How Social Media are Changing the Business Landscape | Article

Wipro Academic Thought Spot

guitarLast year singer/songwriter Dave Carroll and his band got a gig in Nebraska. They boarded a United Airlines plane in Halifax. While on the tarmac in Chicago, he watched the baggage handlers toss guitar cases around. He told three stewardesses about it before the plane left, but they ignored his impassioned pleas. When the band got to Nebraska, sure enough, his favorite Taylor guitar was broken.

For the next year, he tried to get United to replace his guitar. The airline said no. So what did Carroll do? He wrote a song called “United Breaks Guitars.” He spent $200 and made a hilarious five-minute music video, which he posted on YouTube. In April that video had 8,367,435 views.

“In the old days, the marketing rule of thumb was unhappy customers told 14 others. Today consumers have a megaphone,” observes Jeremy Kagan, Associate Professor, Department of Marketing, Graduate School of Business, Columbia University.

Kagan says before social media, United “probably would have gotten away” with poor customer service. “The impact would have been minimal.” Today he suspects the YouTube posting is affecting sales. “If you make your customers angry, you are subject to a lot more risk than in the past,” continues the business professor.

How social media is changing the business landscape

Social media today is in its early, defining moment, according to Sree Sreenivasan, the Digital Media Professor at Columbia University’s Graduate School of Journalism. “It’s like radio in 1912 or TV in 1950,” he posits.

“It’s the wild, wild West,” adds Don Bates, Instructor and Founding Director at George Washington University’s Graduate School of Political Management’s Master’s Degree Program in Strategic Public Relations.

Sreenivasan likens social media to e-mail and the Web; in the early days, most companies used e-mail simply as a way to chat with each other and the Web as a way to interact. “Now most business is done through the Internet,” the journalism professor observes.

Bates believes social media will not replace more traditional marketing tools like direct mail or e-mail marketing which will evolve in keeping with new online technology. “But social media will have a great influence on extending a company’s reach and brand in myriad new ways,” he says.

The new “listening channel”

“Most companies use social media as a marketing channel. But it’s really a listening channel,” says Sreenivasan. “Your customers and clients are talking about you every day. In some cases, they are complaining to the world. The more you can do to mitigate this, the better your company will be.”

In addition to complaints, some of the things companies can listen for are:

  • Price changes
  • Sources for new suppliers
  • New customer acquisition ideas
  • New ways to work
  • New business practices
  • Early detection of problems with current products (think accelerators and Toyota)

Sreenivasan says becoming a good listener, however, requires a “change in thinking.” For example, he posits companies need to appoint a “listener in chief.” This person must have an open as well as an analytical mind, because both empathy and a clear understanding of metrics are crucial components of the job.

The Columbia journalism professor believes companies need a serious social media policy, crafting it much like HR policy outlining how the company wants its employees to behave.

For example, some enterprises prohibit their employees from logging into Facebook while at work. “What a mistake!” says the Columbia professor. He agrees Facebook can be “a huge time sink,” but he believes the time investment is a good one. “It’s important because that’s how people learn,” explains Sreenivasan. “They can’t do social media professionally unless they do the personal first,” he says.

Kagan adds large businesses should have senior leadership come up with a social strategy and the right metrics to judge their program’s success.

Twitter, LinkedIn, Second Life, and the blogosphere

When it comes to Twitter, companies need to study their Twitter followers and “understand who is there,” says Sreenivasan. “The power of Twitter is the retweet,” he believes.

Bates says companies are using Twitter for direct sales, product introductions, and brand and reputation management. “The goal is to get people to feel good about the company,” he says. “Companies also want to ‘join the conversation’ so they know what’s going on especially things that impact their ability to operate profitability and succeed in their businesses.”

“Twitter is great for building visibility,” Bates adds. Ditto for connectivity. He says public speakers will give a speech at an event and then tweet a link they mentioned in the talk.

The blogosphere is a “great listening channel,” according to Sreenivasan. The Columbia professor says it’s also a good marketing channel. Being strategic is “the key to being successful in the blogsphere,” according to Bates, because there are millions of blogs to choose from. “You have to choose the blogs whose readers resonate with what you’re doing or care about,” he continues.

LinkedIn is useful for salespeople in business development. “Strangers are much more likely to respond to a friend or associate rather than a cold call. They will return a call from someone in their trusted network,” Kagan continues.

Kagan says businesses find LinkedIn valuable as a filter. HR departments, for example, are inundated with resumes when they announce a position. They really only have time to screen 10 of the hundreds they receive. But they can use their LinkedIn contacts to “work through the clutter” to ferret out the best candidate. “The filtration aspect is a huge benefit,” says the business professor.

How companies are using social media today

Companies are also using social media as another layer of communication to their shareholders, Bates notes.

The public relations community is one group that is successfully using social media, reports Bates. They are using social media to send out press releases, product mentions, surveys, even contests. They are also creating issues advocacy campaigns and more sophisticated programming that addresses strategic challenges. PR practitioners know that social media will only grow in influence as a communications tool for public and private enterprises,” he says.

Even though social media became the rage of teens and tweens, Bates says older people are “more savvy about social media” in a business context. “Retired people, in particular, have more time to spend around their computers. And they are more thoughtful about what they write,” he observes.

Caveats

Kagan says one of the biggest challenges in social media today is deciding which one to invest time and money in. “It’s easy to get caught up in the next big thing,” he says. MySpace was the “in” thing before Facebook, he points out. “Right now it’s not clear what will be the next big winner that attracts your customers,” he continues.

Bates says the No. 1 issue with social media is that the message must have credibility. “Companies have to be careful not to promote things the public can’t believe. The challenge is to be more ethical,” he says. That includes not spamming people in Twitter, Facebook, blogs, and other social media.

Companies must maintain their professionalism, the George Washington professor continues. “If someone mentions something innocuous but wrong in your blog, it can really hurt the company,” he points out.

Regulatory issues also loom on the horizon. Bates cites a new U.S. Federal Trade Commission rule that requires bloggers to declare if they are being paid to write about a product or company. He believes this is the first time there is a regulation for social media.

Metrics to determine success

Deciphering social media metrics can be as challenging as unraveling the DaVinci code, but things will become clearer over time. “We are learning something new every day,” says Bates. Right now, he says it’s “easy to spend a lot of money and still get very little results. There’s not much scientific measurement at the moment.”

One sure sign of success: the message is “becoming viral,” according to Bates.

Kagan says return on investment is ultimately the most important metric. “Social media is just another channel. Is the time and effort you’re making to manage a presence worth it?” he asks.

Social media is not like putting up a static Web site; Kagan says companies have to “respond rapidly” to be effective. Is this too costly given the return? For example, say a company wants to get new customers using Twitter. It can measure the cost of staff or outsourcing the function versus getting a new customer another way, say through direct mail.

At this moment in time, Kagan says the only way to stay ahead of the curve is to “constantly evaluate.”

P.S. Fortunately for Carroll, the story has some happy endings. After posting the music video, United did honor his claim. The airlines even flew him to its Chicago headquarters to apologize. It also helped his career. The video included a special offer; some of the eight million people who were suddenly exposed to his music actually bought his CD. And he’s now in demand as a public speaker, telling companies how they should learn from his experience.

Lessons from the Outsourcing Center:

  • Social media is especially effective as a listening channel. Things to listen for include:
    • Complaints
    • Price changes
    • Sources for new suppliers
    • New customer acquisition ideas
    • New ways to work
    • New business practices
    • Early detection of problems with current products
  • Metrics are still evolving, but ROI remains an important consideration.
  • Be careful not to get caught up in the newest thing. It’s best to reevaluate often.
  • Companies should have social media policies for employees as well as a corporate social media strategy.

Read Wipro’s thoughts on social media.

About the Wipro Council for Industry Research:

The Wipro Council for Industry Research comprising of domain and technology experts from the organization aims to address the needs of customers by specifically looking at innovative strategies that will help them gain competitive advantage in the market. The Council in collaboration with leading academic institutions and industry bodies studies market trends to equip organizations with insights that facilitate their IT and business strategies.

For more information please visit www.wipro.com/industryresearch

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