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Scientific paper - Assignment 2

Author: Date of change: Subject: Status:


Markus Suter 16.11.2010 OTEB Final version

University of Applied Science Northwestern Switzerland, Switzerland


markus.suter@students.fhnw.ch
November 2010

The benefits of social commerce for


suppliers and customers

MSc Business Information Systems


Organizations, Technologies and E-Business

Contents
1. Introduction .................................................................................................................... 2
2. What is social commerce? ............................................................................................. 2
3. Benefits for suppliers ..................................................................................................... 2
4. Benefits for customers ................................................................................................... 4
5. Conclusion ..................................................................................................................... 4
Bibliography ............................................................................................................................. 5

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The benefits of social commerce

1. Introduction
The benefits of social commerce in the strategic area are recognized in the field of supplier
(Lange, 2010). On the customers’ side, most of the buyers are familiar with the advantages of
the widely spread recommender systems. This paper focuses on identifying and analyzing
these and further benefits of social commerce from the viewpoint of the supplier as well as the
customer.

2. What is social commerce?


The term „social commerce“ is used in a lot of different ways, which leads to a lot of different
definitions. One example of a definition (Wikipedia, 2010): “Social commerce is a subset of
electronic commerce that involves using social media, online media that supports social
interaction and user contributions, to assist in the online buying and selling of products and
services.”
This definition has been taken to extremes by an online blog about social commerce
(Marsden, 2010): “Social Commerce is the use of social media in the context of e-commerce.”

The start of social commerce can be found in the recommender systems. The first few e-
shops, which gave their customers the possibility to rate their products, started this still
ongoing trend. Why these recommender systems are really successful is explained in the 6
dimensions of social commerce by P. Marsden. He points out that through these systems the
Internet-shopping is getting social again (Marsden, 2010).

3. Benefits for suppliers


The benefits for the supplier related to recommendation systems are basically that whether
buying a product or not is mostly an emotional issue. As pointed out at the Namics conference
this spring (Kaeppli, 2010), 80% of “buy-or-not-buy” decisions are based on emotions. This
means that the suppliers need to generate positive emotions on the side of the customer. The
ideal instrument to carry out this task are recommender systems. Positive ratings of a product
are generating a positive feeling on the customer-end.
The second point is that as result of using social media, like Twitter and Facebook, the
customer loyalty to a brand can be improved. According to the study conducted by Chadwick
Martin Bailey (CMB, 2010), 50 to 70% of the people who are follower or fan of a brand are
more likely to buy a product of this specific brand.

Source: (CMB, 2010)

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The benefits of social commerce

Also worth mentioning is the direct influence of social media on the customer. This can mainly
be realized with brand sponsored community platforms. These platforms are specified for
customers with the same interests in a market share. According to the study carried out by
iNgage Networks (Brannigan, 2010), the investments in and benefits of online community
platforms can be calculated quite easily. For new customers, the presence of highly visible and
active online communities proves that a company or a product is trendy. This can make the
difference between a casual website visitor and an actual conversion into a new customer.

Source: (Brannigan, 2010)

Through this community platforms, the power of the existing customer can be used to sell the
company’s products. According to the Nielsen global survey (Bazaarvoice, 2010), “Word of
mouth” is the most powerful selling tool. It therefore comes as no surprise that the importance
of social media in the marketing area is growing equivalently to the use of the Internet. Owing
to the growing buying power of the “digital natives”, the social commerce trend is just at the
start.

Source: (Ramsey, 2010)

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The benefits of social commerce

4. Benefits for customers


One important benefit of social commerce for the customer is the possibility to communicate
directly with other customers and the supplier. Through this communication, the customer has
a “Seat at the strategy table” of the supplier and has an influence on the products and prices
as mentioned in the article in CrmBuyer (Zabin, 2010). It is clear that this influence is just
indirect, but because of the great number of participants, the voice of the customer has really
an influence on the suppliers.
Another benefit for the customer is the integration of personalization into e-commerce. This
means that, based on the customer–data, similar customers can be found over the social
network relation. As to this connections, user specific recommendations can be displayed as
described in the virology-blog (Yi, 2010). This method allows a buying suggestion for the
customer as accurately as possible which reduces the product search time. Due to the
networking, the recommendations of people whom the customer knows can be weighted more
and displayed directly on screen.

Source: (Nielsenwire, 2009)

5. Conclusion
In my opinion, the ongoing trend in social commerce is relentless. Owing to the growth of the
number of young people known as “digital natives”, the importance is rising now and in the
near future. The combination of the social networks and e-commerce is just another example
for the big global integration trend based on the development of the telecommunication
technology. Through the connection between all the data sources, an “intelligent” supplier
system can serve the customer with exactly the products they want.
I suppose that this chance will be taken by a lot of companies within the next 5 years, which
will generate a big new value for them.
The customer has to resist the temptation of buying products more than ever because the
recommendations will be getting more accurate and also faster. But on the other hand, this
accuracy might also allow to find the products needed in a shorter time.

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The benefits of social commerce

Bibliography
Bazaarvoice. (2010). Power of Word of Mouth. Retrieved November 15, 2010, from
Bazaarvoice: http://www.bazaarvoice.com/resources/stats

Brannigan, P. (2010). Maximize the value of customers through social commerce. Retrieved
November 15, 2010, from iNgage Networks:
http://storage.pardot.com/1134/93371/Value_of_Social_Commerce.pdf

CMB. (2010). Consumers engaged via social media are more liklely to buy. Retrieved
November 12, 2010, from Chadwick Martin Bailey Blog: http://blog.cmbinfo.com/press-center-
content/bid/46920/Consumers-Engaged-Via-Social-Media-Are-More-Likely-To-Buy-
Recommend

Kaeppli, D. (2010). Namics Fachtagung Trends E-Commerce. Retrieved November 2010,


2010, from Namics Corporate Website: http://www.namics.com/download/NAM-
Fachtagung_Trends_im_E-Commerce_26032010_final.pdf

Lange, M. (2010). Mit Social Media nachweisbar Werte schaffen: Vom Hype zum
strategischen Einsatz. t3n Nr. 20 .

Marsden, P. (2010). Social commerce definitions. Retrieved November 12, 2010, from Social
commerce today: http://socialcommercetoday.com/social-commerce-definition-word-cloud-
definitive-definition-list/

Marsden, P. (2010). The 6 dimensions of social commerce. Retrieved November 12, 2010,
from Social commerce today: http://socialcommercetoday.com/the-6-dimensions-of-social-
commerce-rated-and-reviewed/

Nielsenwire. (2009). Global Advertising: Consumers Trust Real Friends and Virtual Strangers
the Most. Retrieved November 15, 2010, from NielsenWire:
http://blog.nielsen.com/nielsenwire/consumer/global-advertising-consumers-trust-real-friends-
and-virtual-strangers-the-most/

Ramsey, G. (2010). Social media marketing. Retrieved November 15, 2010, from Emarketer:
http://www.emarketer.com/blog/index.php/category/social-media-marketing/

Wikipedia. (2010). Social commerce. Retrieved November 12, 2010, from


http://en.wikipedia.org/wiki/Social_commerce

Yi, J. (2010). The next step for eCommerce: Social Commerce Personalization. Retrieved
Nomveber 15, 2010, from Viralogy Social Commerce Blog: http://viralogy.com/blog/website-
best-practices/the-next-step-for-ecommerce-social-commerce-personalization/

Zabin, J. (2010). If You Build a Branded Online Community, Will Customers Come? Retrieved
November 15, 2010, from CRM Buyer: http://www.crmbuyer.com/story/If-You-Build-a-
Branded-Online-Community-Will-Customers-Come-
67790.html?wlc=1249658654&wlc=1252020702&wlc=1282778149&wlc=1289817909

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