Social Networking for Competitive Advantage

In the Dynamic World of Social Networking, The Future Belongs to Marketing Innovators and Pioneers

Owen recently welcomed to its faculty Dawn Iacobucci, E. Bronson Ingram Professor in Marketing, who joined Vanderbilt from the Wharton School of the University of Pennsylvania. Professor Iacobucci is a renowned expert on social networks, customer satisfaction and service marketing, and on quantitative psychological research. She has developed advanced customer satisfaction models and analyzed such topics as differences between consumer experiences across a variety of products and services and the impact of cultural differences on customer perceptions.

The following Q&A is drawn from a discussion OwenIntelligence had with Professor Iacobucci about the opportunities to use data from social networks for competitive advantage and the inherent challenges of service marketing and customer relationship management in an era of consumer-driven brands.

Q: Social networking has rapidly become a dominant force in the marketing of goods and services, especially for younger consumers. How well do companies understand the new marketing channels it is creating?

IACOBUCCI – Not very well. It’s incredibly difficult for corporations to comprehend and utilize these channels in the context of a traditional marketing program, because consumer-to-consumer networks are so dynamic: they change almost daily. That being said, more and more companies are accepting that, despite their lack of understanding, it’s absolutely essential for them to be part of this new online space. This presents an extremely challenging situation for executives to swallow. They’re being forced to put marketing dollars against a medium they don’t really understand and which offers them little or no idea about how it might pay off down the line.

Q: How are marketers attempting to tackle this new medium, which is evolving at such blazing speed?

IACOBUCCI – The pioneering companies are hard at work exploring these network structures and how they might leverage them for competitive advantage. For starters, they have no choice but to accept that this technology-driven medium will likely continue to change at a rapid clip for some time to come. The entrée for some is the very simple and common-sense approach of using the networks to find the online opinion leaders. That may not seem ambitious or creative, but it’s a start. Many other companies want to take the plunge, but their lack of data, or lack of understanding of the data, is holding them back. 

Q: What are the keys to deciphering this consumer-to-consumer environment?

IACOBUCCI – At its core, this environment is made up of intricate networks of individuals and groups. Because the medium burst on the scene so quickly and is changing so fast, traditional consumer data are often not appropriate and new, substantive data is still hard to come by. Industry and academic researchers are hard at work assessing how, within these networks, people interact with one another and with companies, brands and products. Some researchers have the models and the expertise to simulate these networks, identifying patterns in the behavior and developing solutions.

Q: How difficult has it been for the research community to analyze these networks?

IACOBUCCI – The challenge starts with businesses recognizing the value of collecting data in this area and putting it into a research context. This is only just beginning. Some mobile phone companies and airlines are working with academics, but the scope is still too limited to foster large-scale studies. There are numbers out there – via MySpace and Facebook and so forth – that offer an “electronic footprint,” but the companies with control of the information aren’t organizing it as data or don’t think of it as such. The trick for researchers is to find companies with the potential to generate rich information and who have reached a level of understanding about the need for new research models.

Q: Are there examples of industries that are taking the lead or are lagging behind in tapping into the social networking medium?

IACOBUCCI – Music and entertainment have been among the early adopters of social networking to drive sales and business strategy. Just look at the rapid migration of artists to MySpace and similar sites, despite the fact that the Internet was a major reason for declining sales just a few years ago. On the other hand, the sports area of entertainment hasn’t taken advantage of the consumer-to-consumer environment in a similar way. They’ve got some catching up to do. Interestingly, some consumer packaged goods companies are also ahead of the game with some of their products, perhaps because they can afford to experiment with a couple of their brands.

Q: What are some of the other unique challenges for service marketing in this environment?

IACOBUCCI – Unlike packaged goods or electronics, service industries have to contend with various human factors that can have a huge impact on the consumer-to-consumer environment. The customers are much more involved, as are the front line employees. This makes for less reliable quality control and the potential for dissatisfied customers to instantly impact markets. The airline industry is a good example. Delays at airports can’t always be helped, and there isn’t a lot airlines can do to make aggravated travelers happy, aside from being as considerate as possible, and this doesn’t always happen. If a disgruntled employee takes out a bad day on a customer who posts the experience online – perhaps recording it on a cell phone and documenting it on YouTube – the airline’s brand takes a hit. People marketing shampoos and cars don’t have the same worries as service marketers about this kind of immediate negative feedback. The other side of the coin, of course, is that positive feedback can immediately reinforce company and brand image. We are seeing some of this for Apple with the new iPhone, which has thus far been generally well received in the online community.

Q: Speaking of airlines, is there a solution to the customer service/relationship management quagmire in which they appear to be stuck?

IACOBUCCI – I am hesitant to criticize the airline industry, because its job is so hard right now. However, one strategy that the airlines haven’t tried is to just bite the bullet and raise prices. That would mean losing money at first, and it might take some time to become profitable again, but that might be an essential step toward delivering the service that customers are demanding. And that could turn out to be an effective competitive strategy – over the long-run – particularly in a world of full-service and discount airlines.

Q: Can service companies succeed in a consumer-driven environment without jumping into the online space?

IACOBUCCI – Companies are starting to realize that not being in these online spaces is not an option. It’s the preferred medium for the newest generation of consumers – who also happen to be more affluent consumers than younger people have ever been before. Businesses may face major operational and financial headaches as they figure out and fine-tune their strategies, but they will have broadened their opportunities to succeed. The fact is, marketing through online spaces is going to be much cheaper than through traditional mainstream media and, of course, more effective for consumer targeting. To position themselves most effectively for this environment, companies have to tap into the research community. Researchers can help them understand how to analyze and leverage the extraordinary volume of information becoming available. Entirely new ways of marketing services will be created. Undoubtedly, there will be tremendous rewards out there for the innovators and pioneers.

Published Sep 3, 2007 in Vanderbilt Business Intelligence
Copyright 2007 Vanderbilt Owen Graduate School of Management