The Thank You Economy

by Gary Vaynerchuk

  Most businesspeople spend far too long on the wrong side of that chasm, hiding behind tired sayings like “You can only manage what you measure.” That’s how my nemesis won back in 1997. He had numbers from sources the audience trusted; any numbers I might have been able to point to came from research that still hadn’t made its way to the mainstream. No matter how strongly I could feel the vibrations of the future, without hard numbers from old-school sources indicating that the Internet was going to change how Americans thought about buying and selling everything from books and wine to toilet paper and asparagus, I couldn’t win over the corporate mindset.

  Corporate America loves ecommerce now, of course, but business leaders and brand managers and marketers have simply drawn new lines in the sand, this time putting distance between their companies and social media, all the while desperately clinging to the security they still believe numbers can provide. Unfortunately, if you wait until social media is able to prove itself to you before deciding to engage with your customers one-on-one, you’ll have missed your greatest window of opportunity to move ahead of your competitors.

  Resistance Won’t Kill You Right Away

  What should the horse-and-buggy driver have done when he noticed the automobile? Should he have waited until he was down to three fares per day to consider that maybe he needed to make a change in how he was going to make a living, or should he have quickly sold the horses? Sell the frigging horses, of course! Company leaders may not see their lack of participation in social media reflected on their P&L statement, but I promise that, unless something else sinks their company first, they will. Just because you ignore a threat doesn’t mean it doesn’t exist. Will you die if you smoke? Not necessarily. Not everyone who smokes dies of lung cancer, and if smokers live long enough, there are plenty of other things that can kill them. Likewise, you’re not going out of business tomorrow if you’re not on Facebook and Twitter and blogging and creating content and building community. But the risk that your business will die before its time grows bigger every day that you don’t use social media. You think Barnes & Noble and Borders didn’t see Amazon coming in 1997? Of course they did. But the numbers distracted them, and the numbers said that Amazon was nowhere near making a profit, and Barnes & Noble and Borders were still the number-one-and-two book retailers in the country. Even if some Borders and Barnes & Noble execs could sense that change was coming, they probably preferred to believe the story the numbers told them. To doubt the numbers would have meant revamping and hustling like crazy, and it is so much easier to do things the way they’ve always been done before. B. Dalton, owned by Barnes & Noble, didn’t go out of business in 1999. It didn’t happen in 2001, or even 2003. It didn’t happen until January 2010, when the last store finally closed. But it did finally happen, and it didn’t have to. Like the guy who quits smoking only after being diagnosed with lung cancer, by the time B. Dalton realized that Amazon was a force to be reckoned with, it was too late.

  No big company loses to a little company if they are totally committed to winning the fight. There is no reason why mammoth companies like Barnes & Noble or Borders could not have spent real money and hired the right people to come at Amazon with everything they had. Barnes & Noble went online in 1997, but they didn’t go in 100 percent; they couldn’t have, or Amazon wouldn’t have taken over so much of their market. They should have done the same thing I do every time a new liquor store that could be a threat opens up near me—pound the competitor’s face in with advertising and marketing dollars (even if they’re not opening up close to me, you can bet I’m paying close attention to what they’re doing). Barnes & Noble should have come at Amazon the way Fox and NBC came at Google, when they developed a true rival, Hulu, to combat Google’s YouTube.

  Right now, I’d say that social media is a bit like a kidney—you can survive with only one, but your chances of making it to old age are a lot better with two. Eventually, though, I think social media will be as important to a business as a strong heart.

  CHAPTER THREE

  Why Smart People Dismiss Social Media, and Why They Shouldn’t

  I’ve talked to a lot of corporations about the benefits of social media over the last six years, and most of the reasons I’ve heard as to why leaders don’t want to invest in it hinge on fear. As I’ve discussed, Wall Street doesn’t make it easy for companies to take many risks. Maybe there was some risk in the early days, but at this point the risk anyone is avoiding exists only in his or her own head. I know that can be hard to believe when you’re staring at headlines that read “Most Brands Still Irrelevant on Twitter,” and “Social Networking May Not Be as Profitable as Many Think.” It’s possible that for now those headlines and others like them are technically true, but if they are, in almost every case, the reason is the same—most of the companies already attempting to use social media platforms aren’t using them correctly. I mean, just because you can’t dribble well or get the rock in the hoop doesn’t mean that there’s a design flaw in your basketball. And the reason they’re not using them correctly is generally because they aren’t fully committed to it; they still don’t get that intent matters. It is true that you need to use social media because otherwise your competitors will get ahead of you. Yet how we speak and behave when we’re going through the motions of caring is vastly different from how we speak and behave when we care from the bottom of our hearts. Our intent affects the force of our actions, so if a leader has simply got a case of monkey see, monkey do (where people throw themselves and their companies into social media solely because their competitor is doing it) and her intent isn’t to infuse every aspect of her business with Thank You Economy principles, of course she’ll never reap the full benefits. She’s like a competitive swimmer who hangs around the edge of the pool for a month, carefully dipping her toes and analyzing the water, and who then complains that her swim times aren’t improving.

  Overall, there are eleven excuses I’ve heard companies use again and again to justify their refusal to fully commit to and invest in social media, and I want to dissect them all. If you’re a skeptic, I hope you’ll find some new information here that will persuade you that the time to act has come. If you are eager to get your company to connect on a deeper level with its customers but are meeting with resistance, I hope these pages will provide fresh talking points and facts you can use when presenting this issue to the heads of your company or department. One thing is absolutely certain—until leaders erase this particular line in the sand, they will be severely hampered in their attempts to guide their companies smoothly and successfully into the Thank You Economy.

  1. There’s no ROI.

  Brand managers and company leaders are obsessed with numbers because the numbers matter a great deal, if not to them personally, then to their superiors, their stockholders, and the financial and business media. I get that. But let me ask this: what is the return on investment for any kind of customer caring? Is there a formula that calculates how many positive interactions it takes to pay off in a sale or in a recommendation? No, but until now good managers and salespeople have killed their customers with kindness anyway, because even without hard numbers to quantify the ROI, they instinctively know that earning a customer’s trust is key.

  Now, Nielsen has numbers that prove the link between generating trust and making a sale isn’t just theoretical. When Nielsen conducted a study on what drives consumer trust, the results were clear: almost 70 percent of people turn to family and friends for advice when making purchasing decisions. Where have people been talking to their family and friends lately? Facebook reports that 60 percent of the people online are going to social networks, with half returning every day. If there is ROI in friendship and family, there has to be ROI in social media. “We often forget the symbiotic relationship between trust and ROI,” says Pete Blackshaw of NM Incite, a joint venture of McKinsey and Nielsen, and also author of Satisfied Customers Tell Three Friends, Angry Customers Tell 3000. “If consumers trust other consumers more
than they trust traditional advertising, and the platforms to convey their trusted recommendations are now reaching billions, the ROI should start to enter the ‘no brainer’ zone. There’s clearly nuance in the executional elements, and some social media techniques or tactics will clearly drive more ROI than others, but the big picture should be obvious.”

  When faced with two equal choices, people often buy for no other reason than they associate one choice with someone they know. My friends shop at Wine Library, and they go out of their way to do so. Most of my acquaintances from high school shop at Wine Library, too. There is a Dell consumer out there who buys Dell because he has an uncle who works there. There are plenty of people who never stopped buying their gas at Exxon after the Valdez spill, or more recently, from BP, even though they were upset by the environmental catastrophes those companies caused, because they have friends or relatives connected to them. Social media, which allows people to see their family and friends’ preferences and interactions with brands, allows for many more chances for people to make the personal associations that can lead to buying decisions.

  The ROI of a company’s engagement with a customer scales in proportion to the bonds of the relationship. The ROI of your relationship with your mother is going to be much higher than that of the one you have with a good friend. Both, however, are more valuable than the one you have with an acquaintance, which trumps the relationship you have with a stranger. Without social media, you and your customer are relegated to strangers; with it, depending on your efforts, you can potentially upgrade your relationship to that of casual acquaintances, and even, in time, to friends. The power of that relationship can go so far as to convert a casual browser into a committed buyer, or a buyer into an advocate.

  Every company should be bending over backward to transform customers into advocates—they are incredibly valuable. According to an IBM study of online retail consumer buying patterns:

  Advocates’ share of wallet is 33 percent more than that of customers who aren’t advocates.

  Advocates spend about 30 percent more dollars with their favorite online retailers than non-advocates do.

  Advocates stick around longer, proving themselves less likely than other customers to switch to a competitor even if it offers similar products at similar prices.

  Advocates have significantly higher lifetime value than regular customers, for not only do they spend more now, they are more likely to keep spending, and even increase their spending, as time goes on.

  Advocates are bred, not born. According to Nielsen, consumers are generally more motivated to reach out to a company with a complaint than with praise. However, they are willing to publicly praise a company when given the opportunity to do so. Social media allows companies to provide ample prompts for consumers to remember why they like a brand, and inspire them to say so publicly, whether on the company website or via social networking channels. Through an exhaustive consumer-engagement study that focused on moms online, Pete Blackshaw found that when brands started investing in meaningful interactions and conversations with mothers, the mothers were 30 percent more likely to become advocates. In other words, they were willing to write favorable online reviews about the product, essentially doing the brand’s marketing for it. According to Blackshaw, marketers consider online reviews among the most coveted form of consumer expression, because they tend to show up close to the “purchase event,” and because their clicks and links result in higher search results. The study showed, in addition, that mothers who became “high participator moms”—answering questions from other mothers, providing information, and creating online content about the product or brand—saved the brands 15 percent on call support. Overall, the numbers show that there is significant ROI in engaging with customers and strengthening your relationship with them. Blackshaw, who has consulted with hundreds of Fortune 1000 brands, says this is especially true in the early phase of a new product launch. “The early reviews can be as impactful as a $10 million media buy in shaping early perceptions, even among the traditional media, who increasingly lean on social media as a ‘cheat sheet’ to understand what’s really going on with brands.”

  Even if only a small percentage of your customers become true advocates, there is tremendous ROI in treating your customers as well as possible. According to Jason Mittelstaedt, chief marketing officer of RightNow, a customer service consulting firm that published the Customer Service Impact 2010 Report, 85 percent of U.S. consumers say they would pay 5 percent to 25 percent more to ensure a superior customer experience. In addition, 76 percent of consumers say they appreciate it when brands and companies take a personal interest in them. In other words, advocates and non-advocates alike say they want superior service, and they’re willing to pay for it. Can there be any doubt that engaging one-on-one with customers, making each and every one feel valued and heard, constitutes a superior experience?

  * * *

  Consider these statistics pulled from the Customer Experience Impact 2010 Report as well:

  40 percent of consumers switched to buying from a competitor because of its reputation for great customer service.

  55 percent cite great service, not product or price, as their primary reason for recommending a company.

  66 percent said that great customer service was their primary driver for greater spending.

  * * *

  It’s very logical: There is proven ROI in doing whatever you can to turn your customers into advocates for your brand or business. The way to create advocates is to offer superior customer service. In the Thank You Economy, a key component of superior customer service is one-to-one engagement in social media. It’s what customers want, and as we all know, the customer is king.

  2. The metrics aren’t reliable.

  The tools for tracking and measuring social media initiatives are becoming increasingly sophisticated and reliable. After all, this data is coming from Nielsen. If you place television ads, you’ve probably been making enormous financial decisions based on the Nielsen ratings for years, trusting them to tell networks who is watching what shows so the networks and cable stations can charge you a fortune to place your brand in your target demographics’ line of sight. And by the time you’re reading this book, you’ll be able to rely on metrics bearing the Nielsen seal of approval for your online ads, as well. In September 2010, Nielsen announced that it was launching a cross-media metrics tool that will measure a campaign’s effectiveness online, with ratings data comparable to that already offered for TV. One of its first partners to test the new tool? Facebook. In the press release, Steve Hasker, Nielsen’s president of Media Products, said, “This new system will provide marketers with a better understanding of their ROI, and will give media companies a much needed tool to prove the value of their audiences.”

  But what about engagement? The new tool from Nielsen measures the effect of online ads, not whether all that time a company spends talking to customers online translates to sales. Well, in 1990, how many execs imagined they’d be spending money to post banner ads on that thing called the Internet? Placing product in video games? It was unthinkable. How about paying for SEO? SEO, what the heck is that? Now, you put a lot of money into SEO.* Everything we count on today to tell us how our marketing efforts are working was once brand-new and risky. And then it wasn’t. So it will be with social media and the metrics that accompany it.

  In 2010, Ad Week reported that Vitrue, a social media management company, had calculated that a million Facebook fans were worth $3.6 million in “equivalent media” over a year; $3.60 per person interested enough in your brand to friend you up is not chump change. If that number had come from Nielsen, everyone in the marketing and advertising industry would have treated it as gospel. The metrics already in existence are being refined with incredible speed, and the fixed standards execs crave so much are on their way.

  Will there still be ways for consumers to game the system? Of course. But the vast majority of people on Facebook and Twitter are a
ctually living within the medium. If they’re not there, the conversation stops. If they get distracted or lose interest, the conversation changes. The data businesses can collect about what their customers are talking about, with whom they’re talking about it, and how often, is far less ambiguous than it’s ever been. The problems in accurately measuring impressions that plague traditional media will continue for online ads, but the data about consumers’ experience and their perception of your brand is right there to collect with every tweet, button, heart symbol, comment, and share. Even better, by engaging one-on-one, you can ask for clarification, request details, and really delve into why your customer feels the way he or she does.

  Every media platform has loopholes. When I first suggested buying Google ads, my father wasn’t convinced it was a good idea. How would we know that real people had clicked through? What if it was just our competitors making us think the ads were working and driving up our budget? Well, I didn’t know. But I was pretty sure that my competitors were too busy with their own marketing to spend the kind of time it would take to sabotage mine. Google claimed to have an algorithm to prevent fraud, and it seemed to me it was in Google’s best interest to protect me. Believe me, I wasn’t in business to lose money. But I was thinking long term, and long-term thinking requires that you look at all the options, including the ones that might take a little time to pay off. All media-buying decisions are based on best educated guesses, so it makes no sense for people to hesitate to use a new tool, especially one with such a low cost of entry.