Social Media and Competitive Advantage

I have said before that you don’t need a social media strategy, you need a strategy. Social Media is one possible way to create the value that is needed to have a competitive business.

Chris Kirubi, Chairman of Coca Cola Nairobi, agrees with me: “You don’t need a social media strategy – You need a brand strategy that leverages social media. Don’t get off the brand strategy just because there’s a new communications channel, that’s how you lose the plot as a brand. Technology is the tail, not the dog.”

Fundamentally, business still primarily exist to make profit, and they still need a strategy that defines how they intend to do that. Their strategy should essentially rest on how they create value in a difficult-to-copy way.

30 years ago, Michael Porter wrote about the three ways to achieve Competitive Advantage: cost leadership, differentiation, and focus. 11 years later, he simplified this further, saying: “Competitive advantage can be divided into two basic types: lower costs than rivals, or the ability to differentiate and command a premium price that exceeds the extra costs of doing so. Any superior performing firm has achieved one type of advantage, the other or both”

When considering a Social Media program, maybe we should analyse it in terms of these three strategic pillars:

Cost Leadership

Social Media is one way to achieve cost savings and operational excellence. Twitter can be a cheaper way to service customers. Even better would be building an army of advocates who like nothing more than to answer your questions in social spaces for you, which is a more scalable solution.

The cost of marketing can also be reduced using social media, as you can earn media. A Facebook message that reaches a million people can be a more cost-effective way to get a message out than buying media. (Although note that earning media has less guarantees than buying media, so a healthy combination is optimal.)

Differentiation

I think it is possible to use Social Media to augment your product offering, and actually provide a better experience for your customers. Chris Brogan calls it Guest Experience Design. Whether this be solving people’s problems via Twitter and thereby reducing churn, or providing useful well-timed info to customers so that they make the most out of the product, the key is using social media to actually increase value to your customer. This should lead to higher sales, or possibly to the ability to charge a price premium.

Focus

This is where Social Media is at its best. Here you build a community , a metaphorical bonfire, to which you can get close and serve better than anyone else; some people have defined this as Customer Intimacy.

The important thing here is that you have the right people at your bonfire i.e. the people who are likely to buy more of your product. Fiskars did this brilliantly with their scapbooking community The Fiskateers.

But, in my opinion, this is why Pepsi Refresh Everything has not increased sales: although it gathered millions of “likes”, the community it was building had no interest in soft drinks; in fact this charity-concious group may have been less likely than most to buy sugary drinks. So build a community, but make sure it is one that will want your product.

Of course, you can also focus on a community who’s only common objective is to buy your product. The special offers provided by the likes of @Delloutlet are effective: in simple terms, if you deliver good, bespoke offers via a channel such as Twitter, you will get followers, clicks, and (most importantly) sales. Just as you would if they were on an email list. Note that there is nothing particularly “social” about this use of social media!

Question to ask yourself

If your social media program is not helping you achieve one of these three competitive advantages, then perhaps it’s time to question whether you really need it.

After all, Apple is doing just fine without a Twitter channel.

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