ROLAND BERGER STRATEGY CONSULTANTS
CONTENT
Changing the Game
| Social media has
transformed traditional marketing into
a haphazard game |
Old rules no longer
apply | New rules
have yet to emerge
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Fresh thinking for decision makers
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100
H
H
H
H
H
FROM BOWLING TO PINBALL
Traditional marketing worked like bowling.
If successful, the bowling pins fall; customers
buy products. With social media, rules of the
marketing game are not so straightforward.
Just like a game of pinball, companies reach
customers through many contact points.
The pinball doesn't go in one direction,
but can spring in any angle switching
direction at any time.
The top
100
200
30
0
15 social networking sites
recei­ve 1.4 billion unique visitors a month and 1 million new
900
0
100
accounts are added to Twitter every­day.
90%
OF ALL PURCHASES ARE SUBJECT
TO SOCIAL INFLUENCE.
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CONTENT
Before there was television or radio, before even catalogues, all marketing was word of
mouth. Customers bought products at local stores from shopkeepers who knew them,
their family and their needs. They met friends, neighbors and family face to face to talk
about their experiences with a product, influencing whether or not it was popular in a town.
Then over time as technology entered the picture, companies used developments such as
television to communicate directly with potential customers. While word of mouth still
played a role, traditional marketing was far more of a one-way street. Companies could
quickly establish a product's brand or image through marketing campaigns and spread
that message to millions of people at once. It's why companies pay millions of dollars for
Superbowl ads. Now with social technologies also transforming every aspect of our personal
and professional lives, the game has changed again. Social technologies, including social
networking, microblogging, social collaboration, social commerce and the like, go beyond
just social media where social technologies are used for marketing. They now also supplement, though not substitute, all kinds of face-to-face interactions. They are becoming a
powerful ingredient within future successful businesses to be leveraged across the entire
organization.
ALL COMPANIES ARE IN THE GAME
Marketing professionals have led the way in realizing the tremendous impact of social technologies and using that impact to their advantage. The top 15 social networking sites receive 1.4 billion unique visitors a month and 1 million new accounts are added to Twitter
everyday. Social media especially upends the traditional order, revolutionizing how companies interact with customers: 90% of all purchases are subject to social influence. Social
media brings back the importance of word of mouth marketing, but amplifies its impact to
a whole new level.
S o c i a l Te c h n o l o g i e s
SOCIAL MEDIA IS HERE TO STAY
955
000
000
By August 2012 Facebook reached
955 million active users worldwide,
up from 100 million in 2008
Customers can speak to not only people they know personally, but to millions around the
world sharing negative and positive experiences with products and services they buy, creating huge consequences for companies who can no longer control their message. By
August 2012 Facebook reached 955 million active users worldwide, up from 100 million in
2008. In Germany more than 75% of Internet users login to social media sites. In Asia, especially in China, social media usage is even higher. Now with social media no longer simply
confined to PCs, but becoming increasingly mobile, customers can spread messages to
wide audience faster than ever by tweeting instant restaurant reviews or posting Facebook
status updates about a new product they've tried. In Germany 64% of social media users log
in with their mobile phones or tablet PCs.
The threat of scandals has kept many companies from using social media to their advantage. But all companies are in the game, regardless of official policies, with customers driving conversations in the absence of corporate presence. A lack of social media strategy
also means that companies aren't taking advantage of powerful new tools available to them.
So how do companies play and win the new marketing game? With U.S. companies spending
USD 3.8 million for social media marketing in 2011, the stakes of the game are high. Building
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ROLAND BERGER STRATEGY CONSULTANTS
on deep project experience, Roland Berger Strategy Consultants has drawn up new rules of
the game, giving companies a guidebook on how to come out ahead by using social media
to transform their business model.
FROM BOWLING TO PINBALL
THE "TWITTER EFFECT":
MAKING OR BREAKING A PRODUCT
Pioneering study of the Social Media Think:Lab
at the University of Münster proves the effect
by analyzing:
4
000
000
105
4 million tweets to 105 movies
In traditional marketing rules of the game are tidy. Like a game of bowling companies lob
marketing campaigns towards potential clients. If successful, the bowling pins fall; customers buy products. While the bowling lane wasn't always straight or smooth, the goal was
clear: knock down as many pins as possible. With social media, rules of the marketing
game are not so straightforward. Just like a game of pinball, companies reach customers
through many contact points and the effect of a marketing campaign is not just hit or miss.
The pinball doesn't go in one direction, but can spring in any angle switching direction at
any time. Social media, like a pinball bumper, changes the intensity and direction of a traditional campaign as customers interact with friends, followers, gaming partners and bloggers directly or indirectly influencing their decisions. Customers can even create their own
marketing through, for example, YouTube videos or Twitter feeds.
The pinball game of social media makes it much harder for companies to control the path of
their marketing campaigns. The reception of a media campaign in the realm of social media
can catch companies off guard, with its effectiveness hinging on the personal recommendations of customers in different networks. At the same time positive customer recommendations can replace the costs of a traditional marketing campaign. When used properly,
companies can use social media to do more with smaller budgets. Rather than a splashy
television ad launched in prime time, the fragmented nature of today's consumer groups
means that a small, targeted campaign can be just as, if not more effective.
In a pioneering study of the Social Media Think:Lab, 4 million tweets related to 105 movie
releases were analyzed over the course of a year in North America revealing just how
powerful social media can be in making or breaking a product, even in the face of large
advertising budgets. The study shows that social media still has an effect on the bottom
line. The huge impact of Twitter, the most used microblogging site, on sales had never
before been proven and film releases were chosen as an initial test because of the immediate success of a movie translates to long-term success. Opening weekend box office sales
provide almost half of total ticket sales. Plus strong opening weekend box office sales in
North America get widely reported and encourage moviegoers to continue seeing the film in
subsequent weekends. Meanwhile weak box office sales at the start, especially for movies
that have been widely promoted, signal its lack of quality and sales in the following weeks
only trail off.
And because Twitter has more than 100 million active users, users have the power to
reach a large audience with their messages. Users are also not shy about expressing their
opinion or providing peaks into their daily life at any time and in any place - they tweet
250 million messages every day with about 40% posted on the go with mobile devices. In
terms of the film industry, users sent Twitter messages letting their followers know when
they were going to see a movie and very quickly posted instant reviews after. About 65%
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CONTENT
S o c i a l Te c h n o l o g i e s
of the movie reviews in the study were posted from Friday, the opening day of the film,
until the following Saturday at noon.
A change in Twitter evaluations can have a substantial impact on the bottom line – simulation analyses show that movies that received a large percentage of negative tweets
would have generated additional revenues through positive tweets of more than 20%
(or USD 4 million) on the Saturday and Sunday following their release, and that up to 30 %
(or USD 10 million) of positively-reviewed movie revenues can be attributed to Twitter.
INSTANT REACTION WITH
HUGE IMPACT
Up to 30 % (or USD 10 million) of positively-reviewed movie revenues can be attributed to Twitter.
HOW TO PLAY AND WIN
Playing the pinball machine and winning requires sensitivity and sophistication. Marketing in the realm of social media is not about big, ostentatious campaigns; rather it is
about subtlety and above all understanding customer target groups. Just as social technologies are changing the way that companies collaborate, innovate and recruit, social
media is changing how companies gain customer insights, generate buzz and address
customer questions. With social media, all marketing becomes a conversation. Companies
can no longer lob campaigns towards customers and wait for uptake. Instead customers
are always talking about a company, its products and practices.
Companies cannot hide, but must be active part of the conversation. If they do not engage, their customers will drive what happens to the image of the company. Managers
must start by listening to the conversation, learning who is talking about their products
and how. Today's technological tools allow managers to track disparate social media
conversations from Facebook to Twitter and get an overview of what is being said. Once
they get this overview then managers must delicately step in to direct the conversation,
choosing topics relevant to their target group.
30%
Source: Hennig-Thurau, Thorsten, Caroline Wiertz, & Fabian Feldhaus,
"Exploring the 'Twitter Effect': An Investigation of the Impact of Microblogging Word of Mouth on Consumers' Early Adoption of New Products"
Already in 2010, Procter & Gamble did just that with their highly successful Old Spice
campaign, called "The man your man could smell like," inviting customers to answer the
question. Within hours customers sent in 186 personal YouTube videos in response.
In total all the videos have been viewed 74 million times and within six months generated
1.4 billion page views for the brand, with sales up markedly as a result. The conversation
continues with parodies of the original videos still being made and generating views.
Pharmaceutical companies also use social media to interact directly with diabetes patients
as opposed to previously when only physicians had contact with patients. By getting valuable patient input along the whole value chain, companies are able to improve patient
health, boost research effectiveness and lower costs.
Because the conversations taking place within social media are often personal and
even intimate, marketing must also be authentic and original. Social media users reveal
themselves through their Facebook posts, tweet their daily lives and express themselves through YouTube videos. They can spot insincerity a mile away and traditional
brand campaigns no longer appeal. Instead they expect originality and the same
openness they impart about themselves from companies. Ford Motor Company, for
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ROLAND BERGER STRATEGY CONSULTANTS
example, failed to stand out from its peers and make an impression on today's over
taxed social media users. It chose a routine sock puppet called "Doug" as its brand
ambassador, which barely generated 44,000 friends on Facebook, a paltry number for
an international car company.
MANAGERS ALREADY KNOW
Three-quarters of managers agree on the
major impact of social technologies on their
business model
Other brands have mastered this game. Microsoft was able to radically improve its image
from diabolical to friendly by employing its own corporate ambassador, Robert Scoble.
Scoble, now reportedly the second most influential Twitterer, does not shy away from
difficult topics and instead considers himself a customer advocate. In addition to tweeting
about his own life, he tweets on abuses in Microsoft and even invites customers to join
him for coffee. American television actor Ashton Kutcher is another success story.
Kutcher built his brand by sending incredibly personal, revealing tweets, which go to about
10 million followers, including pictures of his own ex wife, actress Demi Moore. He often
even personally responds to his loyal and intense followers. So when the main role of the
popular show "Two and Half Men" came up for grabs, producers nabbed the actor knowing
he would bring his fan base with him.
STORM PREPARATIONS
Still despite even the best-formed strategy, managers must be prepared for crisis. The
reality is that customers are going to write about negative experiences online and with
social media networks those negative opinions will reach millions of customers in an
extremely short time frame. When United Airlines broke country singer Dave Carroll's
Taylor guitar and refused to help him replace it, the singer created a song called "United
Breaks Guitars" and posted it on YouTube. On the first day alone 150,000 people saw
the video and 11 million viewers checked it out online. The singer was invited to several
national media interviews.
Ignoring such occurrences is not an option. By failing to respond, United made the situation worse. Internally companies need to recognize what is a genuine crisis, as in the case
of Carroll's song, and what is not, perhaps a negative tweet from an anonymous customer.
When the negative publicity could spiral out of control, companies need to react quickly
and thoroughly. A pre thought out social media policy is a good start to guide the shape
of the overall strategy and crisis response. Even with official social media guidelines,
however, managers need to be flexible. Crisis often occur outside of regular working hours
and each one requires a tailored response. They should seek to control the negative news
from spreading without quashing the conversation all together, which can spawn more
negative sentiments. Nestle learned that point the hard way when they deleted negative
Facebook posts on the Kit Kat page prompting outcry.
ALL IN
Because social media provides a penetrating lens on a company, magnifying failures and
amplifying successes, every aspect of the company must play the game. A comprehensive
social technology strategy brings everyone on board and requires a shift in structure, processes and corporate culture to embody new realities of not just marketing, but also operations as a whole. Three-quarters of CEOs and seniors managers agree that social technolo-
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CONTENT
gies will radically transform their business models, enabling them to be more productive,
to grow faster and to gain a competitive edge. With marketing, social media means that
companies must deliver high quality at all times or suffer the consequences of negative
customer experiences being broadcast. As in the case of the Twitter effect, a huge marketing budget cannot paper over the flaws of a major blockbuster movie. Product defects and
poor customer service are easily tweeted experiences that have the ability to spread far
and wide. New types of recruiting are required not only to hire people versed on social
media strategies, but also to reach new graduates and experienced professionals who
might look up a company on LinkedIn before applying. New structures must be lean allowing managers flexibility to respond quickly to social media crisis before they spiral out of
control. And finally employees must be encouraged to spend time on social media sites to
understand general trends. Social technology should not be left to evangelists and interns,
but rather be fully integrated in a company's business model.
Already in 2005 computer maker Dell started experiencing its first social media crisis due
to poor customer service. In response the company built up a strong social media practice
using it not just in marketing, but also to provide input on product development and customer service. Its social media strategy included comprehensive communications guidelines for all employees, a training program, goal setting and basing pay on social media
activities. As a result it was able to measure a positive impact on online sales, customer
satisfaction, employee motivation and product quality.
HANDING MARKETING TO CUSTOMERS
Social media has emboldened customers, giving them a platform to spread their opinions
to a wide group of peers in just a short time. Today's customers have new expectations
of companies, holding them to higher standards. Because social media hands control of
marketing to customers, success stories and scandals are equally possible. Equipped
with new rules of the game, however, companies can make sure that success stories are
common, while scandals are contained. They will need high sensitivity to the new environment where social technologies are reshaping business models, plus skills to navigate
these changing winds.
Social media gives companies a powerful tool to interact with customers. They will be able
to use new technologies to form closer relationships with customers and learning what
their needs truly are. Customer information gained from social networking allows retailers
to target marketing offers, for example, so that they can boost sales without spending
too much money. Using social media to increase customer loyalty directly translates into
bottom line profits and even upping product quality through feedback. In the final game
tally, social media allows everyone to win.
In a nut shell: Companies must transform their organizations to accommodate the new
realities of social technologies. As they radically change the game in many industries,
companies must figure out how to incorporate them into their value chain from R&D to
post sales support if they do not want to be left behind.
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S o c i a l Te c h n o l o g i e s
EXPLORING THE POTENTIAL
OF SOCIAL TECHNOLOGIES
www.socialmediathinklab.com
Marketing Center Münster & Roland Berger
Strategy Consultants
IF YOU HAVE ANY QUESTIONS,
PLEASE FEEL FREE TO CONTACT US:
Prof. Dr. Björn Bloching, Partner and
Head of Marketing&Sales CC
bjoern.bloching@rolandberger.com
Egbert Wege, Principal
egbert.wege@rolandberger.com
Philipp Leutiger, Principal
philipp.leutiger@rolandberger.com
Prof. Dr. Thorsten Hennig-Thurau
Professor of Marketing, University of Münster
& City University London
Scientific Director Social Media Think:Lab
thorsten.hennig-thurau@socialmediathinklab.com
Jonas vor dem Esche, Research Executive,
jonas.vordemesche@socialmediathinklab.com
think:act CONTENT
Editors:
Dr. Martin C. Wittig, Charles-Edouard Bouée
Overall responsibility: Dr. Torsten Oltmanns
Project management: Dr. Katherine Nölling
Design: Roland Berger Media Design
Roland Berger Strategy Consultants GmbH
Am Sandtorkai 41
20457 Hamburg
+49 40 37631-4421
news@rolandberger.com
www.think-act.com
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