Current market dynamics were shaped decades ago and since then have seen little change. The competitive landscape upon which companies compete has also largely remained unchanged although technology has sped-up competition and globalization has created hyper-competitive industries.
Enter social media.
Over the course of the next five years we will see the emergence of a new social economy where the basic rules of business have themselves changed. Strategy, true strategy – how competing organizations operate relative to each other within industry – will be influenced by dynamics that simply did not exist just several years ago. Organizations that fail to adapt to this new social economy will find themselves left behind; those who once dominated the landscape will be no more influential or relevant than dinosaurs when the ice age arrived – unless they adapt. We previously looked at the changes social media has created within enterprises. Today we look at those changes in market dynamics themselves.
Friends, followers, connections. These are the currency in the new social economy. Companies will be forced to first compete to earn this new currency before they can then compete to convert these fans into cold hard cash. The brand that wins the hearts and minds, consistently and continuously, will be the brand that prospers. The initial appeal of the brand will not be based primarily upon features and functions as it today, but upon their ability to connect with potential consumers. There will still be consumers that buy based purely upon price, features and functions, but as time passes another important factor in the buyer decision-making process will be their connection to the brand. Think of this connection like a current-day coupon – it will focus them in on your brand first, by-passing the competition, increasing your chances of a purchase and raising customer lifetime value.
2. The New Customer
Today customers are defined by anyone having a need that can be met by your product or service, or those that have already purchased. Get ready to rethink that definition. In the future your definition of a customer will have to include everyone that is interested in the activity, problem or interest that your product or service addresses. Your communication will have to include things that impact the community of people who care about things that you might consider even tangential to your brand. While these might not tie directly into what you consider your true value proposition, remember, in the new social economy, you must first win their hearts and minds before you will win their loyalty. Showing them you understand and care about the same things they do is a necessary first step.
Economists talk about the multiplying effect that spending creates as it trickles down through the economy. The same will apply to branding as communicated through social media. In fact this multiplier already exists but its power will increase as social media gains influence. In the old days the multiplier was: you tell two friends, they tell two friends, ect. Now, you tell your friends and they tell 10,000 friends, ect. We’ve already seen the impact when videos go viral – both good and bad. This is the foundation of why the basic currency in the new social economy has changed.
4. Calculating Market Value in the Future
Perhaps more than any other positive impact that social media will have on our culture, it has the potential to change one of the most destructive market dynamics currently in place – the focus on short-term gains that fail to properly gauge the true market value of an organization. To a large part market value is determined based upon the perceived value of an organization as ‘experts’ see it. Much of the insight these experts use comes from corporate communications and industry news combined with their own core beliefs and assumptions. The greater the investors’ confidence that these experts are right the higher the market value a brand. We have all felt the impact of those assumptions being wrong, either because these experts guessed wrong or executives intentionally misled. The only way around these mistakes is greater transparency – something that social media demands. In the future, organizations that allow executives to engage directly in conversations about their performance via social media will see higher market values simply because experts and investors will have greater confidence. Over time, it will become mandatory. Over time, it will create a very necessary cultural business change.
Are you seeing any of these changes taking place in your industry yet?
From Northern New Jersey… Dave