• Share on Google+

Why have leading consumer brands started selling on Facebook?

The results of an 18-month study on the emerging trend of ‘f-commerce’ conducted by SCT editor Dr. Paul Marsden tells the tale. It provides a critical overview of f-commerce  – selling with Facebook – specifically as it applies to consumer brands and identifies key risks and opportunities for using Facebook as a commerce channel.

It also advocates an alternative solution for brand pages on Facebook – fan-stores selling fan-first/fan-exclusive products for the purpose of promoting brand advocacy.

Five key brand-building benefits are identified and a blueprint for setting up a Facebook fan-store is outlined using an evidence-based 3-point “advocacy activation” formula. The report concludes by outlining emerging trends and new opportunities for consumer brands.

INTRODUCING THE F-COMMERCE ECOSYSTEM

F-commerce started 2009 with 1-800-FLOWERS setting up the first fan-store. Others soon followed – musicians, film and TV shows, celebrities, retailers and brands. Initially, the focus was selling products with e-commerce apps for Facebook pages, but, since that time an evolution has occurred to include a full ecosystem of selling solutions that include the following:

Selling on Facebook

  • E-commerce apps for Facebook pages – transactions are conducted without leaving Facebook; examples of brands include ASOS, JP Penney, GNC and others
  • Facebook Credits – Facebook’s own currency used for purchases within the social network for virtual goods, digital products.

Selling with Facebook

  • Storefront apps for Facebook pages – product showcase apps linked through to stores
  • Facebook apps for e-commerce sites – toolset designed to allow businesses to simplify, personalize and socialize both the FB fan-store and retailer’s e-commerce site to enhance customer experience; these include Facebook Social Plugins, authentication mechanisms, API and Open Graph;
  • Facebook Check-in Deals – mobile, location-based advertising designed to drive retail store footfall;
  • Facebook Advertising – display ads designed to drive traffic to e-commerce sites, footfall to stores or retailer’s fan page.

F-COMMERCE – SIZZLE IN THE SOCIAL COMMERCE STEAK?

  • F-commerce has become the “poster child” for social commerce;
  • Investment funds are following f-commerce innovation; in the first few months of 2011, over $2bn investment was poured into social commerce ventures;
  • Consultants Booz & Co forecast that the social commerce market will drive $30bn in annual sales in less than five years time.

Booz&Co estimate of social commerce growth

DOES F-COMMERCE WORK?

Reasons from detractors as to why f-commerce will fail:

  • Doubts persist around the viability of f-commerce success, comparing it to attempts by brands to sell via Second Life;
  • Poor conversion rates cause it to fall into fourth place behind email marketing, search marketing and affiliate marketing;
  • Privacy, data ownership and security issues also factor into bearish predictions about the future of f-commerce.

Reasons advocates say f-commerce will work:

There is a small, but growing body of evidence to support its viability. Example include:

  • 40x increase in referral traffic from Facebook for Levi’s e-commerce site after implementing the ‘Like’-button in April 2010;
  • 100% increase in revenue from Facebook traffic within two weeks of adding the ‘Like’ button for sports retailer Giantnerd;
  • 1000 diapers sold by consumer products giant Procter & Gamble in under an hour on its Facebook store.

Considering the reasons proffered by both antagonists and protagonists, it is too soon to tell how much of a role Facebook will play in e-commerce.

Brands should think beyond the use of f-commerce as a transactional medium to one focused on increasing customer lifetime value (CLV) , which the study defines as today’s value of the sum of all purchases that have and will be made by an average customer. It is in this arena that some of the greatest innovations are taking place.

F-COMMERCE FOR BRANDS: FIVE REASONS

  • Reason #1: Facebook ROI – f-commerce offers a real solution to delivering a measurable ROI on Facebook
  • Reason #2: Brand Experience – f-commerce can help brands deliver a compelling experience in Facebook that beats expectations;
  • Reason #3: Brand Insight – f-commerce can help brands better understand their customers;
  • Reason #4: Brand Loyalty –  f-commerce can drive loyalty among customers;
  • Reason #5: Brand Advocacy – f-commerce can activate brand advocacy through fan-exclusives and fan merchandise.

BRAND BUILDING WITH THE ‘SOLOMO’ CONSUMER

  • Conservative brands may choose to wait out this period of f-commerce experimentation until more evidence appears to support its use;
  • Learning how customers use social, location-aware and mobile technologies (SoLoMo) are reasons not to wait;
  • The SoLoMo consumer is changing how consumers connect and engage with brands;
  • A growing body of research suggests that branding today has less to do with what a brand says about itself and more about what other people say about it.

SoLoMo customer journey

F-COMMERCE: TURNING FANS INTO ADVOCATES

F-Commerce can assist in building brand advocacy by helping brands get new products that are worth talking about into the hands
of the people most likely to recommend them – brand fans.

Example: Chanel selling new cosmetic products from its Facebook fan-store before they reach the brick-and-mortar store – giving brand fans exclusive ‘fan-first’ access and thus something to talk about to their friends.

Advocacy Activators

  • #1: Experience – advocacy is primarily driven by salient memories of personal experiences with products or brands;
  • #2: Involvement – advocacy is driven by the degree to which we care about something, including products and subjects with which we have high degree of personal involvement and interest;
  • #3: Incentives – advocacy is also driven by incentives that motivate consumers to advocate.

Advocacy Activation with Fan-Stores

  • Fan-stores provide a channel through which advocacy activators can be put into play;
  • Fan-stores enable brands to relate to consumers as product advisors, empowering them to have input on product development;
  • Fan-stores can be used to incentivize fans to act as advocates.

Activating Advocacy with Fan Merchandise

  • Advocacy can be generated through the use of exclusive fan-first or fan-only merchandise offerings;
  • Branded fan merchandise can also be used to promote advocacy; ex: Westin hotels selling branded robes, candles, towels, sheets and spa products.

F-COMMERCE FUTURE TRENDS

  1. Systematic ‘fan-seeding’ – consumer brands will use Facebook fan-stores systematically to “seed” new products with brand fans;
  2. Viral fan-stores – fan-stores will use viral mechanisms – content appearing in newsfeeds, for example – to promote advocacy;
  3. Empowered involvement – using product review and rating mechanisms will get fans more involved, thereby increasing advocacy;
  4. ‘Pop-up’ fan-stores – temporary fan-stores will be used to support new product introductions, advertising campaigns, special events and other brand activities;
  5. Analytics & logistics – specialized fan-store analytics and metrics will emerge, along with fan-store logistics companies that offer fulfillment and drop-shipping services;
  6. Digital and virtual goods – growth in fan-stores will be driven by high-involvement categories offering the instant gratification;
  7. of digital downloads: music, movies, TV, gaming, publishing and sports, ticketing, and digital merchandise;
  8. Facebook Credits – fan-stores will increasingly allow frictionless fan payment with Facebook Credits for both digital and physical products;
  9. Fan-store agencies – agencies that specialize in turn-key Facebook fan-store management will arise;
  10. Fan marketing – a new era of ‘fan marketing’ with marketing campaigns and special products designed specifically for brand fans may emerge;
  11. Beyond the brand – fan-stores may shift from brand-centricity to interest-centricity; brands become curators of products for non-competitive brands.

CONCLUSION: START WITH THE SMILE AND LEAD

Consumer brands can build advocacy with ‘fan-first’ marketing using Facebook fan-stores to get new product lines and fan merchandise into the hands of those most likely to recommend them – their Facebook fans.

There is no “one-size-fits-all” template. Instead, brands should listen to Facebook fans, experiment with techniques to drive advocacy, adapt to an outcome-driven solution, and continuously develop fan-stores to improve fan experience.

Success depends, not on processes, but on insight gained from fan interaction; making fans “smile” by exceeding expectations should be the number one goal.

  • Reply
    Author
    Lauren Proctor

    It’s been fascinating to watch the rocky rise of f-commerce, as it seems to be one of the most polarizing topics in social (aside from privacy and a couple others of course). At the end of the day f-commerce conversion rates are low for the same reason Facebook ads are generating such little revenue per user: Intention.

    Google search ads work because Google matches their business model with user intention. When you search for blue widgets on Google, search ads deliver blue widgets. Facebook users, on the other hand, spend time on Facebook for the purpose socializing (and games, etc). Ads don’t necessarily fit into this equation and neither does f-commerce (at least not yet).

    F-commerce retailers may cause an evolution in user intention on Facebook, but for f-commerce to work it has to be as much about social as it is about commerce. I don’t have the answer for what that will look like, but when thinking about f-commerce models for the future we must remember, it wasn’t that long ago that gaming on Facebook sounded ludicrous. Now the company that created social games is changing the gaming industry across the board.

    Will f-commerce follow in social gaming’s footsteps and change all of commerce? Only time will tell.

    • Reply
      Author
      Paul Marsden

      Hi Lauren, good points- I agree intention is absolutely key here (and I like the analogy with social gaming).

      People don’t go to Facebook to shop.

      But fans do go to Facebook to connect with their favourite brands, bands, movies etc – and often they do so in the hope of getting a special fan offer. The opportunity for f-commerce (IMO) is to build out this opportunity by allowing fans to get what they are after on Facebook through a fan-store…

      • Reply
        Author
        Lauren Proctor

        Great point Paul. I was close-mindedly considering all-the-time f-commerce stores without the special offer angle. The fashion brands who have experimented (and succeeded triumphantly) with Facebook exclusives for pre-order straight off the runway would be a perfect testament to how well your notion of the exclusive fan-store works.

  • Reply
    Author
    Eyal Reich

    Paul,

    I visit your site on a weekly basis, this is without a doubt the most serious, comprehensive site when it comes to F-commerce.

    I couldn’t agree with you more about the future F-commerce trends, we at StoreYa, keep educating our clients about the benefits of F-commerce, teaching them about the different engagement tools & marketing technique they should use, in order for them to enjoy this social ecosystem.

    Regarding no. 9 ‘Fan stores agencies’ – we launched this plan two weeks ago, and see an enormous traction, we already have tens of agencies using our platform, they were really hungry for this kind of solution.
    BTW, I’ll be happy to hear your thoughts about the article that was posted on Bloomberg two days ago, regarding F-commerce.

    Keep up the good work!:-)

  • Reply
    Author
    Engagement, una cuestión de emociones | Territorio creativo

    […] Como decía Jaime Valverde en su post de Social Commerce, hay que aprovechar todo aquello que “nos ayude a crear mejores experiencias y más exportables hacia otros usuarios“. Porque al final, nada hay más gratificante para una marca que sacar una sonrisa a su consumidor, ¿se os ocurre mejor signo de satisfacción? Quizá sí, ¡la compra! (ver Libro Blanco de la venta en F-Commerce). […]

  • Reply
    Author
    El Blog de Abraham Villar. Consultor Marketing Online

    […] Los datos de este estudio podéis seguirlos en el siguiente enlace Socialcommerce Today. […]

  • Reply
    Author
    Las 6 tendencias clave del “f-commerce” | El Comercio Online

    […] sitio especializado Social Commerce Today, con base en un estudio realizado por STC en Estados Unidos, ha dado a conocer las algunas […]

  • Reply
    Author
    Las 6 tendencias clave del “f-commerce”para el 2013 | El Comercio Online

    […] sitio especializado Social Commerce Today, con base en un estudio realizado por STC en Estados Unidos, ha dado a conocer las algunas […]