Socially commercial

In the West, many companies are already using social media to listen to customers, build brand loyalty and learn how they can improve customer service. Facebook recently partnered with Amazon.com to generate recommended gift lists based on Facebook users’ favorite books and movies, recent activity, and what friends have liked. The telecommunications company Verizon monitors Twitter for public comments mentioning the company, and customer service agents directly message negative commenters to resolve their complaints. Apple Inc. liaises with over 800 registered user groups, whose members post on forums, plan events and attend Apple sales training courses to stay up-to-date with the company’s latest products.

It would do Chinese companies some good to learn from these examples, says Cheung Kong Graduate School of Business (CKGSB) Associate Dean and Professor of Marketing Sun Baohong, since Chinese companies are only starting to understand how they can leverage social networks to build communities around their products.

“Chinese companies still use social media as a tool to draw eyeballs,” Sun says. “They advertise on social media, but this is only one of the many uses of social media [available for companies].”

According to a recent Chinese consumer study by the consulting firm McKinsey & Company, 20 percent of Internet users in China share information about products over social media, compared to 36 percent of American users. There is a gap, but Sun said there are some advantages to reaching out to a Chinese audience.

“Social influence is always important among Chinese consumers and Chinese people are comparatively less concerned over privacy issues,” Sun said.

Already, some Chinese companies are venturing into social commerce to build their audiences. In November, Xiaomi Technology Company’s CEO Lei Jun used the company’s BBS forum to “poll the audience” on whether an upgraded version of its low-cost smart phone with more advanced capabilities should be launched, since only high customer interest could justify the phone’s development costs. Within one month, over seventy-thousand people responded to the Xiaomi survey: 42.8 percent voted in favor of launching a newer version of the phone, while 42.6 percent considered it unnecessary. The company has yet to decide if it will create the newer version.

Meilishou, another Chinese start-up, is a popular online forum for the style-conscious to discuss the latest deals and purchases. Taobao, China’s largest e-commerce site, has been operating its own social network called Tao Jianghu since 2009. According to the China technology blog TechRice, the social network has roughtly 10 million active users, making it one of China’s top ten social media communities, in terms of number of users.

Online communities based on user-generated content have opened up a new body of research into the value of acquiring content creator fans. Kaifu Zhang, a Ph.D. candidate in marketing at INSEAD, investigated the benefits that new users bring into online marketplaces. According to Zhang, every person who enters a company’s marketplace immediately brings far more value beyond his or her transactions–by attracting more people into the network through word-of-mouth or by contributing content that makes the site more attractive to other users. After developing a tool to quantify these indirect benefits, Zhang and his colleagues found that the average value of each user to the website (in terms of sales commissions) quintupled.

The sooner companies realize the many different ways they can reach out to customers over social networks, the better they can use social media to its full potential, Sun says: “Social media should be used as a tool to create customer satisfaction, to listen to consumers’ voices. In essence, to make a consumer want to spend money on your product.”