Silos changing: Our Cambashi expert investigates the savvy consumer’s social media

Posted on 6 Mar 2012 by The Manufacturer

Industry experts at analyst and market consulting firm Cambashi contribute a regular blog titled Silos Changing exploring how new software applications enable manufacturers to implement business initiatives in the new economy.

Mike Evans, research director , Cambashi

This week, Mike Evans, researh director at Cambashi, discusses how consumers are using social media to make buying decisions on products and services.

In our earlier blog,  we talked about consumers’ buying behaviour.  In the past, they asked family and friends when they were unsure about product information.  Today, they increasingly turn to social media to mitigate the risks in purchasing products.

When a product is bought from a shop, the consumer has a face-to- face contact with a sales representative. Our inherent knowledge and experience help us assess the reliability of this individual and hence the product information they deliver. We balance this against other factors such as availability and price to arrive at a decision.

When consumers buy products on-line, they generally regard purchases as involving a higher, and more difficult to evaluate risk. They often turn to reviews of products and services published on social media sites. However, many consumers don’t yet possess the inherent knowledge and experience to assess the reliability of these reviews.

All of us over 40 tend to give undue weight to the printed rather than the spoken or hand-written word.  Test yourself: get several friends to calculate a complicated multiplication of their choice, something like 2,348 x 7,654. Ask them to randomly give you some right and some wrong answers, some handwritten and others printed from a spreadsheet, also randomly.

You have to look at these and guess quicker than calculation time which are right and which are wrong. My guess is that you are more likely to say the handwritten answers are wrong than the printed answers.

Social Media is user generated content. The publishers do not edit, do not generally verify or qualify contributors. That means that information should be treated warily. Positive reviews may come from vested interests or employees. Negative reviews may come from competitors.

Unless there are a substantial number of reviews, there is likely to be bias. Satisfied users are less likely to contribute. Dissatisfaction can dominate the discussion.

Some companies have a social media monitoring function that identifies dissatisfied customers and attempts to placate the issue before it blows out of proportion. Reacting with a positive response to complaints is good practice. Demonstrating a generous returns policy is one way that customer purchase risk can be mitigated.  Ironically, if social media demonstrates that the company deals well with problems, then this can encourage consumers to buy.

Various community marketing campaigns by manufacturers can encourage satisfied users to engage and describe their use of the product as well as the available complementary services and add-ons. In an extreme case, users can even be encouraged to build a community that acts as unpaid support to other users.

The objective is to have ubiquitous information on the product so that negative comment will be drowned out. By the way, this only works if dissatisfied customers are only a tiny proportion. If the product is a dud, ubiquity will confirm that opinion.

So, if consumers’ buying decisions will be based, inter alia, on social media, what will the effect be on Enterprise Applications that are supposed to guide enterprises’ business decisions?

The honest answer is that it is too early to know. Many business decisions are based on a gut feel of what the consumer thinks and how they will behave. It is easy for an Enterprise Application to be “enabled” with social media so that the user of the application will be able to see the information that consumers are exchanging with each other about that company’s product and its competitor equivalents.

The business processes that such real-time information might affect run from tactical changes to distribution strategies to a complete rethink on new product introduction. Product designers would be able to see how product function and values affect consumer buying decisions.  Product marketing could monitor a trial release of a prototype product.

In future blogs, we will go on to write about some of the pioneering ways we have seen social media in Enterprise Applications.