Let’s have some fun with my buns.  Cinnamon buns, that is.

One of the myths we recently discussed on {grow} was the claim that every business needs to use social media in its marketing strategy.

So what determines if the social web can be used effectively in any company?  One key is industry structure.

Marketers are actually quite limited in the number of options they have based on the competitive structure of their industry.  Social media is just one marketing channel, and its opportunity for use will be determined by the marketplace, not the hype you read on the Internet!

To illustrate this concept, let’s look at how four companies — with four very different competitive structures — may or may not use the social web to sell the very same product: cinnamon rolls.

Flat Rock Village Bakery, Flat Rock N.C.

The Flat Rock Village Bakery is a small, family-owned cafe that serves its customers wood-fired pizzas and artisan pastries. They have a single location in a tiny mountain town. Why would somebody buy a cinnamon roll from this bakery?

• Convenience of central location amid relatively little competition
• Ambiance of tree-lined community setting
• Community involvement and reputation of the company
• Consistent quality of artisan products
• Appeal of non-chain, local ownership
• Attentive Service

As a marketer, we want to increase sales by promoting these points of differentiation.  The social web can certainly enhance the reputation of the bakery but probably won’t significantly drive more traffic to this store — They essentially already have a captive audience. Their focus should be on increasing sales per customer at the actual point of purchase. What is their risk of NOT participating in the social web?  Low.

McKee Foods, Chattanooga, TN

Now compare that to a national bakery like McKee Foods whose Little Debbie brand is found in grocery and convenience stores throughout the country. Little Debbie will sell you a cinnamon roll based on

• Low price, which is enabled by efficient operations and distribution
• Large selection of products in a grocery store aisle
• Coupons and promotions
• Brand awareness
• Consistent, but low-quality, product with a relatively long shelf life

Unlike the cozy competitive climate of the Flat Rock Bakery, competition in the grocery aisle is fierce and Little Debbie would ignore the social web to its peril.  The bakery giant can certainly use social media to:

• Monitor customer conversations about its products
• Build brand awareness cost-effectively
• Coupons and promotions
• Involve consumers in its brand
• Create new products
• Facilitate customer service
• Monitor competitor activities

Can you begin to see how these dramatically different competitive structures influence marketing strategy?

Panera Bread, everywhere

Panera has built its successful business by establishing clean, bright stores that serve as community meeting places. You might drive to Panera to buy a cinnamon roll because:

• It’s a spacious, convenient place to meet colleagues and friends
• They have bakery-quality food at reasonable prices
• Free Wi-Fi
• A recognizable national brand with predictable quality

Panera faces a host of competitors offering similar value.  Compared to the first two examples, its business model is more easily duplicated, so finding ways to connect to customers is key.

There are lots of opportunities to do this through the social web, especially if it could master location-based apps like Foursquare that reward frequent visitors.

Cinnabon, a mall near you

Although Cinnabon also serves up cinnamon rolls — in fact that is basically ALL it sells — it represents a radically different competitive dynamic.

Cinnabon bases their competitive advantage on one thing — location — and the opportunity to sell you through an impulse buy. They are usually located in malls and airports so if you are hungering for a fresh-baked goodie, you really have no choice.

Their price point is set high, and they don’t need to use coupons or other promotions because they’ve got you right where they want you – captive.

They have a Facebook page and a Twitter account but is this where they should spend their primary marketing effort?  No.  As a marketer I would probably spend money on fans to blow the heavenly cinnamon smell out onto the airport concourse!

Putting this to use for your business

Obviously in the space of a short blog post I had to do a simplistic comparison to make a point. I realize the industry structures are more complex than what I present here.  Still, I think it’s a useful example illustrating the widely different dynamics in selling even a simple product like a pastry.

Where do you go with this as you make your decisions about social media?

1. Begin with the fundamentals including market research, customer interviews and competitor analysis before jumping into any marketing initiative.  Spending money without knowing the competitive structure of your industry will create disastrous results.
2. Use clear-eyed intellectual honesty when assessing the social media opportunities for your company. There is a natural tendency to want to climb onboard Facebook or YouTube because everyone else is … but take a hard look at what effort is going to be the most effective use of your resources.
3. Look for channels that allow you to emphasize your competitive advantages and how they match customer needs.
4. Measure every effort to constantly adjust your efforts to the changing marketplace.

What is the competitive structure of your business?  How many “stars” would you give your social media opportunity and why?

These “suggested bids” reflect what advertisers have most recently paid to reach a demographic group based on CPMs (cost per 1,000 impressions) or CPCs (cost for every time a user clicks on an ad).

Some trends make sense — older (and richer) users are more expensive to reach than younger ones, for example.

But there are some counter-intuitive trends, too.  Japanese users are less expensive to advertise to than Russian users, even though the Asian country’s GDP per capita is more than three times as large.

The recession has culled the weak from the pack but it’s likely that your competition is still fierce.  Is there a way to attract and retain B2B customers without lowering your price? And is there a way to leverage the social web to keep your customers … even in the extreme case of a commodity market?

Holding onto customers in a buyer’s market is one of the most extraordinary challenges in business, especially if you’re selling a commodity (Commodity = purchasers view suppliers as identical on all factors but price, i.e. common coal, steel, or chemicals).

There is usually only one winner in a commodity market — the lowest cost supplier — except in periods of high demand when supply falls short.  But there are ways to lock-in customers even in ugly downturns.  One strategy I used throughout my career was to create a systematic plan to raise switching costs. By this I mean create obstacles — through valuable benefits — to prevent a customer from leaving you for the competition.

A process to retain customers

This process starts with getting out to your most valued customers and listening. And I mean REALLY listening. We would sometimes have half-day sessions to explore un-met and under-served customer needs that would …

• Improve their competitive position
• Enhance profitability or productivity
• Eliminate waste
• Lower risk
• Increase speed to market

One strategy that uncovered potential points of differentiation was to ask customers what they hated about their job. This always seemed to get people to open up about an idea we could implement to make their life easier!   Some other potential approaches to this challenge:

• Solve a customer problem (reporting, data-gathering, analysis/testing) that might add slightly to your cost, but establishes enough value to create a hurdle to switching
• Create a specialized service that would be difficult for competitors to match (we did a specialized truck-return recycling program, for example)
• Work actively with customers to influence specifications and terms that could advantage my company or disadvantage a competitor
• Focus retention efforts on most profitable customer locations
• Look at eCommerce integration options to enhance retention

Notice that all of these ideas go beyond the basics of price, quality and service. Those aren’t strategic initiatives. Those are competitive tablestakes these days.

When customers don’t play nice

This process of listening, reacting and renewal must be continual and integrated through an effective CRM system. But it doesn’t always work.

In the middle of all this great creative marketing work I just suggested is another dynamic. Purchasing may not want you to implement your ideas – even if there is an advantage – because it reduces their flexibility with suppliers.  They may even force you to hand over your innovations to competitors. I witnessed this in the automotive market in the 1990s.  This ended up hurting customers because when there is no reward for innovation, innovation ends.

Now what about the social web?

Is it possible to develop some distinct value through social media that could create a switching cost? My answer – probably not. The social web might be a tool to listen and tune-in to possible innovations and market needs but I don’t see how social networks can create sustainable switching costs in this part of the sales cycle. It’s free to everyone and easily duplicated by competitors.

However, I do think you can create PRIVATE information networks and communities that create distinct value. For example, one idea that worked really well was a private, unique market information hub for customers who remained in our top tier in revenue.

What are you doing to hold onto your best customers in tough economic conditions?  Can you think of any way to leverage the social web for DISTINCT value in a commodity market?

I found this little animation to be entertaining and instructive and wanted to share with you.  I have no connection with the producers of this video, Scholz & Friends.  They just did a good job and I wanted to say so. : )  Three minutes well-spent.

Apologies for the annoying Google ads on this video.  Not my idea.

Don’t you think this makes an effective point about media noise?

Place, product, price and promotion.

We all learned these basic marketing principles in college and they still stand up today. But the social web is a true shift in the way we communicate and go to market.  For the first time, mankind has access to real-time, free, instantaneous, two-way, global communication — and the good old marketing mantra needs a little updating.  Here are my thoughts on the NEW Four P’s of social media marketing — People, Presence, Pervasiveness and Publishing.

People

The social web is the first true PEOPLE-driven communication channel.  Everybody’s a video star, a rock star, a broadcaster, an author. Everybody creates, reviews, publishes, and bitches.  Publicly.  Permanently.  We have the opportunity to listen intimately and often. We can tune in to laugh and cry with our customers, wherever they are in the world. The consumer-driven web is the biggest marketing revolution since radio.

Presence

This is different from the old concept of “place.”  The old marketing “place” to sell, market or distribute was a tangible location like a grocery store. We knew where our consumers were … and they’ve probably been there for decades.   Where are they getting their information today?  From a video game?  From a link on a tweet?   From their phone?  From a coupon on their phone automatically sent to them by an RFID/GPS system while they are standing next to your product in the grocery store?

To make it even more complicated, a customer’s source of information may be constantly shifting.  Think of the implications if you choose incorrectly or your competitor moves into an emerging platform more rapidly. Kind of makes you want to go back to newspapers, huh? That’s why you need to develop a presence that can adapt and adjust to wherever consumer attention drags you. It will be fascinating to watch the big brands create a unified and compelling presence across so many platforms.

Pervasiveness

Let’s take a lesson from Twitter to illustrate this key concept. For years, Twitter hasn’t focused on making money. It has focused on DOMINATING  and pervading a consumer space. Why? They know that consumers will have the bandwidth for just one micro-blogging site. Once they devote their emotional equity to one platform it will be extremely difficult to get them to switch. Perhaps impossible. And that’s what Twitter is counting on.

So it might be easy to get folks to taste a new brand of cookie or soft drink, but it will be much more difficult to get them to switch to an unfamiliar communication or marketing channel.  Brand marketers jockeying for precious consumer online attention will have to develop ideas and entertainment concepts that are pervasive and with high emotional switching costs.  Not cheap. Not easy.

Publishing

Five years ago, would you consider a shoe company to be a significant publisher?  Yet Zappos has more than a dozen blogs. I contend the biggest challenge to any marketer may be the publishing of consistently engaging, meaningful content. And increasingly that means cutting through the clutter with entertaining content like puzzles, games, contests and videos. The implications of sustaining an organization’s publishing presence is daunting!

So what’s your take on this?  How are you adjusting to the new P’s?  How are you integrating them with the old ones?

I’d like to start with an excerpt from a a recent Gregg Morris post. This is an email from one of his associates, expressing frustration at an inability to convince small businesses to engage in social media marketing:

Social networking is making zero inroads into any of the businesses (SMBs) we have visited and interest in “mining” those networks is similarly zero.  It’s not that they are rejected as future possibilities, but rather that SMBs haven’t time for it, since they sense the costs far exceed the benefits … The facts are the facts – SMBs are still the same as they always were: overworked, scratching for dollars, but now fighting even harder for market share. They are competing not just with local competition but also with online, distant suppliers and, of course, big box retailers.

To the point: Joe average – architect, restaurant owner, retail store – are not stupid, nor are they unaware of the need to handle their customers better. All I see … is the same, stupid Social CRM Expert-type of messaging. A bunch of esoteric bullshit skimming the surface of the problem, with no real solution offered. Everywhere I look, they all say the same thing: “You have to communicate with your customer…”, “you need to serve your customer…”, “you need to do this, that or the other…”. Lots of “you needs”, but few “here’s exactly how”

This little rant hit a chord for me because I teach a social media marketing class for small businesses and I constantly hear these same concerns.

There is a business cultural gap that is keeping many SMB’s from working this channel: Typical SMB ”advertising” is a hand-off. All the work is done by an ad agency and/or the advertising sales people.  There is little personal time expenditure and the cost/benefit is usually easily measurable. Not so with social media marketing.  There is more hands-on doing and the results may not be immediate.

When I consult with small businesses, I recognize that for many, the time commitments and demands of maintaining a consistent, effective presence seems overwhelming so I help them cut through the hype and FOCUS.  I encourage them to consider five very practical questions:

1) Do I know enough about social media marketing to make the right decision for my business?  Not knowing the possibilities would be the same disadvantage as operating a business without knowing such a thing as television advertising existed.

2) What is mybusiness strategy and how could a social toolkit align with my key initiatives?

3) Are my customers using the social web?

4) Are my competitors using this channel, and what are the competitive implications if I decide to participate or not?  Could I create advantage by being an early adopter?

5) Do I have the resources, or can I acquire the resources, to conduct limited, focused experiments to see if working through the social web can provide a cost-benefit exceeding traditional advertising?

After my students walk through these questions, they usually conclude a) yes, this is something with a lot of potential and b) there are practical and manageable methods to approach this if I stay committed and focused.

Does this make sense to you?  What is your experience with SMB’s and the social web right now?

{grow} community alert: Pete Mosely, a frequent contributor to {grow} has a new eBook out on promotion fundamentals which is a nice companion piece to this blog article.

Inventory — A customer in France made coated metal plates and, for quality control purposes, had to keep a large volume on hand in a warehouse. This tied up valuable working capital. We had the idea to use this as a rapid-turnaround stockpile. They could sell and ship material out of the warehouse for customer emergencies as a premium service — at a premium price!

People — A local company said they needed my help because “everyone was just sitting around” with their business levels so low. I saw this as under-utilized human capital. How could they put these people to use to connect to customers and discover un-met or under-served needs?  Turn EVERYONE into a sales person?  Study the competition?

Information — A client had developed a weekly email update to keep their salespeople on top of changing market conditions. A survey indicated their customers were hungry for the same type of information. Their email was turned into a premium information service to increase customer satisfaction and loyalty. They leveraged information they already HAD to create a siginificant new customer benefit.

Services — I recently taught a class on recession marketing. The class content is now an asset, part of my “buffalo.” I turned some of the ideas into articles for my website and now, my blog. I promoted this content through online forums and social media. One article had more than 500 downloads in two days. These new contacts were added to my mailing list for further follow-up. The session was videotaped and edited into short topics for my website and YouTube.

How are you using the whole buffalo in your business?

The GE Social Media Team: Gary Sheffer, Jen Walsh, Sean Gannon, Lisa Lanspery, Mike Eisenreich, Megan Parker and Vivek Kemp

• Did this lady just win the lottery?  Or did she get goosed or something?
• Why was she compelled to rise out of her chair and stare straight at me and laugh?  It’s unnerving.
• There is a very small coffee cup behind her. Why is it so small?  Is it a demi-tasse?  Is it a cup for sake?  Is she caffeine-intolerant?  I just want to hug her and say, “Drink a nice BIG cup of coffee.  This is America, honey. Our cups hold a quart.  Here, have mine.”
• It looks like she’s knitting.  But what is it?  She’s wrapped it around her neck somehow.  Lady, that could be dangerous.  Put down the sharp objects and slowly unwrap that that thing from around your neck.  And what is that on your breath?  SAKE?  We’ve notified the authorities.