Social Media for Small Business

Before moving into the significance of social media for small business, let us try and put some shape in the definition of small business.

What is small business?

Small businesses are firms privately owned, partnerships with number of employees significantly less, the specified maximum number depends on the economy of the country. These firms derive special tax benefits and other benefits from the government.

In the philistine bible when David decided not to wear the king’s armour while he went to fight against Goliath, it was 1043 B.C. The rules of the game has changed in the 21^st century, the Goliath’s alias the large firms have grown stronger and taller, the Davids thus need to be more armed to go head on against the Goliaths. Social media is one such armoury for the small business to grow and sustain their growth.

Challenges for Small business

Out of many challenges faced by small businesses around the few relevant (to the topic) challenges are listed below:-

• With little focus/ability to increase customer awareness, small businesses are often cramped by low revenue and little market share. The breakeven point in their cost function is not reached, hence under recovery of the overhead cost is common
• High dependency on single/few customers binds them in matters related to strategy, pricing and sometimes operational quality as well. The firms have to abide to the rules set by the big profile customers. In Michael Porter’s term “the bargaining power of buyers” inflates heavily.

The solution to the above problems is three fold:-

Increase Customer Awareness– It requires advertising, marketing of the product to the targeted customer segments, so that more customers are aware of the offerings.

Increase Customer Reliability– The trust not only increases through product quality but also through public relation activities, marketing communications and nonetheless through brand image.

Increase Customer Life Span– Retaining the acquired customers, sustains the growth in revenue.

We will try to evaluate using various methodologies, as how social media helps in solving the problems stated above. We will also try to understand the transaction cost the small businesses has to bear in going in the social media front and then evaluate the benefit, if any.

 

The growth and prospects of social media

Let us look at the growth curve of facebook over the years.

 

 

The steep growth curve indicates the reach of the social media. It is increasingly growing with a projected growth of 3.14% in the next year. Thus approximately 14-15% of the world population is reached by facebook.

    

The staggering data indicate that social media can be utilized as a platform to help businesses reach customers. Now the question to businesses is whether the targeted customers is there in these social media? The answers to the question are not simple but require a detailed analysis of the market segment targeted the behavioural aspect of the consumers.

Let us generalize the scenario and apply through some fact findings. Social media users are willing to pay 21% premium for brands that deliver greater service through social media. The question is why they are willing to pay the premium. Going by the Kapferer model of brand as a prism, the customers looks to embrace the brand as it reflects the image of being tech savvy, connected to customers and responsive to the customers. Thus the customer develops a resonance with the brand and embraces its offerings.

Now for small business reaching the maximum customer is the primary criteria, understanding the market and extrapolating the projected growth of social media a fare idea can be found on the amount of reach social media would provide the business. The reach as compared to traditional media is several folds with each follower in twitter getting in the message and spreading across to all its followers and subsequently to the next level of the tree, thus considering each receiver having n friends/followers, the maximum reach is n(n+1). The information flow tree for both traditional media and social media is shown below:

The next point to consider is the increased reliability through social media. Social media offers sophisticated tools for understanding consumer behaviour patterns, thus helps firms to build on the trust they created t
hrough better responses to the consumers questions, better resolutions to the problems faced by consumers. The entire brand reliability effort may be grouped under the below headings:-

• Brand Building
• Increase channels for customers to reach businesses
• Select methods to monitor

Brand Building need to be done with utmost care, a tremendous consistency is required in brand building exercise. Establishing a facebook account by an online grocery store could provide customers with required details about the offerings, promotional offers and also availability. An online toy manufacturer could gather new ideas from customer feeds and thus create a demand of its new products among other customers. Yellow giraffe – an online toy manufacturing company would soon go in facebook front to understand new requirements from customers and develop its future products. Thus companies can avoid being myopic and understand customer needs and wants in a better format.

Social Media provides the exquisite opportunity to connect with customers without any cost, gone are the days when customers mailed their feedback to companies. Thus at very little monitoring cost small businesses are empowered with a customer connection. The import point to consider is whether the target segment is online or not. But with the growing trend in social media, for generic business the target segment is largely online. More importantly other traditional communication can create the required push to make customers reach small business through social media.

The monitoring is the only cost incurring part of social media. Small business not only have to devote time and effort to respond and react to customer feeds but also have to use tools and techniques to monitor trends. Flipkart, at its inception use sentiment analysis tool in facebook to understand the service improvement. Using effective tools, small businesses can develop and improve themselves to grow and sustain against the Goliaths.

The other part to consider is in increasing customer life span. Though much of the component depends upon the product, customer need but social media may create a difference in terms of service- be it after sales or product enquiry. Below is a diagrammatic representation of how to increase customer loyalty.

  Brand Resonance Pyramid

The Social Media Effects:-

Salience: It creates awareness among new and old customers through facebook posts, twitters, and blogs

Imagery: It creates a responsive, caring and tech savvy image of the brand, when it goes online in social media sites

Feelings: As per the Kapferer Model, customers start to see an image of them.

Thus it translates to a resonance, increasing the life span of customers.