Social Media: Is the juice worth the squeeze?


Nora Aufreiter, Julien Boudet and Vivian Weng at McKinsey and Co. have published some excellent research on the current state of consumer email that came my way via my old pal and newly minted colleague, Maggie Fox. Just as Altimeter Research founder Charlene Li’s work on internal social technology usage showed less than what you might call fantastic uptake, the same seems to hold true for customer facing use of engagement channels. Email may well be losing ground to Social Networks and IM when it comes to usage but when it comes to customers converting from lurkers to buyers, Email continues to pummel social into the ground. This graph says it all


Per McKinsey:

“….email continues to account for a far greater share of acquired customers than social media – nearly 40x that of Facebook FB +1.1% and Twitter combined (see Exhibits below).  Email remains a critical part of the marketer’s toolkit, with 91% of all consumers still reporting daily email use. Email conversion rates to purchase are estimated to be at least 3x as high as social media conversion rates, with average order values estimated to be 17% higher via email than social media, according to eMarketer.”

And this post by Carmel Diamicis shows that the Venture Capital community generally agrees. Investment in social is down and then some.

Net net: When it comes to social as a stand-alone channel for customer or employee engagement, there’s more evidence that the juice just isn’t worth the squeeze.

So where to, from here?

Social or not, abject inefficiencies in how we transact (yes, transact) with customers still exist today:

  1. Customer acquisition costs continue to be astronomical and customers never gave you permission to acquire them anyway. The peaks and valleys in customer relationships need a happy medium and a platform that enables you to scale building and maintaining relationships with thousands. This won’t happen by just throwing a social networking or community forum application out there. It requires that real time 360-degree information be available across your sales, service and marketing touch points to serve this networked buyer.
  2. Customers don’t buy best product: With due respect to Jon Reed who wrote an otherwise outstanding post on selling, here, a form of relationships does matter. The reality is that unlike consumer goods where you will buy best in class, when it comes to complex B2B or B2C goods, you don’t buy just based on best product. You pull the trigger based on best fit, which includes the technology, service, the team and commitment and other soft attributes. The individual signing the check and betting her career on the purchase puts a lot of stock in the spit handshake.
  3. And perhaps most important, thanks to 100’s of review sites such as Trip Advisor, or Yelp or Chowhound, your customer know more about your reputation and your product before they even let you in on the secret that they’re officially a prospect.

lemonWhether email gets displaced or not, these remain real networked-customer behaviors that require real attention. And clearly, today’s best attempt at creating a composition of transactions, business process, and social media technology and associated programs, just isn’t cutting it.

I’m not throwing out a litany of clichés here such as deep relationships, trust, bleh bleh bleh. The environment on both sides still remains cutthroat and ultimately, transactional in nature. The customer doesn’t want to be best friends with every vendor. In turn,  the vendor doesn’t want to transact unprofitable business. This is squarely about making transactions more meaningful.

While social media in its current form hasn’t mattered, the network does matter. Aaron Au, co-founder of SuccessFactors astutely pointed out to me last week that the Amazon shopping cart button used to be huge and center stage 10 years ago and now, it’s a tiny icon on the top right of their site. He’s right. The network’s opinions and conversations around the transaction take’s center stage to not only inform the purchase but to also minimize expensive returns. Real-time manipulation of the surrounding data such as adjacent goods, affinity to your purchase history and to your wish list wish-list together make up the networked experience. By all accounts, Jeff Bezos is an operational genius who knows how to grow the bottom line as much as the top line and his customers and shareholders expect an operational and transactional focus from him.  And he does this by leveraging the pull of expert networks to drive transactions. Paul Greenberg, the godfather of CRM said it best in his book, CRM at the Speed of light a long time ago:

“Transaction is not the paramount artifact of the interaction. Instead a transaction becomes the side effect of rich relationships that are built on conversation. This notion is fundamental, and is a radical switch in priorities for the interaction between customer and vendor.”

We seem to be at a fork in the road. We can keep doing what often can amount to what Jeff Lautenbach, President of SAPs CRM business characterized as “Social Dumpster Diving” – the act of just scouring networks, hoping to find prospects that covert. This was designed as social to be stand alone along slide other channels. Or we can start to understand how networks need to be designed to wrap around real time data (sometimes generated from, yes, email), transactions and like-minded peers and provide the needed 5 or 10X the value back that gets the customer to pull out her wallet. Depending on your business, this comes from making sure your sales teams, you’re service reps and your customers are fully networked. Amazon, being in the consumer business has perfected how customers are fully networked. This is the power of truly networked businesses.

Stand alone technology that promised to power social business failed. However, truly networked businesses are killing it.

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Acquisition campaigns should not only be measured by the number of acquired customers but on the quality of the new customers acquired

timoelliott when can we look forward to being able to sign up for new posts via email? (not just feed) :-) 


Great post Sameer. If transactions were linear perhaps the squeeze is worth the juice, but in most instances they are non-linear. Multi-channel attribution applies in most instances. Customers touch points (often a focus of stand alone social) are passé and in fact customer journeys, per McKinsey, are 33 to 40% more predictable than individual touch points in determining, customer/prospect outcome. And journeysalmost always, comprise of multiple channels, besides social.

Maik Schmalstich
Maik Schmalstich

I cannot agree more, the "Economy of Networks" will be the economy of the future, especially of the so called New Millenials. So this way of making business will be the fastest growing (or to say it in another way - it will possibly replace other, older networks). Although I am not quite sure, if e-mail is the reason to address this better than Social Media. Maybe because Social Media is not about social MEDIA but more about social SOFTWARE so if we would talk more about content and less about the channel then even social media would have the right place! From my personal assumption (I have not check any of the hype cycles out there), social media is right now in the trough of disillusionment. But it will reach the plateau of productivity for sure - as soon as network driven business has arrived.


Sameer this is spot on, particularly about transactions being a smaller part of a relationship. Even Amazon - I don't really have a relationship with Amazon, but I'm at ease with their platform and easy of transactions. As such I have wish lists and shopping cart items saved for future visits - where I may kick tires further based on reviews and so on. And, I'm consuming more content via Prime/Instant Video. 

I do have one question on the graph above, the data pretty much corresponds to what I see but there is a "social search" element now, wherein both Bing and Google personalize your search results when you are logged in. Those results are influenced by social channels, so I"m not sure the "social" element can be totally separated now from the search variable, or even the email variable, for that matter. But - the chart still strikes me as roughly accurate.

SameerPatel moderator

@timoelliott you mean for my blog? You can via Feedburner email (left nav) but i need a better email tool for sure. Thanks for reading, Timo!

SameerPatel moderator

@ShailKhiyara Thats a great point about linearity. Customer journeys were just never really a big consideration in the social value prop and now in hindsight it seems so obvious. 

SameerPatel moderator

@Maik Schmalstich Maik, thanks. You're absolutely right. The conversation around the channel has superseded the need to understand the right balance between networks and transactions. Today it tilts in the direction of the former as more metadata informs the right decision. And as Amazon and others are doing, they let market forces decided the right balance between the two, depending on the business. 

SameerPatel moderator

@jonerp Thanks Jon. I fully agree with the part that traditional channels are influenced by social channels. Its in some ways the central point of the post. I was using the example of social + comments (Amazon) but other pairings of social + traditional is IMO the only way forward. If you look at some of the new upstarts in the social space, they come tied to the hip with other channels, be that at the publishing layer and/or at the analytics layer. 

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