Paul: This is going to be a solo pod where I will talk through one of the best practices around brand advocacy and brand building. And today we’re going to be talking about social commerce. Now, this is quite a broad topic and I won’t be going into the most depth on it, but I think it’s just worth kind of touching on what it is. I think what it is, what it’s not, how is it going to affect the industry on a macro level and actually for us as brand builders on a micro level, what we can do to get after this opportunity. So social commerce is commerce influenced by people through social media, right? People, they are your advocates. This is someone talking positively effusively about your brand on social media of every single kind. That could be Instagram, that could be TikTok, as you’d expect, maybe YouTube, but also this counts as peer-to-peer messaging, dark social as well. So WhatsApping to a community of ten friends saying you should go here or you should buy, this thing, still counts as social commerce. And what this basically means is it is the way that word of mouth flows in the digital era, in the social world that we live in. And when that then moves from being just awareness, from clicks and likes and views, to actually someone making a purchase, wherever that may be, be that online or offline, that is the commerce part of it. So you’re combining the social element, the human, the person, and you’re combining that with commerce. When you buy, you get. Social commerce. Now, it’s worth touching on what this is not. So social commerce is not someone buying an ad on a social media platform and making a purchase on a social media platform. If I go through Instagram shopping or whatever and I make a purchase there and then, that is not social commerce. Now, a lot of people get this mixed up because it is on a social platform, correct. And because it is commerce, correct. Yes, it does sound like social commerce, but when we mean social commerce, we mean something very different. It’s about the human element of it and that is what we are trying to do today. So where does this come from and what does this mean and what is the opportunity for brands? So the idea of e-commerce, it’s been around well since the early 2010’s and it’s been growing very quickly since then. You’re growing from about half a trillion dollars in e-commerce revenue back in 2010, 2011, up to over $4 trillion by 2020. And that growth has been quite deep. And we’ve all done it, we’ve all seen it. We’ve all bought online during that time and we probably didn’t buy online that much beforehand. However, there is an inflection point that’s happened around 2020, 2021 where there have been two very clear winners around the idea of driving commerce through e-commerce. And that is basically in the discovery and phase of how a person finds out what they want to buy. And that is basically search and through ads. And there have been two very clear winners in this, Google and Meta and Facebook. So if you think about it, when I sit down, I want to buy a thing, I write it into Google and I say, I would like a jacket to go skiing in and it will pop up with a whole bunch of really suitable jackets to go skiing in. And also it gives the ability for brands to buy an ad exactly the moment that I want to buy what you have to sell and match it to me at that perfect moment, it’s probably the most magical sales machine that anyone has ever built. And so that is Google, Meta and obviously all the other ad tech companies, that are about placing an ad to inspire you to go and make a purchase of maybe a ski jacket. Not in the purchase journey directly as Google are doing it, but you are probably on the hunt for something and they’re going to present it to you. This is e-commerce, takes you to the brand’s website, you make a purchase, job’s done. And really there are two winners, as I say, Google and Facebook. And what has happened since they have absolutely got their dominance in the late 2010s is that they’ve won. They have built a hotel on every square of the monopoly board and they have switched to charging rent. And so, unsurprisingly, every time you get to have to pay the piper. And in their case, it’s costing more and more and more. This is then exacerbated by what happened with COVID is that all those brands that have not normally been online had no other way of spending their advertising budget, so they ended up spending it on online ads to drive them to their website, .com website, which would have been a very, very small minuscule percent of their revenue until COVID kicked off, and then all of a sudden became every bit of their revenue whilst we were in lockdown. And so they all piled in and they haven’t really piled out since. And because of this, the competition has skyrocketed. And both these companies, all the ads, work on a bidding model. So the more people bid, the higher they bid, the more expensive it is. And the result of this has meant customer acquisition has almost tripled since 2020. And this is really the end of the e-commerce era. So e-commerce, there was amazing growth. It was super exciting. Two massive winners. Those winners are dominant and now charging rent and it is very, very hard to play in this and so therefore, and very hard to stand out as well. There were some brands that had stood up because they optimized their ad flows in an incredible way and they were able to acquire customers for a lot less than their margin and therefore run profitable businesses. The direct to consumer 1.0 era brands that everyone knows, the mattress companies, the glasses companies, the first time that anyone was buying direct to consumer products. These guys basically pushed it out through better ads and did an incredible job of it and did very well. But what has happened since COVID is that the cost of acquisition tripling means their margins have been completely eroded and a lot of these companies have been suffering. Whether you’re looking at all birds or you’re looking at the demise of some of the mattress companies, it’s all the same. It’s part of the same mix as they built a business model for e-commerce that relied on Meta and Google and now that doesn’t work for them and they are really struggling. So what’s left? What else is going to happen? Well, the opportunity for every brand is social commerce and this is something which if you look at the numbers, it’s gone from very little to, around 2021 it was about half a trillion dollars going up. Now we’re looking that’s on track to be over $6 trillion by 2030, more than e-commerce was back in 2020. You’re mapping a similar sort of line from that perspective and this is just the way that the world is moving it’s that we are probably going to discover less on search engines and well, ads will still have a part of that, but we’re going to be discovering through our friends as we’ve always done. But it’s now becoming much more commercializable by brands and we’re able to track when the revenue comes through word of mouth. And therefore we have this channel that had never existed because it’s something you can invest in and you can scale and you can get behind. It becomes a channel. And this is the opportunity that we’re all getting after. So there’s a little bit of a similarity on it. So the fact that customer acquisition has tripled and is leading to the case that social commerce has been exploding and presents for many brands the only opportunity to acquire and grow their brand, acquire customers and grow their brand outside of spending money on ads, which is inefficient and uneconomical in many ways now. So huge opportunity doesn’t make it any easier to do because the complexity of social commerce is much, much higher. If you think that optimizing your ad spend to get to the right person at the right time is complex, social commerce is exponentially more complex, because at the heart of it is a human. And humans are unpredictable, and they don’t do what you want, and they’re very, very hard to scale and to predict in the same way. And actually this is a lot of the reason why many of the influencer marketing platforms have been struggling over the past couple of years because they try to apply a very similar ad-based scalable model to humans and unsurprisingly, it hasn’t necessarily worked because people don’t do what you want. So how can a brand tap into social commerce? Well, the key thing to remember is that people buy from people they trust. It’s always been the case, it always will be the case, and we trust authentic fans and customers of a brand. Like if your mate came up to you and said, oh, I’ve heard this thing’s quite cool, you should buy it, and you say, well, have you bought it? And they say, no, never used it. It doesn’t hold as much sway as I bought this product. I love it. I think it’s amazing. You need to go out and buy it right now. You trust that person massively and they’re authentically users of that product. The difference between you thinking might be interesting to you, getting your checkbook out book out is massive. And that’s the power of social commerce. The key to making this work is to find those advocates, those customers who love what you do and already and want to tell as many people as possible and then activate them to become your spokespeople. And it matters less now about how many followers they’ve got. It is really about the authenticity first, because if you have enough of them, you can still reach enough people and you can drive revenue. And let’s just break that down for a second. Let’s just take a really normal person. On average, I think the average person has about 800 followers on Instagram, although over 60% of people on Instagram have over 1000 followers. So let’s even say that 1000. Nice easy number. So if we take someone with a thousand followers, what can they do? Those are their friends, their networks, people they went to school with, a few randoms who are following them. But when they say, I love this brand, or I love this restaurant, or I love watching that movie or this TV show, and they push it out to their network, a number of people will see it based on the algorithms at that level, around 10% of their audience. So around 100 people will see that. And of those 100 people, how many of them can be convinced to go and make a purchase? It is a lot higher than you would think because of the authenticity. Because if you know this person, you trust what they have to say. And if that person can drive one, two, three, even five purchases of your product, what is that worth to you? So if you’ve got an average order value of $100 and five people buy your product, that’s worth $500, not counting the fact they might have a lifetime value of a lot more than that. So that one individual, if they drove you $500, normally you wouldn’t really look at someone with 1000 followers as being beneficial to the brand. But actually, they could be worth $500 to you. And actually, if you have ten of them, they’re worth 5000. If you have 100 of them, they’re worth 50,000. You start to see how this machine can start to build up and actually drive that commerce part of things. So that’s just at the bottom end of the spectrum. But obviously it works just as well. No, in fact, it works much better when you’re looking at people with larger audiences. But they must have that first thing that matters more than anything else, which is authenticity. And that authenticity, as I said, that’s what drives the point of purchase. If you’re driven to a website, your conversion rate on that website will be much higher if they’re sent by an authentic source. And you can run these experiments, we’ve done it and we found that is much about three times higher conversion rate when someone is coming from a true customer. But the other side of it is that their authenticity is what makes you a longer standing customer as well. So it works very effectively from that perspective. So how can you make sure that you have as many authentic people talking about you? Well, your customer base is probably your biggest opportunity. I’ve never met a brand who has fully tapped out their customer base for finding those potential advocates that sit within their dormant who can become out and be weaponized and turned into a customer acquisition channel. So I definitely recommend starting there. Looking at your CRM, looking at your social followers, anywhere where you have a group of fans activating them, giving them the opportunity to talk about you more, recognizing them when they do it, incentivizing them to do it, so they do it again and again. That’s probably the easiest opportunity. However, the other side of it is getting your product in the hands of other people. So if you’re thinking about gifting, if they have to be a customer, a user is as good as being a customer. It doesn’t matter whether I paid for a product or I got it for free, if I tell you it’s brilliant, you’re probably still going to go out and buy it. So making sure you can get your product in the hands of as many people as you possibly can, ideally as influential as you possibly can. And obviously we’re very familiar with the influencer marketing industry, but just think of your gifting budget. How big is your gifting budget? Now, gifting budgets tend to fall as a cost. Gifting budget is not a cost. Gifting budget is an acquisition cost. This is the same as spending money on your Meta ads or your Google ads. It is a marketing spend designed purely to acquire customers, not necessarily easy to track, but doesn’t mean that you shouldn’t be doing it. So first of all, make sure that your finance team view any gifting costs as that, as a marketing budget, because that’s the biggest hurdle many brands have. The next thing is, well, how big is it? Like your gifting budget should be as big as you can possibly make it. And I would say I’d like to see at least 10% of your customer acquisition budget to be in Gifting, which now sounds crazy because the vast majority of brands it’s like sub 1%. But if you think about it, the value you can get of getting a product in someone’s hands and getting them to tell as many people as possible is so much more than acquiring just one customer because you have that exponential growth curve that word-of-mouth and advocacy will cause. And also the fact is gifting is really cheap. You cost it as the cost of your good. You don’t do the recommended retail price, the cost of your good, putting it in the hands of people. It’s a really cost effective way of turning people into advocates and getting those people to tell as many people as they possibly can. So that is probably the high level area that we should be looking at when you are getting out there, just being as generous as possible, building relationships with people, getting a product in their hands so that they tell folks. We’re not just talking about big influences here, making sure they have it, just getting out there generally. A few examples of this. Lululemon have one of the most generous gifting budgets of any brand I’ve ever seen. They are now worth twice as much as Adidas and they’ve done that all without spending very much, if any, money on adverts until 2018. That’s an incredible example for it. Another brand I love to talk about here is a brand called Stripe & Stare, a much smaller brand who make the most comfortable pants in the world. And you can never meet the founder and she has not already gifted you a pair of pants and everyone I know who’s been gifted them has raved about those pants to other people. It’s such an easy win and it’s something that is so rarely done. So think about how do I whack up my gifting budget so I have so much gifting budget, I don’t know what to do with it? That’s the point when you should be should be in the right sort of area for it. And between those activities of activating your customers and actually making sure you gift enough, you can really start to drive this machine of social commerce. Because really at essence, what is social commerce? Well, it’s word of mouth. It’s word of mouth marketing on social media. And it’s done at massive scale because we are now on massive scale across five, six, seven different social media platforms that every single person will use every single day. Whether that’s TikTok, Instagram, LinkedIn, YouTube, WhatsApp, iMessage and beyond you’ve got from there. These are all potential channels for you. And the way you can activate people on those channels is literally to get them to talk about you. And the best way of doing that is to get products in their hands and to remind them to tell as many people as they possibly can. And by doing that, you should be able to lay the seeds for a really powerful engine of growth. It’s not predictable in the same way as buying ads is, but it’s also not linear. This is an exponential growth curve that will continue to get bigger and better and better the more that you invest in it. And it is the modern way of growing a brand. There are no free lunches for brands who are going to be trying to optimize their ad spends. That happened in 2015 and 2016. Those brands already run. One, you need to be doing something different and you need to be playing the landscape today. The landscape today is an entirely social one. Like Gen Z, their preferred search engine of choice is TikTok. I can link to the study from it, but if you think about that, their preferred search engine of choice is searching on TikTok to find people talking about a product that they’re thinking of buying and then getting the reviews and getting the feedback, because it’s real, it’s user generated, it’s authentic. That is what they’re looking for. That is what everyone is searching for today. So if you want to capitalize on this as a brand, you’ve got to make sure that you are there. You cannot be the one creating the content. It has to be earned. Earn the right to do that. So be a great brand. Care deeply about your customers, get your product in their hands and remind them to talk about you. And if you do that right, you will have this incredible engine of growth, which is perfect for the 2020s and beyond from there. Thanks a lot. Let me know if you like this kind of podcast where we go through the basics and the more complex parts of brand building and brand advocacy building. I’d love to hear from you. And if there’s any other topics you’d like to go even deeper in, give me a shout. And please like and subscribe so you get an update for every time we have one of these solo pods or get to interview some of the incredible brand builders that we talk to every single week here on the Building Brand Advocacy podcast. Cheers.
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