Consumer Psychology for a Digital Age

Groupon Founders on the True Value of Social Commerce

What’s the true value of social commerce; selling with social media?

The simplest answer (and ours) is that social commerce helps businesses realise their word of mouth potential (i.e. the referral value component of total customer value), which can be worth 44% of how much each customer is worth to you (what proportion of your new customers come to you by word of mouth?).

But Eric Lefkofsky and Brad Keywell, co-founders of #1 group-buy site Groupon have a slightly different answer.

The value of social commerce is two-fold;

  1. Social commerce helps businesses get online (social has a lower barrier to entry)
  2. Social commerce helps your business grow (“disseminate”) faster (viral effect)

At last week’s Chicago’s Idea Event, the two co-founders pointed out that many businesses have not cracked ‘digital’; Social in general and Groupon in particular is an easy way to get online.  There’s more to social commerce, they imply, than advertising or running direct mail campaigns on ad-supported social networking services.

So, need to convince a boss or client to invest in social – here are three reasons (two admittedly related)

  • Social commerce helps businesses get online
  • Social commerce helps your business grow faster
  • Social commerce helps you drive word of mouth sales

Comments (4):

  1. Rod

    October 15, 2012 at 14:35

    Great post – loved the Apple graph. Can you share more details (e.g. math, data) on the 44% referral value?

  2. Mark Riley

    October 30, 2012 at 10:54

    I really admire people who can say the blindingly obvious and make it sound deeply profound


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