Demystifying social media

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Demystifying social media

April 2012

Roxane Divol, David Edelman, and Hugo Sarrazin


As the marketing power of social media grows,it no longer makes sense to treat it as an
experiment. Here’s how senior leaders can harness social media to shape consumer decision making in predictable ways.

The problem


Companies invest millions of dollars in social media,
with little understanding of how it influences consumers
to favor their brands or buy their products.

Why it matters


Without knowing how social media affects consumer
behavior, companies run the risk of aiming it at the
wrong targets, wasting time and money on ineffective
efforts, and generally failing to harness its potential.

What to do about it


Understand social media’s core functions: to monitor,
respond, amplify, and lead consumer behavior. Then
look for the best opportunities to carry out those
functions along the journey that consumers embark
upon when they make purchasing decisions.


Executives certainly know what social media is. After all,
if Facebook users constituted a country, it would be the world’s third
largest, behind China and India. Executives can even claim to
know what makes social media so potent: its ability to amplify wordof-
mouth effects. Yet the vast majority of executives have no idea
how to harness social media’s power. Companies diligently establish
Twitter feeds and branded Facebook pages, but few have a deep
understanding of exactly how social media interacts with consumers
to expand product and brand recognition, drive sales and profitability,
and engender loyalty.

We believe there are two interrelated reasons why social media remains
an enigma wrapped in a riddle for many executives, particularly
nonmarketers. The first is its seemingly nebulous nature. It’s no secret
that consumers increasingly go online to discuss products and
brands, seek advice, and offer guidance. Yet it’s often difficult to see
where and how to influence these conversations, which take place
across an ever-growing variety of platforms, among diverse and
dispersed communities, and may occur either with lightning speed or
over the course of months. Second, there’s no single measure of
social media’s financial impact, and many companies find that it’s
difficult to justify devoting significant resources—financial
or human—to an activity whose precise effect remains unclear.
What we hope to do here is to demystify social media. We have identified
its four primary functions—to monitor, respond, amplify, and lead
consumer behavior—and linked them to the journey consumers undertake
when making purchasing decisions.

Being able to identify
exactly how, when, and where social media influences consumers helps
executives to craft marketing strategies that take advantage of social
media’s unique ability to engage with customers. It should also help
leaders develop, launch, and demonstrate the financial impact of socialmedia
campaigns (for insight into the world’s biggest social-media
market, see “Understanding social media in China,” forthcoming on
mckinseyquarterly.com).

In short, today’s chief executive can no longer treat social media as
a side activity run solely by managers in marketing or public relations.
It’s much more than simply another form of paid marketing, and
it demands more too: a clear framework to help CEOs and other top
executives evaluate investments in it, a plan for building support
infrastructure, and performance-management systems to help leaders
smartly scale their social presence. Companies that have these three
elements in place can create critical new brand assets (such as content
from customers or insights from their feedback), open up new
channels for interactions (Twitter-based customer service,
Facebook news feeds), and completely reposition a brand through the
way its employees interact with customers or other parties.

The social consumer decision journey


Companies have quickly learned that social media works: 39 percent of
companies we’ve surveyed already use social-media services as their
primary digital tool to reach customers, and that percentage is expected
to rise to 47 percent within the next four years.1 Fueling this growth
is a growing list of success stories from mainstream companies:

Creating buzz: Eighteen months before Ford reentered the US
subcompact-car market with its Fiesta model, it began a broad
marketing campaign called the Fiesta Movement. A major element
involved giving 100 social-media influencers a European model
of the car, having them complete “missions,” and asking them to document
their experiences on various social channels. Videos related to
the Fiesta campaign generated 6.5 million views on YouTube, and Ford
received 50,000 requests for information about the vehicle, primarily
from non-Ford drivers. When it finally became available to the public,
in late 2010, some 10,000 cars sold in the first six days.

Learning from customers: PepsiCo has used social networks
to gather customer insights via its DEWmocracy promotions, which have
led to the creation of new varieties of its Mountain Dew brand.
Since 2008, the company has sold more than 36 million cases of them.

Targeting customers: Levi Strauss has used social media to offer
location-specific deals. In one instance, direct interactions with
just 400 consumers led 1,600 people to turn up at the company’s stores—
an example of social media’s word-of-mouth effect.
Yet countless others have failed to match these successes: knowing
that something works and understanding how it works are very
different things. As the number of companies with Facebook pages,
Twitter feeds, or online communities continues to grow, we think
it’s time for leaders to remind themselves how social media connects
with an organization’s broader marketing mission.

1 See “What marketers say about working online: McKinsey Global Survey results,”
mckinseyquarterly.com, November 2011.


Marketing’s primary goal is to reach consumers at the moments, or
touch points, that influence their purchasing behavior. Almost three
years ago, our colleagues proposed a framework—the “consumer
decision journey”—for understanding how consumers interact with
companies during purchase decisions.2 Expressing consumer behavior
as a winding journey with multiple feedback loops, this new framework
was different from the traditional description of consumer
purchasing behavior as a linear march through a funnel. Social media
is a unique component of the consumer decision journey: it’s the only
form of marketing that can touch consumers at each and every stage,
from when they’re pondering brands and products right through the
period after a purchase, as their experience influences the brands they
prefer and their potential advocacy influences others (Exhibit 1).
The fact that social media can influence customers at every stage
of the journey doesn’t mean that it should. Depending on the company
and industry, some touch points are more important to competitive
advantage than others.3 What’s more, our work with dozens of
companies adapting to the new marketing environment strongly
suggests that the most powerful social-media strategies focus on a
limited number of marketing responses closely related to individual
touch points along the consumer decision journey. Exhibit 2 depicts
the ten most important responses, range from providing customer
service to fostering online communities. One of those ten—monitoring
what people say about your brand—is so important that we see it
as a core function of social media, relevant across the entire consumer
decision journey. The remaining nine responses, organized in three
clusters in the exhibit, underpin efforts to use social media to respond
to consumer comments, to amplify positive sentiment and activity,
and to lead changes in the behavior and mind-sets of consumers.

1. Monitor


Gatorade, a sports drink manufactured by PepsiCo, has been diligently
working toward its goal of becoming the “largest participatory
brand in the world.”4 It has created a Chicago-based “war room” within
its marketing department to monitor the brand in real time across
social media. There are seats where team members can track custombuilt
data visualizations and dashboards (including terms related
to the brand, sponsored athletes, and competitors) and run sentiment
analyses around product and campaign launches. Every day, all of
this feedback is integrated into products and marketing—for example,
by helping to optimize the landing page on the company’s Web site.
Since the war room’s creation, the average traffic to Gatorade’s online
properties, the length of visitor interactions, and viral sharing from
campaigns have all more than doubled.
Such brand monitoring—simply knowing what’s said online about
your products and services—should be a default social-media function,
taking place constantly. Even without engaging consumers directly,
companies can glean insights from an effective monitoring program that
informs everything from product design to marketing and provides
advance warning of potentially negative publicity. It’s also critical to
communicate such feedback within the business quickly: whoever
is charged with brand monitoring must ensure that information reaches
relevant functions, such as communications, design, marketing,
public relations, or risk.

3 Readers interested in a detailed approach for understanding which touch points matter—based on research techniques that reveal what consumers are seeing, saying, and doing—should read David Edelman, “Branding in the digital age: You’re spending your money in all the wrong places,” Harvard Business Review, December 2010, Volume 88, Number 12, pp. 62–69.

4 Comment by Carla Hassan, Gatorade’s senior marketing director, consumer and shopper
engagement. For more, see Adam Ostrow, “Inside Gatorade’s social media command center,”
mashable.com, June 15, 2010.


2. Respond


Valuable though it is to learn how you are doing and what to improve,
broad and passive monitoring is only a start. Pinpointing conversations
for responding at a personal level is another form of social-media
engagement. This kind of response can certainly be positive if it’s done
to provide customer service or to uncover sales leads. Most often,
though, responding is a part of crisis management.
Last year, for example, a hoax photograph posted online claimed that
McDonald’s was charging African-Americans an additional service
fee. The hoax first appeared on Twitter, where the image rapidly went
viral just before the weekend as was retweeted with the hashtag
#seriouslymcdonalds. It turned out to be a working weekend for the
McDonald’s social-media team. On Saturday, the company’s director
of social media released a statement through Twitter declaring the
photograph to be a hoax and asking key influencers to “please let your
followers know.” The company continued to reinforce that message
throughout the weekend, even responding personally to concerned
Tweeters. By Sunday, the number of people who believed the image
to be authentic had dwindled, and McDonald’s stock price rose 5 percent
the following day.

Responding in order to counter negative comments and reinforce
positive ones will only increase in importance. The responsibility for
taking action may fall on functions outside marketing, and the
message will differ depending on the situation. No response can be
quick enough, and the ability to act rapidly requires the constant,
proactive monitoring of social media—on weekends too. By responding
rapidly, transparently, and honestly, companies can positively
influence consumer sentiment and behavior.

3. Amplify

“Amplification” involves designing your marketing activities to have an
inherently social motivator that spurs broader engagement and sharing.
This approach means more than merely reaching the end of planning
a marketing campaign and then thinking that “we should do something
social”—say, uploading a television commercial to YouTube. It means
that the core concepts for campaigns must invite customers into an
experience that they can choose to extend by joining a conversation
with the brand, product, fellow users, and other enthusiasts. It means
having ongoing programs that share new content with customers and
provide opportunities for sharing back. It means offering experiences
that customers will feel great about sharing, because they gain a
badge of honor by publicizing content that piques the interest of others.
In the initial phases of the consumer decision journey, when consumers
sift through brands and products to determine their preferred options,
referrals and recommendations are powerful social-media tools. A
simple example is the way online deal sites such as Groupon and Gilt
Groupe provide consumers with credit for each first-time purchaser
they refer. Our research shows that such direct recommendations from
peers generate engagement rates some 30 times higher than traditional
online advertising does.


Once a consumer has decided which product to buy and makes a
purchase, companies can use social media to amplify their engagement
and foster loyalty. When Starbucks wanted to increase awareness of its
brand, for example, it launched a competition challenging users to
be the first to tweet a photograph of one of the new advertising posters
that the company had placed in six major US cities, providing winners
with a $20 gift card. This social-media brand advocacy effort
delivered a marketing punch that significantly outweighed its budget.
Starbucks said that the effort was “the difference between launching
with millions of dollars versus millions of fans.”

Marketers also can foster communities around their brands and
products, both to reinforce the belief of consumers that they made a
smart decision and to provide guidance for getting the most from
a purchase. Software company Intuit, for example, launched customer
service forums for its Quicken and QuickBooks personal-finance
software so users could help one another with product issues. The result?
Users rather than Intuit employees answer about 80 percent of
the questions, and the company has employed user comments to make
dozens of significant changes to its software.

4. Lead


Social media can be used most proactively to lead consumers toward
long-term behavioral changes. In the early stages of the consumer
decision journey, this may involve boosting brand awareness by driving
Web traffic to content about existing products and services. When
grooming-products group Old Spice introduced its Old Spice Man
character to viewers, during the US National Football League’s 2010
Super Bowl, for example, the company’s ambition was to increase its
reach and relevance to both men and women. The commercial became
a phenomenon: starring former player Isaiah Mustafa, it got more
than 19 million hits across all platforms, and year-on-year sales for the
company’s products jumped by 27 percent within six months.
Marketers also can use social media to generate buzz through product
launches, as Ford did in launching its Fiesta vehicle in the United
States. For example, social media played an integral role in the success
of “Small Business Saturday,” the US shopping promotion created
by American Express for the weekend immediately following Thanksgiving
(for American Express CMO John Hayes’s perspective on
that launch, see “How we see it: Three senior executives on the future
of marketing,” on mckinseyquarterly.com). In addition, when
consumers are ready to buy, companies can promote time-sensitive
targeted deals and offers through social media to generate traffic and
sales. Online menswear company Bonobos, for example, provided
an incentive for its Twitter followers by unlocking a discount code after
its messages were resent a certain number of times. As a result of

5 See Claire Cain Miller, “New Starbucks ads seek to recruit online fans,” nytimes.com,
May 18, 2009.

this effort, almost 100 consumers bought products from the site
for the first time. The campaign delivered a 1,200 percent return on
investment in just 24 hours.

Finally, social media can solicit consumer input after the purchase.
This ability to gain product-development insights from customers in a
relatively inexpensive way is emerging as one of social media’s most
significant advantages. Intuit, for example, has its community forums.
Starbucks uses MyStarbucksIdea.com to collect its customers’
views about improving the company’s products and services and then
aggregates submitted ideas and prominently displays them on a
dedicated Web site. That site groups ideas by product, experience, and
involvement; ranks user participation; and shows ideas actively under
consideration by the company and those that have been implemented.

Converting knowledge to action


Despite offering numerous opportunities to inf luence consumers,
social media still accounts for less than 1 percent of an average
marketing budget, in our experience. Many chief marketing officers
say that they want to increase that share to 5 percent. One problem
is that a lot of senior executives know little about social media. But the
main obstacle is the perception that the return on investment (ROI)
from such initiatives is uncertain.

Without a clear sense of the value social media creates, it’s perhaps
not surprising that so many CEOs and other senior executives don’t
feel comfortable when their companies go beyond mere “experiments”
with social-media strategy. Yet we can measure the impact of social
media well beyond straight volume and consumer-sentiment metrics;
in fact, we can precisely determine the buzz surrounding a product
or brand and then calculate how social media drives purchasing
behavior. To do so—and then ensure that social media complements
broader marketing strategies—companies must obviously coordinate
data, tools, technology, and talent across multiple functions. In
many cases, senior business leaders must open up their agendas and
recognize the importance of supporting and even undertaking
initiatives that may traditionally have been left to the chief marketing
officer. As our colleagues noted last year, “we’re all marketers now.”

6 See Tom French, Laura LaBerge, and Paul Magill, “We’re all marketers now,”
mckinseyquarterly.com, July 2011.

Consider the experience of a telecommunications company that proactively
adopted social media but had no idea if its efforts were
working. The company had launched Twitter-based customer service
capabilities, several promotional campaigns built around social
contests, a fan page with discounts and tech tips, and an active response
program to engage with people speaking about the brand. In socialmedia
terms, the investment was relatively large, and the company’s
senior executives wanted more than anecdotal evidence that the
strategy was paying off. As a starting point, to ensure that the company
was doing a quality job designing and executing its social presence,
it benchmarked its efforts against approaches used by other companies
known to be successful in social media. It then advanced the
following hypotheses:

• If all of these social-media activities improve general service perceptions
about the brand, that improvement should be reflected in a
higher volume of positive online posts.7
• If social sharing is effective, added clicks and traffic should result
in higher search placements.
• If both of these assumptions hold true, social-media activity should
help drive sales—ideally, at a rate even higher than the company
could achieve with its average gross rating point (GRP) of advertising
expenditures.

The company then tested its options. At various times, it spent less
money on conventional advertising, especially as social-media activity
ramped up, and it modeled the rising positive sentiment and higher
search positions just as it would using traditional metrics. The company
concluded that social-media activity not only boosted sales but also
had higher ROIs than traditional marketing did. Thus, while the company
took a risk by shifting emphasis toward social-media efforts before it
had data confirming that this was the correct course, the bet paid off.
What’s more, the analytic baseline now in place has given the company
confidence to continue exploring a growing role for social media.
In other cases, social media may have a more specific role, such as
helping to launch a new product or to mitigate negative word of mouth.
Similar types of analyses can focus on mixing the impact of buzz,
search, and traffic; correlating that with sales or renewals (or whatever

7 There’s no shortage of methods purporting to measure social media’s presence and impact.

The company in this example used BuzzMetrics, a suite of tools developed by NM Incite
(a joint venture between Nielsen and McKinsey).

8 Gross rating points measure the size of the audience a specific media vehicle reaches. To calculate them, multiply the percentage of the target audience an advertisement reaches by the number of times it airs.

the key metric may be); and then gauging the result against total
costs. This approach can give executives the confidence and focus they
need to invest more money, time, and resources in social media.

As these social-media activities gain scale, the challenges center less
around justifying funding and more around organizational issues
such as developing the right processes and governance structure, identifying
clear roles—for all involved in social-media strategy, from
marketing to customer service to product development—and bolstering
the talent base, and improving performance standards. New
capabilities abound, and social-media best practices are barely starting
to emerge. We do know this: because social-media influences every
element of the consumer decision journey, communication must take
place between as well as within functions. That complicates lines
of reporting and decision-making authority.

If insights from monitoring social media are relevant to nonmarketing
functions such as product development, for instance, how will you
identify and disseminate that information efficiently and effectively—
and then ensure that it gets used? If you spot an opportunity to have
a meaningful conversation with a key influencer, how will you quickly
engage the right senior executive to follow through? If you recognize
a fast-moving service concern, how will you respond rapidly and
openly—and when should you do so outside the traditional service
organization? Senior executives across the company must recognize
and begin to answer such questions.

Social media is extending the disruptive impact of the digital era
across a broad range of functions. Meanwhile, the perceived lack of
metrics, the fear, and the limited sense of what’s possible are
eroding. Executives can identify the functions, touch points, and goals
of social-media activities, as well as craft approaches to measure
their impact and manage their risks. The time is ripe for executivesuite
discussions on how to lead and to learn from people within your
company, marketers outside it, and, most of all, your customers.

The authors would like to acknowledge the contributions of Sirish
Chandrasekaran, Dianne Esber, Rebecca Millman, and Dan Singer to the
development of this article.
Roxane Divol is a principal in McKinsey’s San Francisco office,
David Edelman is a principal in the Boston office, and Hugo Sarrazin is
a director in the Silicon Valley office.


Source: www.mckinseyquarterly.com