SocialSocial CommerceThe Future Is Free*

The Future Is Free*

Gift marketing can be a powerful promotion tool enhanced by social media. Here are three tips for marketers.

Since commerce’s beginnings, product makers and marketers have been giving away free samples in hopes of turning “samplers” into either customers or advocates who will recommend the sampled products to their friends. I refer to this tried-and-true method as “gift marketing” as it aptly describes the value exchange between brands and consumers – a gift in exchange for some good word-of-mouth marketing.

With the growth of social media, I am seeing two prominent evolutions in gift marketing. First, the practice is brought online in a more affordable and streamlined way. Second, the word-of-mouth benefits have become even more important for marketers when they execute gift marketing. Groupon is a good example of a service that leverages both of these trends, by allowing businesses to sell products at steep discounts in exchange for potentially explosive growth in awareness and traffic through social commerce.

Gift marketing is also showing up as one of today’s preferred marketing and business models for online services – freemium. Dropbox and Zynga have done very well by initially offering compelling free services with well thought out paths to paid premium services and social recommendations to fuel their expansion.

However, many businesses have not done well with gift marketing for one or more of the following reasons:

  1. The product sucks and people won’t pay full price for it, much less recommend it.
  2. Free or discounted products offered indiscriminately to everyone, regardless of history, propensity to purchase repeatedly, or to recommend to a friend.
  3. Lack of business mechanisms to ensure, or at least increase, social sharing.

Here are my thoughts on how marketers can improve in each of the above areas and make the most of their gift marketing efforts.

Improve Thy Product

“A great ad campaign will make a bad product fail faster.”
– William Bernbach, co-founder DDB

With the number of inexpensive social monitoring and customer feedback solutions out there, I’m surprised to see the number of businesses still not actively listening to their users in the social space or directly asking for feedback. Consumers are evolving constantly. They expect companies to listen using the latest technologies and respond quickly.

I see companies that have adopted a social enterprise strategy perform much better in this area as they are able to bring those responsible for product and customer service closer to the end consumers, thus being able to iterate and improve much faster. Don’t launch a gift marketing program until your product is great or remarkably good in some way, or else you might see your efforts backfire and create bad word-of-mouth that requires even more resources to dissipate later on.

Free for the Influencers

One of the major merchant complaints about Groupon (and rightly so) is the lack of customer analytics and segmentation. To survive and add real value, Groupon will need CRM capabilities to enable merchants to target offers by attributes such as customer purchase history and social influence.

To more actively activate their fan bases, marketers also need to start integrating social CRM into their social media strategies. It’s no longer sufficient to just have a database of customers; marketers now need a database of customers plus fans and influencers. Who are the people who don’t buy but show strong brand affinity and have the potential to bring in 100 customers from their fan base of 100,000 followers? Using the tools available today, brands have the ability to prioritize their gift marketing efforts on the most influential fans and customers, and close the attribution loop through smart use of coupons.

Don’t Stop at Free

Most marketers recognize referrals as the number one source of qualified leads, but a surprising few have formal referral marketing programs, much less ones that are integrated with social media. The basic simple mechanism hasn’t changed much: refer a friend and we’ll give both you and your friend something of value. Zynga excels in this area with its creative ways of integrating social referrals as a critical part of improving your gameplay and score. Dropbox gives you 250MB more space for each friend referral and your friend gets 2GB free.

With any kind of gift marketing program, don’t just aim at acquiring customers directly (sampling), also have a plan and mechanisms prepared to acquire more through existing customers (referrals). The key is to make social sharing an important, rather than optional, part of the product experience. Explicitly ask the people receiving the free gifts to help you with their social capital.

Gift marketing is a powerful promotion tool that is improved by social media and coming back into favor, and I predict it will be a major marketing trend that will redefine customer loyalty and acquisition for the next 10 years. Join me in rethinking what it means to give more to your customers and leverage their social influence to create demand and advocacy for your brand.

*Instead of money, people will be paying with their social influence.

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