketing idea!” but then I started to doubt whether this idea was feasible and would get any customer buy-in. On the one hand, people I am friends with probably fit within my age and socio-economic group, thus purchases I make might be items my friends would be interested in buying. Ecommerce businesses by making my purchases public would be getting access to exactly the customers they want. Furthermore, the fact that I actually made the purchase as opposed to just liked the item (Pinterest allows users to simply share items they find appealing) might be a more powerful signal to my friends and might have a meaningful influence in driving transactions for any given ecommerce business. However, at the same time users might not be as excited about making their purchases (sometimes irrational, i.e. items of designer clothing that cost way more than they should) public. I, for one, thinking about that downside refused to become a member of this service despite the whooping 20% discount Gilt offered me). I imagine, there are many users like myself out there who would be worried about giving away the right to make their purchases public to online commerce website.

Social media democratized marketing for small businesses: successful promotion and distribution of products is no longer reserved for larger companies who can afford expensive media expenses such as TV ads, commercials during sporting events, etc. Companies like Facebook and Twitter have leveled the playing field – allowing participants to share events, products, and companies they are excited about with their friends by simply clicking the “like” button. Mass adoption of these platforms made it incredibly cheap for companies to reach a large subset of the population that might have a high likelihood of enjoying and purchasing their product.

EVENTBRITE CASE[1]:

Eventbrite is one of the companies that is very excited about social commerce and uses it extensively. The company allows users to share the event before they’ve purchased a ticket by featuring the Facebook “Like” button. On their order confirmation pages (after the ticket has been purchased), they placed a “Publish to Facebook” tool. They track event-sharing behavior carefully and have made few key discoveries from the data they collected between October 2010 and March 2011:

  • 40% of sharing through Facebook occurred on the event page (via the “Like” button) vs. 60% of sharing which occurred on the order confirmation page. This suggests that the motivation to share is higher once the purchase is made and the guest is confirmed to attend the event.
  • The company’s BSR (browsing share rate) is 1% — only 1% of people who are simply exploring the idea of going to the event share with their friends before purchasing a ticket to the actual event. Eventbrite’s TSR (transcation share rate), on the other hand, is 10%, which means 10 times more people share an event from the order confirmation page.
  • They’ve also found that post-purchase share on facebook drives 20% more sales than a pre-purchase share.

The Eventbrite case shows that social commerce is a very powerful tool that could be used to drive sales for a business. However, are all businesses created equal when it comes to social commerce? Or are some businesses meant to succeed in integrating their tool into their marketing strategy while others are doomed to fail?

I believe it is the latter. Although people feel more and more comfortable sharing many aspects of their lives online – e.g. music they listen to (Spotify), events they go to (Eventbrite), places they’ve attended (FourSquare) – products they buy might not be one of them. Firstly, because frequently purchases we make online (although frequently discounted) might be overpriced – an average price for a shirt on Gilt is around $100, which is significantly higher than the price of an average shirt an average American buys (partly due to the fact that items sold on Gilt are designer). Secondly, frequency of their purchases might be something people are ashamed of. If someone shops online every week feels embarrassed by their shopaholism, they might be uncomfortable by these public posts and thus, it could potentially hurt Gilt by discouraging to customers to make frequent purchases. Thirdly, many of us have facebook friends that we do not know much about, so perhaps I am not comfortable with those individuals finding out more about my spending patterns. For the reasons above, I can see how Gilt could fail at implementing a successful social commerce initiative. I believe to succeed, they should beta test it and incorporate a solution similar to that of Eventbrite, i.e. let customers choose which purchases they want to make public and which they prefer to keep private (as opposed to making every purchase public by default). This approach would allow Gilt to analyze their preliminary data and ensure that their customers are happy with this sharing and then consider making it a default feature.


[1] http://blog.eventbrite.com/social-commerce-2/

 


7 Comments

  1. I agree with you that there are significant barriers to get people to post their apparel purchases online. Another possible reason is that while I may be comfortable sharing what i just brought with my close friends, I'd rather the acquiesces do not see them.

    Companies could potentially get around this by partnering with facebook to make it easier to group friends and select who sees your updates.

  2. Samia Shamim

    I agree with your observation that social commerce may not apply to all business models. To take that argument further, there are niches where exclusivity is assuming greater value than social commerce. Rather than share everything with everyone on platforms such as Facebook and Twitter, users are increasingly placing greater value on closed networks and circles that provided access to limited online sample sales no else discovered or invite only professional networking platforms – aspects that users do not want to share with their world at large. This desire for exclusivity will directly limit how social the commerce on certain sites can become.

  3. DebbieLimongan

    Great post on social-commerce, Dilshoda! Though tempted by those juicy discounts, I also hesitate to blast my online purchasing over social media. Some things, like social capital and embarrassment, money can’t buy.

    I do agree that some items are more conducive for sharing – clothing and items that are closely linked to self-expression and uniqueness seem tough. While I love to share great finds with my friends, I certainly do not want my closest friends to purchase the exact same shirt! However, I like Samia’s point to limited social-sharing. I think limited sharing can be extremely effective given you can target sharing only to those who will likely take interest (e.g. sharing baby clothes purchases with other mothers). Similarly, I think retailers can approach social commerce in two ways – encouraging users to share via your social graph (i.e. facebook, twitter) or through your interest graph (e.g. pinterest followers, blogs). I believe the latter is actually much more conducive for social commerce. Firstly, simply being “friends” does not necessarily mean you share the same purchasing preferences, style or even interests. Interest based sharing allows people to share and inspire with other like-preferences while keeping personal connections out of the picture. Moreover, this approach alleviates the fear of committing a social faux-pas by torturing your friends and acquaintances with spam – interest based social sites allow people more flexibility to opt-in or out (much harder to de-friend someone simply because his/her blasts annoy you).

    At any rate, I agree that social commerce, despite all its hoopla, is quite difficult to crack (and monetize). One can only have so much social currency before “friends” begin to feel like they’re being used in a marketing stunt.

  4. DebbieLimongan

    I just came across this article on digital privacy on eMarketer and wanted to share:

    &lt ;http://totalaccess.emarketer.com.ezp-prod1.hul.harvard.edu/Reports/Viewer.aspxR=2000967&dsNav=Ntk:basic%7cThe+Digital+Privacy+Dilemma%7c1%7c,Ro:-1>

    It touches upon a lot of the concepts we discussed like the general concerns around social sharing, the social factor and tempting tradeoffs of providing personal information. What I found most interesting was the "Say-Do-Gap" phenomenon where most people say they care about digital privacy (i.e. would not want to share personal information on social sites or to retailers), but do little to protect themselves on a normal basis. Furthermore, around 45% of people surveyed said they would exchange elements of personal information in exchange for a deal/coupon. While it is easy to say "I wouldn't do it" in theory, perhaps we are more easily bribed than we would like to admit?

  5. Manasi Totade

    Another interesting article published in the HBR " Why We Blab Our Intimate Secrets on Facebook"
    (http://hbswk.hbs.edu/item/7102.html?wknews=09052012). A key takeaway from the study for me was "protect people's privacy, but don't explicitly tell them you're doing that," since most of us don't really know to value our own information, our judgement about what to share and what not to is influenced by arbitrary contextual factors.

  6. Manasi Totade

    I definitely agree with your premise that today people are more comfortable sharing some aspects of their lives (music, events they are attending) online over others. However, I believe that the critical descriptor is 'today'. 10 years ago sharing personal details such as holiday plans, getting a speeding ticket, updating your relationship status, displaying photos at bars and allowing colleagues to provide online reviews/endorsements of your work (Linkedin) online would have been unthinkable. The trend over time has been for users to develop a higher level of trust and comfort sharing more and more personal data, preferences and potentially purchases. Facebook has observed that the rate at which its users are sharing is increasing at an exponentially. On average, the amount they share today is twice what they shared a year ago — and in one year they’ll probably be sharing twice as much as they are today. In 2011, users were sharing 4 billion ‘things’ on Facebook every day. (http://techcrunch.com/2011/07/06/zuckerberg-online-sharing-is-growing-at-an-exponential-rate-and-users-are-sharing-4-billion-things-a-day/)

    With the advent of pinterest and other such sharing platforms this trend is set to continue. While it is hard to predict how quickly this transformation will happen, I do believe that in the long term users will be willing to share their purchase data online. However, as with many other platforms, retailers that succeed most in this endeavor will need to put control back in the hands of the user.

  7. I wonder how effective this marketing method will be before it goes the way of display advertising with repeated exposure blindness. I feel like my facebook feed has been overrun with these kinds of sponsored likes and purchase shares, to the point that I no longer process them.

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