Wednesday, February 15, 2012

Speed Summary: F-Commerce Selling on Facebook - White Paper

Paul Chaney provides us a speed summary of an 18-month study done by Dr. Paul Marsden, editor of Social Commerce Today. This is something that FMCG/ CPG brands getting into F-commerce, need to appreciate very well to get the best out of Facebook and F-commerce. We in India, in particular, need to go through this to learn from the experience in more mature markets like the United States & Europe.

Why have leading consumer brands started selling on Facebook?

The results of an 18-month study on the emerging trend of ‘f-commerce’ conducted by SCT editor Dr. Paul Marsden tells the tale. It provides a critical overview of f-commerce  - selling with Facebook – specifically as it applies to consumer brands and identifies key risks and opportunities for using Facebook as a commerce channel.

It also advocates an alternative solution for brand pages on Facebook – fan-stores selling fan-first/fan-exclusive products for the purpose of promoting brand advocacy.

Five key brand-building benefits are identified and a blueprint for setting up a Facebook fan-store is outlined using an evidence-based 3-point “advocacy activation” formula. The report concludes by outlining emerging trends and new opportunities for consumer brands.

Introducing the F-commerce Ecosystem

F-commerce started 2009 with 1-800-FLOWERS setting up the first fan-store. Others soon followed – musicians, film and TV shows, celebrities, retailers and brands. Initially, the focus was selling products with e-commerce apps for Facebook pages, but, since that time an evolution has occurred to include a full ecosystem of selling solutions that include the following:

Selling on Facebook

  • E-commerce apps for Facebook pages - transactions are conducted without leaving Facebook; examples of brands include ASOS, JP Penney, GNC and others
  • Facebook Credits – Facebook’s own currency used for purchases within the social network for virtual goods, digital products.

Selling with Facebook

  • Storefront apps for Facebook pages – product showcase apps linked through to stores
  • Facebook apps for e-commerce sites - toolset designed to allow businesses to simplify, personalize and socialize both the FB fan-store and retailer’s e-commerce site to enhance customer experience; these include Facebook Social Plugins, authentication mechanisms, API and Open Graph;
  • Facebook Check-in Deals – mobile, location-based advertising designed to drive retail store footfall;
  • Facebook Advertising – display ads designed to drive traffic to e-commerce sites, footfall to stores or retailer’s fan page.

F-commerce - Sizzle in the Social Commerce Steak?

  • F-commerce has become the “poster child” for social commerce;
  • Investment funds are following f-commerce innovation; in the first few months of 2011, over $2bn investment was poured into social commerce ventures;
  • Consultants Booz & Co forecast that the social commerce market will drive $30bn in annual sales in less than five years time.

Does F-commerce Work?
  • Doubts persist around the viability of f-commerce success, comparing it to attempts by brands to sell via Second Life;
  • Poor conversion rates cause it to fall into fourth place behind email marketing, search marketing and affiliate marketing;
  • Privacy, data ownership and security issues also factor into bearish predictions about the future of f-commerce.

Reasons advocates say F-commerce will work:

There is a small, but growing body of evidence to support its viability. Example include:
  • 40x increase in referral traffic from Facebook for Levi’s e-commerce site after implementing the ‘Like’-button in April 2010;
  • 100% increase in revenue from Facebook traffic within two weeks of adding the ‘Like’ button for sports retailer Giantnerd;
  • 1000 diapers sold by consumer products giant Procter & Gamble in under an hour on its Facebook store.

Considering the reasons proffered by both antagonists and protagonists, it is too soon to tell how much of a role Facebook will play in e-commerce.

Brands should think beyond the use of f-commerce as a transactional medium to one focused on increasing customer lifetime value (CLV) , which the study defines as today’s value of the sum of all purchases that have and will be made by an average customer. It is in this arena that some of the greatest innovations are taking place.

F-commerce for Brands: Five Reasons
  • Reason #1: Facebook ROI – f-commerce offers a real solution to delivering a measurable ROI on Facebook
  • Reason #2: Brand Experience – f-commerce can help brands deliver a compelling experience in Facebook that beats expectations;
  • Reason #3: Brand Insight – f-commerce can help brands better understand their customers;
  • Reason #4: Brand Loyalty –  f-commerce can drive loyalty among customers;
  • Reason #5: Brand Advocacy – f-commerce can activate brand advocacy through fan-exclusives and fan merchandise.

Brand Building with the 'SoLoMo' Consumer
  • Conservative brands may choose to wait out this period of f-commerce experimentation until more evidence appears to support its use;
  • Learning how customers use social, location-aware and mobile technologies (SoLoMo) are reasons not to wait;
  • The SoLoMo consumer is changing how consumers connect and engage with brands;
  • A growing body of research suggests that branding today has less to do with what a brand says about itself and more about what other people say about it.

F-commerce: Turning Fans into Advocates

F-Commerce can assist in building brand advocacy by helping brands get new products that are worth talking about into the hands of the people most likely to recommend them – brand fans.

Example: Chanel selling new cosmetic products from its Facebook fan-store before they reach the brick-and-mortar store – giving brand fans exclusive ‘fan-first’ access and thus something to talk about to their friends.

Advocacy Activators
  • #1: Experience – advocacy is primarily driven by salient memories of personal experiences with products or brands;
  • #2: Involvement – advocacy is driven by the degree to which we care about something, including products and subjects with which we have high degree of personal involvement and interest;
  • #3: Incentives – advocacy is also driven by incentives that motivate consumers to advocate.

Advocacy Activation with Fan-Stores
  • Fan-stores provide a channel through which advocacy activators can be put into play;
  • Fan-stores enable brands to relate to consumers as product advisors, empowering them to have input on product development;
  • Fan-stores can be used to incentivize fans to act as advocates.

Activating Advocacy with Fan Merchandise
  • Advocacy can be generated through the use of exclusive fan-first or fan-only merchandise offerings;
  • Branded fan merchandise can also be used to promote advocacy; ex: Westin hotels selling branded robes, candles, towels, sheets and spa products.

F-commerce Future Trends
  • Systematic ‘fan-seeding’ – consumer brands will use Facebook fan-stores systematically to “seed” new products with brand fans;
  • Viral fan-stores – fan-stores will use viral mechanisms – content appearing in newsfeeds, for example – to promote advocacy;
  • Empowered involvement – using product review and rating mechanisms will get fans more involved, thereby increasing advocacy;
  • ‘Pop-up’ fan-stores – temporary fan-stores will be used to support new product introductions, advertising campaigns, special events and other brand activities;
  • Analytics & logistics – specialized fan-store analytics and metrics will emerge, along with fan-store logistics companies that offer fulfillment and drop-shipping services;
  • Digital and virtual goods – growth in fan-stores will be driven by high-involvement categories offering the instant gratification; of digital downloads: music, movies, TV, gaming, publishing and sports, ticketing, and digital merchandise;
  • Facebook Credits – fan-stores will increasingly allow frictionless fan payment with Facebook Credits for both digital and physical products;
  • Fan-store agencies – agencies that specialize in turn-key Facebook fan-store management will arise;
  • Fan marketing – a new era of ‘fan marketing’ with marketing campaigns and special products designed specifically for brand fans may emerge;
  • Beyond the brand – fan-stores may shift from brand-centricity to interest-centricity; brands become curators of products for non-competitive brands.

Conclusion: Start with the Smile and Lead

Consumer brands can build advocacy with ‘fan-first’ marketing using Facebook fan-stores to get new product lines and fan merchandise into the hands of those most likely to recommend them – their Facebook fans.

There is no “one-size-fits-all” template. Instead, brands should listen to Facebook fans, experiment with techniques to drive advocacy, adapt to an outcome-driven solution, and continuously develop fan-stores to improve fan experience.

Success depends, not on processes, but on insight gained from fan interaction; making fans “smile” by exceeding expectations should be the number one goal.

Download the entire study here.

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