Erik Qualman on Socialnomics, How Social Media Transforms Business

Qualman - Madison Avenue“The biggest shift for a lot of companies is to make sure your mindset is outward-in rather than inward-out.”

Erik Qualman is talking to audiences all over the country about his book Socialnomics, How Social Media Transforms the Way We Live and Do Business. The title states the premise, that social media not only influences lifestyle but also the way businesses market and sell products. Erik points out that social media eliminates inefficiency and allows marketers to better understand consumers. His book was featured in the most recent issue of TEXAS magazine.

Erik is a fellow alum of McCombs School of Business (MBA ’99) so I gave him a call and asked a few questions about the book and his perspective on SM. (And yes, I do follow @equalman on Twitter, what do you think?) Erik also blogs.

To listen: EricQualman.mp3.

Edited Version of Our Conversation

David Wenger: You posted a video on YouTube called Social Media Revolution, I think it’s had over 1/2 million views.  What was that about?

Erik Qualman: That was designed to get people thinking about social media, without a lot of mentions about the book in there. We mention Socialnomics but it’s very soft sell, but even if I wasn’t selling books we just wanted to give a tool to every marketer and every individual who has been struggling with all the hype about social media. Is it a fad or is it the next revolution?  The video is designed to show it’s not a fad and here are some hardcore statistics that show that it’s actually the biggest thing since the industrial revolution.

DW: For every social media pioneer there’s also some senior executive who says, “Come on isn’t this just for kids?” What do you say to people that are hanging on to that outdated perception of what social media is?

EQ: Sometimes we’ll start with statistics. A good example is Twitter. It isn’t just for kids because of kids that are 12-to-17 years old, only 11% are on Twitter. Another stat is that the fastest growing segment on Facebook is females age 55-plus, and the reason is they want to engage with their sons and daughters and also their grandkids. Facebook has more photos than all the other photo sharing sites combined:  Snapfish, Flicker, and Photobucket. Going back to the video, when I pull up the stats for the 500,000 people that have viewed that video the most people are ages 45-to-55, both male and female.

DW: That suggests that social media is great for consumer products. Does it work for B2B or other kinds of marketing?

EQ: We get a lot of the B2B questions. And the answer to that is it’s huge, because social media is a lot about relationship building. And you could argue that in B2B you have a smaller pool of clients and the relationship is that much more important. So it doesn’t replace the face to face, it just strengthens your current relationship. It allows you to be in touch more often with your most important clients. Then the second piece is that companies can see downstream past their client into their client’s customer, so they can see the pain points. If you’re selling chips — let’s say you’re Intel and you’re selling chips to Dell and also Apple — you can see the pain points of the customer by seeing the conversation on Facebook, on Twitter and all these other social media tools, so you’re a step ahead of the game.

DW: So it actually becomes a type of market research.

EQ: Yes, it’s all transparent, if they roll up their sleeves and use social media as a type of a focus group i.e., collecting data on Twitter, to figure out what the pain points are, they’re going to be ahead of their competition.

DW: A lot of companies are trying to get on the social media bandwagon. You might have two companies, both wanting to leverage the power of social media but one gets it right and the other struggles.  What’s the difference?

EQ: The biggest shift for a lot of companies is to make sure your mindset is outward-in rather than inward-out. In the past you’d have marketing divisions that sit for a year and scope out what’s going to be their next message, and sit behind closed doors and think they have all the answers, when the answers are actually now on their fingertips externally. Their customers are more than happy to provide what their needs are. So that’s the biggest shift is one company that’s thinking outward-in is going to beat the company that’s thinking inward-out. That’s a huge paradigm shift.

The other piece is to keep the investment relatively light, because you’re not going to get it right the first time, so it’s important to be flexible and to adjust accordingly. Coca Cola gets a lot of things right but they jumped into Second Life thinking it was the next best thing and it was great, but they jumped into it a little too much. They didn’t go in with a light approach, and so they spent tons of money and then they only had about 30 people come to visit this pavilion that they built within Second Life. Some of the stuff is changing quickly so it’s important to be as light as possible and adjust quickly.

A great term to use is Beta. Google uses Beta a lot when they’re doing their stuff.  From a tax purpose you can write that off as an investment.

DW: Have companies figured out how to monetize social media?

EQ: Dell’s already been able to sell $3-million dollars on Twitter and that’s one great example. There are different ROI metrics. There are hard metrics like a sale. There are other metrics like traffic…so you look at how much traffic is now coming from Wikipedia, how much traffic is now coming from YouTube, from Facebook, etc. Then there are softer metrics. If you have 500,000 Facebook fans you can run against your database to figure out did these people stay a customer more than someone that is not a fan. Did they cancel less? People are starting to measure engagements, trying to figure out what that is worth. Other stuff is more of a brand awareness standpoint. Here are our overall sales before we ran social media, and here are our sales today. Obviously there’s a lot of other stuff baked in there but sometimes you have to take a huge step back and just look at the whole picture of your company.

DW: Is there a role for brand building in social media that is simply reputation building?

EQ: By all means. Let’s say you launched a video in your dance studio and that video gets 100,000 views, because you’re teaching how to tango, and you’ve got some brand messaging in that instructional video. It might be difficult to track exactly who came from that video to actually sign up for your dance classes, but it’s a huge brand awareness for your dance studio. There’s definitely a huge brand play involved within social media.

Even before social media, Ben and Jerry’s gave away free ice cream cones hoping to get foot traffic into the store, and people would buy more than just that free cup of ice cream. They gave out free ice cream on election day and their Facebook fan base went from around 200,000 to 300,000, they gained 100,000 followers in just one day. That cost them nothing in terms of messaging because they just pushed it out on Facebook.  They still have the cost of giving away the ice cream, they’ve historically always done that, but now they’re able to track it better and get that word of mouth out a lot more.

DW: Part of the concern many executives have is they feel they’re losing control of the conversation.  How can a company establish some sense of boundaries about what they feel comfortable with, and what they don’t feel comfortable with?

EQ: They do have to come to grips with their customer taking a lot more ownership of the brand and that’s actually a good thing on most aspects. If everyone thinks your product says this but you think it does that, then there must be something inherently wrong with your product, or it’s a huge opportunity.  It’s one of two things. Tommy Hilfiger jeans used to be a very high-end product and now it’s more of an urban product. They’ve got to view that as either an opportunity or there’s something inherently wrong with their product that they need to quickly adjust. And they can ask customers out there why they feel that the product is X when they think they’re providing Z.

DW: So there’s an element of trying something, taking a risk, and possibly being a failure at your first entree into social media. There’s also the aspect of letting go of the conversation. These are great concepts but it must scare the heck out of a lot of business people that you work with.

EQ: Anything that’s changed in a new world is always going to be scary. A lot of companies say we’re not going to do social because we’re concerned about letting go of the conversation, and what I argue is that’s like an ostrich putting their head in the sand. You’re not as powerful as you think. You’re not going to enable social to happen, it’s happening without you so you might as well have a piece in the conversation and be part of the conversation.

A year ago on John Deere, who sells lawn mowers and heavy machinery, did not have a presence on Facebook yet there were 500 Facebook groups, and many of those groups had over 10,000 followers. A lot of them positive and a couple of them negative. So this stuff was going on without John Deere jumping in there. They have arguably a fairly boring and mundane product, a lawn mower and heavy machinery, yet the consumer had a passion for that brand. And then there are also a couple of negative groups out there, so the worst thing that John Deere can do is not be part of that conversation. Now they have launched a Facebook fan page and it has, last time I checked, 60-to-80,000 fans. So they’ve realized they do need to be part of that conversation.

DW: So Erik what’s next on your horizon?

EQ: The book’s got me very busy so I’m going to a lot of speaking engagements and then also just meeting with a bunch of folks who are wrestling with the same issues we’ve talked about here today. It’s a learning process for me as well to figure out how does a mattress company differ from a B2B company, or how does a student use social differently than a retired person. It’s been really fun for me but definitely for the next year I’m going to be locked down on speaking engagements, working on the book and answering responses.

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4 thoughts on “Erik Qualman on Socialnomics, How Social Media Transforms Business”

  1. I agree Erik Qualman has some amazing insight… I loved the book too! Moreover, when you consider he wrote the book in 2008 (2 years ago) that shows he was, and still is, very much on the cutting edge.

    Perhaps my favourite quote is: “You will not longer search for products, they will find you”…

    Anyway, I actually love Erik’s stuff so much I interviewed him… I’ve uploaded it here if you want a copy: http://www.davidjenyns.com/internet-marketing/social-media-trends/

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