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‘Seismic Shift’ in Marketing or ‘Overreaction’ to Social Media?

Social media have revolutionized marketing by forcing the integration of analog and various digital media, by “outsourcing” the process to end users, and by forcing companies to focus on customer needs, said Rishad Tobaccowala, ’82, chief innovation and strategy officer for VivaKi.

“There has been a seismic shift,” Tobaccowala said during the keynote panel at the 59th Annual Management Conference at the Hyatt Regency Chicago on May 20. “For many, many years you never had to understand and meet customer requirements, because customers weren’t involved. Like the Renaissance in painting, there is a completely new way of selling stuff. In the next 10 years, it will become very clear. The fact that power has shifted is pretty dramatic.”

Tobaccowala was among five faculty and alumni experts who debated the economics of social media in a discussion moderated by Steven Kaplan, Neubauer Family Professor of Entrepreneurship and Finance. After the 90-minute panel, approximate 900 attendees participated in 13 breakout sessions at Gleacher Center.

Consumer-driven marketing

Much of the talk about seismic shifts in marketing is typically anecdotal, with relatively little quantitative analysis measuring these changes, said Matthew Gentzkow, professor of economics and Neubauer Family Faculty Fellow. “I think it’s really important that businesses keep a little perspective about what’s actually happening,” Gentzkow said.

The average American currently spends 5.5 hours a day watching television, 6 minutes a day on Facebook, 4 seconds a day on Twitter, he said. “That doesn’t mean that these technologies are not important, playing an important role in various ways,” Gentzkow said. “For particular businesses, whose customers, say, are really focused in demographics where they are using these tools, they are relevant. Maybe society will be changed, but the idea that society has been changed or marketing has been changed in a fundamental way already is not true. The biggest risk for business may not be moving too slowly, but rather overreacting to all of this.”

Social media have created accountability in brands, said Jean-Pierre Dubé, Sigmund E. Edelstone Professor of Marketing and Robert King Steel Faculty Fellow. “Back in the day brands could lie and exaggerate their benefits, but that’s not possible anymore,” Dubé said. “If you deceive customers, it just takes one person to find out and start tweeting that or blogging about it. Next thing you know millions of people are aware of this.”

This accountability creates “good news and bad news” for customers and brands, he said, adding that morning’s news headline highlighted the pressure social media has put on the sale of Girl Scout cookies. Two girl scouts used social media to pressure the CEO of Girl Scouts of the USA to stop using rainforest-destroying palm oil in Girl Scout cookies. Surprisingly, Dubé said, Girl Scouts of the USA’s response was to delete all palm oil related comments from its website and to shut off users' ability to post on its Facebook page. Many Girl Scout troops subsequently threatened to refuse to sell Cookies, a $700 million revenue source for Girl Scouts, unless palm oil is removed from the process.

Not only can such consumer empowerment help improve products, as with the content of the Girl Scout cookies, companies may also face scrutiny over once-insignificant decisions, Dubé said. “The Gap changed its logo, and normally these sorts of things go unnoticed. But there was enough consumer backlash about the changed logo that the company changed it back again. The good news is that some firms who have brands with virtues worth peddling to the market can actually harness social media and use it to their advantage.”

Companies like Best Buy, Dell, and Southwest Airlines use Twitter on a regular basis as a form of customer service, said Brent Hill, ’97, director for the central region at Twitter. “On day one, they set up their Twitter handle,” Hill said. “On day two, people started to try to communicate with them, asking questions, mostly challenges to the business. People at the company tweet back to them and try to solve problems.”

Thanks to Twitter and Facebook, firms get direct connections with consumers at no cost, versus paid advertising, he said. “No brand can connect with everybody on Facebook or Twitter, and they have to work at it,” Hill said. “As part of their business models, both of those companies have created solutions to help marketers connect with a broader audience. When the numbers get as large as they have on Facebook and Twitter, that becomes very lucrative to a marketer.”

For companies operating on the levels of Groupon or Twitter, it’s hard to imagine what’s coming next in social media, said Eric Lefkofsky, cofounder and chairman of Groupon and adjunct professor of entrepreneurship. After launching in October 2008, Groupon is now adding almost 1,000 employees a month and between 3 million and 4 million subscribers a week in 47 countries, Lefkofsky said.

“Where are all these people coming from, where does it end, and when does this slow down?” he asked. “You’re on this S curve; you just have no idea where you are. For people running these companies, we just have to take this journey wherever it leads us. The companies at the top of this sort of mountain are just on a ride. We have no idea what’s next because this thing is so fast and so big.”

Phil Rockrohr