The Friendly Brand – E-commerce’s Embrace of Social Media

As mainstream media continues to highlight #swineflu, @aplusk’s follower count, and status updates, they continue to miss the more important trend percolating in social media.  That is, e-commerce’s embrace of social media and willingness to invest in this medium because of the important role it plays in the business.

Every relevant e-commerce establishment is moving ahead and connecting to their customers via their blog, Twitter profile, and Facebook group.  The stories about companies building customer service support into their Facebook pages or local yogurt shops giving away free yogurt through Twitter are only growing.  Unfortunately, there still are many skeptics who question the value of these actions – especially because of the widespread belief that directly selling to customers via these channels tends to be viewed as digital assault.  If you can’t sell to them, then why bother?  Here’s the simple reason why social media matters to online retailers – brand advocacy.

When I was a consultant at Bain & Co, I directly witnessed the positive effects of brand loyalty on sales growth.  Companies with high customer advocacy (American Express, Southwest airlines, to name a few) experienced a much faster sales growth than those with lower advocacy ratings.  If you still don’t believe me, the London School of Economics also did a study quantifying and linking sales growth to brand advocacy.  In this study, it noted that a 7 percentage point increase in brand advocacy results in a sales growth of 1%. What better way to build loyalty and engage an audience than to interact with them on the platforms they spend most of their time on?  A recent report by Nielsen highlights that the amount of time spent on Twitter has increased by 3712%, Facebook by 700%, and Blogger by 30%.  In short, if you are an online retailer, ignore this avenue at your own peril.

Written by: Anton Dy Buncio, e-commerce entrepreneur and founder of funsherpa, Stanford graduate, and former management consultant.

EDITORIAL NOTE: funsherpa is a stealth start-up that is a Wasabi Ventures portfolio company.