December 22, 2014

2014 Year In Review: Why Do You Think Social Media Doesn't Work? It Does Work

This question came to us from an individual on Twitter.

Question: You are very hard on social media, and you are wrong. Retail is being reinvented, right before our eyes. All you have to do is look. Look at Brandy Melville, for instance. Why do you think social media doesn't work?

This whole issue is just such a time waster. It can be twisted to fit the narrative of any individual. But the person asking the question on Twitter is technically correct, in some instances..

Click here, and click here, to read more about Brandy Melville (click here to see the home page). The individual on Twitter forwarded the information to me.

Let me tell you a story. Four years ago, I was speaking at a conference in Berlin. I was having dinner with the CEO of a small, fashion company ... under $10,000,000 in annual sales. The CEO told me how his team scraped information from the internet in the morning, discussed trends around lunch, and put together an assortment in the afternoon. Two weeks later, the merchandise conceived today was available for sale on his website. The entire process was based on data - what were people talking about, what images were being shared, what colors and moods were resonating? Analytics folks love this ... they call it "being data driven".

Today, some folks call his methodology "fast fashion".

Let me tell you another story. I recently visited a company. This company was operating nine months out. In other words, they were planning their summer 2015 assortment. There wasn't data available, nor did the merchandising team want data. They were making guesses as to what they wanted to accomplish. One person called this technique "leading the customer".

Do you understand the difference in approach between the two companies? Both can work, of course. But there is a major difference.

The first company is not proof that social media works. That's not the issue. The issue, of course, is that social media simply "is". It's no different than the focus groups and surveys of twenty years ago. It's both marketing and customer research. It's data. It just "is". You cannot separate social media from the rest of the branding elements of the business. You can't. You cannot prove that social media works, and you cannot remove it from the business. It is not a tactic. It simply "is" the business. And customers are acquired cheaply as a result.

The second company can easily prove that social media doesn't work. They should know. They tried putting some sale messages on Twitter, and nobody responded. The second company is fully confident in their merchandising team. The second company just needs to find marketing channels to communicate the merchandising strategy to the customer. The second company is going "omnichannel". They'll ship-to-store or buy-online-pickup-in-store or get you a discount on your mobile phone when you're in the mall (if the customer ever steps foot in a mall anymore).

Retail is moving in two different directions.

The first direction is a deep understanding of the target customer, based on scraping as much data as humanly possible from the internet. Merchants use information, say images from Instagram, to understand how the target customer feels today, and then merchandises against what s/he sees. It's a modern blend of art and science. It's terribly hard for old-school marketers to understand how to run a business this way - neurons in the brain have been hard wired, it's too late now to change (but it is not too late to trust somebody else).

The second direction is a deep immersion in digital tactics, enabling an infinite number of channels to sell merchandise. The belief is that the merchandise and marketing strategies are sound, it's just that the customer "demands" multiple channels to complete a transaction. This direction is good for the vendor community. This direction is good for old-school CRM folks. This direction is good for traditional merchants looking to "set the trends" in a traditional manner.

Most traditional retailers are choosing the second direction, and for good reason - it's easy to understand.

Younger customers are choosing the first direction.

During the next twenty years, it is possible that the first direction will run the second direction out of business. Or maybe the first direction will lead us into an unholy nether world that nobody likes - that can happen when we optimize for the short-term.

What do you think will happen?