Social Commerce: Foundations,

Social Marketing, and Advertising 8

Contents
Opening Case: Social Media Wants Your Marketing Dollars........................................................................................................................... 285
8.1 Social Commerce: Definitions and Evolution............................................................................................................................................ 287
8.2 The Content of the Social Commerce Field............................................................................................................................................... 288
8.3 The Benefits and Limitations of Social Commerce................................................................................................................................... 290
8.4 Social Shopping: Concepts, Benefits, and Models.................................................................................................................................... 294
8.5 Social Advertising: From Viral Advertising to Microblogging and Other Promotions......................................................................... 305
8.6 Social Customer Service and CRM............................................................................................................................................................ 310
Managerial Issues.................................................................................................................................................................................................. 317
Closing Case: How Sony Uses Social Media for Improving CRM................................................................................................................... 321
References.............................................................................................................................................................................................................. 322

Learning Objectives
Upon completion of this chapter, you will be able to:

1. Define social commerce and describe its roots and evolution.

2. Describe the scope, drivers, and content of the social commerce field.
3. Summarize the benefits and limitations of social commerce.
4. Describe the major models of social shopping.
5. Explain how advertising and promotions are conducted in social networking environments.
6. Describe how social networking can facilitate customer service, customer support, and CRM.

OPENING CASE
SOCIAL MEDIA WANTS YOUR MARKETING DOLLARS

A common concern for social networks is the lack of a coherent or well-defined business model. Many social networks
struggled to create or implement a business model during their infancy and growth stages (Facebook.com), while others are
still in the process (Twitter.com). Until any business is able to clearly articulate its revenue model, as well as prove that that
revenue model works, its future viability is unknown. One well-known social network that had this issue in its early history
is Facebook. Facebook has had a very complex growth and development over the last 10 years (see an infographic at ignite-
visibility.com/history-of-facebook-infographic or en.wikipedia.org/wiki/History_of_Facebook).

© Springer International Publishing AG 2018 285

E. Turban et al., Electronic Commerce 2018, Springer Texts in Business and Economics, DOI 10.1007/978-3-319-58715-8_8
286 8 Social Commerce: Foundations, Social Marketing, and Advertising

The Problem

Facebook now has developed viable revenue streams, many based around marketing, advertising, and sponsorship. Other
revenue streams include online games and services (see the infographic at business-management-degree.net/facebook).
These activities have been very successful, and Facebook recently reported earnings growth of over 52% on the year
(King 2016).
The growth of social media has provided a viable secondary option for businesses wishing to advertise to potential
customers. In the past, much of this online advertising was focused around search engine advertising techniques, specifi-
cally search engine marketing (SEM). The undisputed leader in this area is Google. The company earned over $75 bil-
lion in revenue in 2015, with most of that coming search revenues (Rosenberg 2016). The company is strongly committed
to this business model and continues to innovate with its AdWords product across all platforms, including mobile
devices.
This competition between the titans of social media and search has had mixed results for advertisers. While additional
competition has allowed businesses to target potential customers in different ways, understanding which platform to use, or
how much of each platform to use, has become a difficult question for many (Sullivan 2015). Each business has attempted to
define its place in the market, but these definitions do not always hold. Google maintains its lead in search, but the two com-
panies are now focusing on the ability to display targeted ads to users based on their preferences. Neither has established
supremacy in this area, and the definitions of success seem to be changing (see wordstream.com/facebook-vs-google).

The Solution

Business owners and marketing managers must now determine where their marketing dollars should be spent, based on where
they can most efficiently be used. A huge advantage that today’s marketer has over advertisers of the past is the mountain of
metrics and data available from both providers. Today, businesses are able to examine the profitability and effectiveness of
campaigns using any search provider or social network (Hague 2016). These metrics can show marketers which products,
targeting plans, and search terms have the greatest impact for the money spent. Impact can be measured in traffic or sales.

The Results

Using this available data, companies are able to identify an optimal marketing mix and can balance their media spend
between many different providers such as Google and Facebook. While this is all possible, it may not be as easy as it sounds.
Many businesses use specialized software products to manage this data (see hubspot.com) or outsource their operations to
marketing companies who are better able to do these analyses and balance their marketing mix (see distilled.net).
To learn more about advertising with Facebook, see blog.hootsuite.com/how-to-advertise-on-facebook and youtu.be/
XYY6zn3c8Xk. To learn more about advertising with Google, see fitsmallbusiness.com/advertise-on-google and youtu.
be/_KEzjdWATYQ.

LESSONS LEARNED FROM THE CASE

In this case we see that social networks are challenging other providers in the quest for businesses marketing dollars.
By defining a revenue model based around marketing, social media sites have been able to monetize their activities and
ensure that they will be solvent in the future. Businesses today are given more choices, but these choices lead to greater
complexity when decisions about marketing budgets are evaluated. Tools and solutions that exist help make these deci-
sions, but the decisions may not be simple.
8.1 Social Commerce: Definitions and Evolution 287

8.1 SOCIAL COMMERCE: DEFINITIONS AND EVOLUTION

Social commerce (SC), also known as social business, refers to e-commerce transactions delivered via social media.

Definitions

As it is a new field that involves several academic and professional disciplines, there is no agreed-upon definition or descrip-
tion of the content and boundaries of the social commerce field. Regardless of its definition, the field is growing rapidly both
in the United States and elsewhere. For statics and trends for 2017 and beyond, see Smith (2016). For the impact of the
technology, see DeLuca (2015). The magnitude of the field can be seen in Quirk (2016).
For additional discussion, see bazaarvoice.com/research-and-insight/social-commerce-statistics and yotpo.com/blog/
the-4-most-powerful-social-commerce-trends.

The Evolution of Social Commerce

Social commerce emerged from the integration of several fields, which are shown in Fig. 8.1. For example, Marsden and
Chaney (2012) show how social media contributes to sales, making it a social commerce application.
A major origin of social commerce (SC) was the development of Web 2.0 technologies, as previously mentioned. With
these came commercial applications, which included activities in social networks and the use of social software such as blogs
and wikis. A major driver of SC is the globalization of business. This prompted the need for collaboration of employees,
partners, and customers, sometimes worldwide. Web 2.0 applications created an efficient and effective platforms for such
collaboration. Web 2.0 is a major contributor to social media, which is the major driver of social commerce. For details, see
Turban et al. (2016).
The development and rapid growth of mobile computing and smartphones have also facilitated social commerce. Mobile
commerce is the basis for SC models such as location-based applications, social networks, and consumer/company
networking.
A major emphasis of SC is its marketing orientation. Traditional marketing activities were applied to Internet marketing
in the mid-1990s, when companies began building websites and using e-mail to advertise their products for sale offline.
As the Web developed, marketers applied the Internet to facilitate e-commerce transactions. Until that point, marketers

Fig. 8.1 The major roots of

social commerce
288 8 Social Commerce: Foundations, Social Marketing, and Advertising

Table 8.1 The major differences between e-commerce and social commerce
Property E-commerce Social commerce
Major objective Transactions Social interactions
Major activity Publishing Engagement
Content Company generated User generated
Problem solving Company experts, consultants Crowdsourcing
Collaboration Traditional, unified communications Web 2.0 tools
Product information Product descriptions on websites Peer product reviews
Marketplaces E-tailers (e.g., Amazon.com) and direct from Social networks (f-commerce), collaborative markets
manufacturers’ stores (Dell)
Targeting Mass marketing, segmentation Behavioral targeting, microsegmentation
CRM Seller/manufacturer support Social support by peers and by vendors and employees
Online marketing strategy Website selling Multichannel, direct at social network sites
Integration System integration Mashups and system integration
Data management Reports and analytics Analytics

c­ ontrolled brand messages and continued their advertising and other communication monologues to customers and potential
buyers (prospects). With the emergence of social media, marketing communication changed to a dialog with Internet users,
and many marketing strategies evolved or completely transformed to support social commerce.
For comprehensive coverage of social media marketing, see Williams (2016) and Van Looy (2016). For a complete guide
to social commerce (free), see pixlee.com/download/the-complete-guide-to-social-commerce. The major differences
between social commerce and e-commerce are illustrated in Table 8.1.
For a chronicle presentation and an infographic of historical milestones in the development of social commerce, see
socialtimes.com/social-commerce-infographic-2_b84120.

SECTION 8.1 REVIEW QUESTIONS

1. Define social commerce and list its major characteristics.

2. Trace the evolution of social commerce.
3. Describe the major differences between e-commerce and social commerce.

8.2 THE CONTENT OF THE SOCIAL COMMERCE FIELD

The content of the SC field is very diversified. For example, Johnson (2015) focuses on the landscape from a company-
centric approach, detailing the five main players of social commerce (Twitter, Pinterest, Facebook, Instagram, and YouTube).
Alternately, viewing the ecosystem from a function standpoint, Hossain (2016) describes the progressive development of
species of the field:

• Peer-to-peer sales
• Social network-driven sales
• Group buying
• Peer recommendations
• User-curated shopping
• Participatory commerce

The Landscape and Major Components of the Field

The landscape of social commerce is multidisciplinary (Turban et al. 2016). Most of the activities center around e-marketing
conducted with social media, particularly marketing communication, techniques of advertising, sales promotions, and public
relations, usually expressed as social media marketing activities. However, several other areas are emerging in the field,
8.2 The Content of the Social Commerce Field 289

Fig. 8.2 The major dimensions of social commerce

especially activities within organizations that are referred to as social enterprise or Enterprise 2.0. Liang and Turban (2011–
2012) illustrate the social commerce landscape in Fig. 8.2 and an infographic describe only some of the areas here. Discussions
of the other activities of the figure are provided throughout the book.
For a detailed discussion, see Marsden’s slide presentation “Social Commerce Opportunities for Brands” at digitalinno-
vationtoday.com/new-presentation-social-commerce-opportunities-for-brands. For statistics about social commerce
and its use, see “Social Commerce Statistics” at bazaarvoice.com/research-and-insight/social-commerce-statistics. For a
specialized textbook, see Turban et al. (2016). The two major elements in social commerce, social media marketing and
Enterprise 2.0, are described next.

Social Media Marketing

Social media marketing (SMM) is the application of marketing communication and other marketing tools using social
media. Social media marketing facilitates social commerce, builds brands, repairs brand reputation damage in social media,
and fosters long-term customer relationships, among other things. For a free toolkit, see act-on.com/resources/
social-media-marketing-toolkit.
For the industries that benefit most from social media, see Carranza (2015). For predictions of 50 experts on the develop-
ment of social media and social media marketing for 2016, see Gil (2015). For an infographic, see Wood (2014).

Enterprise 2.0

The second major type of social commerce is Enterprise 2.0, also known as social media-based enterprise, which is used by
an increasing number of companies to conduct several social media and social commerce activities inside the enterprises
(e.g., idea generation, problem solving, joint design, and recruiting).
290 8 Social Commerce: Foundations, Social Marketing, and Advertising

There are several definitions of Enterprise 2.0. The initial definition connected the term to Web 2.0 and to collabora-
tion. A refined definition is “What is Enterprise 2.0? The easy answer is that Enterprise 2.0 is bringing Web 2.0 into the
office, but that is not entirely accurate. In part, Enterprise 2.0 is a push toward integrating the social and collaborative
tools of Web 2.0 into the office environment, but Enterprise 2.0 also represents a fundamental change in how businesses
operate” Nation (2016).
Note: For more definitions and concepts of Enterprise 2.0 technology, see the slide presentation “What is Enterprise 2.0?”
at slideshare.net/norwiz/what-is-enterprise-20. The following are the major characteristics of Enterprise 2.0: ease of infor-
mation flow, agility, flexibility, user-driven content, bottom-up communication, global teams, fuzzy boundaries, transpar-
ency, folksonomies (rather than taxonomies), open standards, and on-demand (rather than scheduled) activities. Also
important are flat organizations (rather than hierarchical) and short time-to-market cycles.
For a comprehensive article on the social enterprise, see worldlibrary.org/Articles/Social enterprise?&Words=social
enterprise.
For more on Enterprise 2.0, see Forrester (2016).

Examples of Social Enterprise Applications

Some examples of social enterprise applications include the following:

• Dell, Sony, IBM, and many other companies solicit ideas from large groups of employees, customers, and business
partners on how to improve their business operations (e.g., Dell’s IdeaStorm site).
• More than 50% of medium and large corporations use LinkedIn and Facebook to announce available positions and
to find potential employees.
• Best Buy provided state-of-the-art customer service via a Twitter-based system where thousands of employees used
to answer customers’ questions, sometimes within minutes.

The Future

While social commerce today can be described based on the component parts of social media marketing and Enterprise 2.0,
the future is less clear. Social media and its attached commerce activities are evolving rapidly and have the ability to expand,
diversify, or redefine the field. By evaluating current trends in the market, it is possible to see that other areas may also
become a part of social commerce through the convergence of other related technologies. Some of these technologies are
software-based and can include artificial intelligence and virtual reality; other technologies are hardware-based and may
focus around logistics (such as drone-based same-day delivery) and advanced mobile devices (Smith 2016).

SECTION 8.2 REVIEW QUESTIONS

1. Describe the major components of social commerce.

2. What is social media marketing?
3. Describe Enterprise 2.0.

8.3 THE BENEFITS AND LIMITATIONS OF SOCIAL COMMERCE

According to many practitioners and researchers, social commerce is making significant impacts on organizations and indus-
tries. A major impact has been seen in the fashion industry.
Several surveys (e.g., SUMO 2016, get a copy of the report at info.sumoheavy.com/2016) have confirmed that social
commerce results in significant monetary and strategic benefits to businesses. The report found that:

• 72% use social media on a daily basis.

• 47% use it multiple times per day.
• Only 11% say they don’t use it at all.
8.3 The Benefits and Limitations of Social Commerce 291

• 42% are influenced by what they see on Facebook.

• 56% are influenced by posts from family members’ and friends’ about a brand and its product.
• 62% have shared information about products and offers on social media.
• 83% would share information about a product on Facebook if they loved their purchase.

SC benefits fall, in general, into three categories: benefits to customers, benefits to retailers, and benefits to other types of
enterprises. Some are described in the following section.

Benefits to Customers

The success of social commerce depends on its benefits to customers. The major benefits appear in the following list:

• It is easy to get recommendations from friends and other customers (e.g., via Twitter, in social network discussion
groups, and on product review sites).
• Recommendations result in more confidence and trust helping customers decide about purchasing products and
services.
• Added convenience in online shopping.
• Customers are exposed to special deals (e.g., via Groupon) for large savings.
• Purchases are better matched with specific needs, wants, tastes, and wishes of customers; this increases satisfaction
and reduces product choice decision time.
• It is easy for customers to use the SC technology.
• Social commerce fits the mobile device lifestyle well.
• Authentic interactions with vendors
• Increased trust in vendors is developed (via closer relationships).
• Social commerce allows customers to help other customers (social support).
• Customers can get better customer service from vendors.
• Customers can meet new friends (e.g., for travel) and socialize online.
• Customers can get rich social context and relevancy during their purchase decisions.
• Customers can connect with individuals and businesses who otherwise are inaccessible to them.
• (See businessnewsdaily.com/8430-social-commerce-trends.html and academia.edu/1364232/The_benefits_of_
social_commerce_for_suppliers_and_customers.)

Benefits to Retailers

Retailers are major benefactors of social commerce. For example, about 50% of businesses globally find new customers via
social networks. In addition, about 30% of companies invest in social networking in order to acquire and retain customers.
Retailers may benefit from social commerce in the following ways:

• Consumers can provide feedback on market communication strategy and on product (service) design.
• Improved customer loyalty.
• Vendors get free word-of-mouth marketing.
• Increased website traffic which increases revenue and sales.
• Better search engine rankings.
• Increased sales as collaborative filtering and other social influence methods are used.
• Better data and metrics on customer preferences.
• (See blog.pixlee.com/5-business-benefits-of-social-commerce and trendwatching.com/trends/TWINSUMER.htm.)

For more on benefits to retailers, see the video titled “Social Media a Powerful Tool for Online Retailers” (4:08 min) at
youtube.com/watch?v=1ByDmQICXs4.
292 8 Social Commerce: Foundations, Social Marketing, and Advertising

Example
GoPro Inc., producer of rugged adventure cameras, uses social media intensively to help reach its target audience of young,
active users. The company uses a combination of social media networks and focuses on sites that allow customers to share
their pictures and video (like Instagram and YouTube). The company credits its social media marketing as a big factor in its
early adoption by customers and revenue growth (even though that growth began to stall in 2016). The company believes that
continuing to use social media to target its customer base will help it roll out new products in 2017 (Oaks 2016). For more
see youtu.be/oCUjAmW5yCA and gorilla360.com.au/blog/gopro-user-generated-content-marketing.

Benefits to Other Types of Enterprises

In addition to increased sales and revenue, enterprises can benefit from social commerce in several ways:

• Conduct faster and less costly recruitment with a larger reach to large number of candidates.
• Reduce costs via innovative methods such as using the collective intelligence of employees and business partners.
• Foster better external relationships, for example, with partners and channel distribution members.
• Increase collaboration and improve communication within the enterprise and with business partners (e.g., by using
blogs, microblogs, and wikis).
• Foster better internal relationships (e.g., by increasing employee productivity and satisfaction).
• Provide free advice to small enterprises by other enterprises and experts (e.g., via LinkedIn groups).
• Understand that it is usually not expensive to install and operate SC systems.
• Locate experts quickly, both internally and externally, whenever needed (e.g., see guru.com).
• Conduct market research quickly and inexpensively and get feedback from customers, employees, and business
partners.
• Better understand customer needs.
• Increase market share and margins.
• Build brands through conversations and social media promotions.
• Microsegment for reaching very small markets with brand offerings at a low cost.
• Manage company and brand reputations online.
• Build brand communities for positive word of mouth online.
• Enhance customer service and support.
• Generate more authentic customer feedback.
• Increase traffic and sales at the company website and at physical retailers.
• Facilitate market research by monitoring conversations online.
• Increase company and brand rankings on search engine results pages.

The potential benefits in the previous list may increase productivity and value and could provide a strategic advantage,
and they encourage companies to at least experiment with social commerce.

The Social Business: An IBM Approach

The previously noted benefits to enterprises make it desirable for enterprises to transform to what IBM calls a social busi-
ness. A social business is “a business that embraces networks of people to create business value.” Many consider this term
equivalent to social commerce and use the two interchangeably. However, IBM is more concerned with the structure and
operations of enterprises.
IBM strategically integrates social media into various business processes (e.g., procurement) and is developing an orga-
nizational culture to support the integration process for delivering rapid and impressive outcomes. For details see ibm.com/
social-business/us/en and the slideshow at slideshare.net/AndersQuitzauIbm/social-business-innovation-in-
ibm-cbs-2016.
Section 8.3 Review Questions 293

IBM takes social media seriously and developed a system for their Watson supercomputer to analyze social media con-
tent. The company describes the innovation as “IBM Watson Analytics for Social Media guides you through the traffic of
social networks and automatically creates data visualizations for exceptionally insightful discoveries, all on the cloud.
Identify a topic and quickly get relevant content that shows you interesting relationships and patterns. You can easily take the
pulse of your audience, gain greater visibility into a topic or market and compare results with other data sources for new
insights derived from different views of information.” This application was first used internally and is now available for other
businesses to leverage. For details see ibm.com/us-en/marketplace/social-media-data-analysis.

New or Improved Business Models

Social commerce provides innovative e-commerce business models. Some are new, while others are improvements of regular
EC models (e.g., group buying). A large number of SC models are in the area of social shopping as described in section
“Social Shopping: Concepts, Benefits, and Models”. Several other new models are in the area of enterprise commerce. Here
are some brief examples:

• Shopping business models include widgets on social media sites to “buy now.”
• Marketing and shopping systems tied to the location of a mobile device (l-commerce).
• Online software agents that put buyers and sellers together, such as when TripAdvisor refers users to online travel
sites to purchase hotel rooms.
• Content sponsorship—selling advertising on a site that supports content development (YouTube).
• Crowdsourcing models that allow companies to design their products or logos by involving their customers.
• Sales promotions conducted in social networks that drive traffic to the company’s site, such as contests, discounts,
and downloading free music and software.
• Recruiting in social networks, as exemplified by LinkedIn.
• Collaboration models that are facilitated by blogs, wikis, and crowdsourcing.

Many start-ups have invented these and other business models. For example, Webkinz (webkinz.com) created a huge
business around virtual pet world for kids. IZEA Inc. (izea.com), a pioneer of social sponsorship, created a marketplace for
connecting advertisers with social media creators of content (e.g., bloggers). Kate Spade, a New York fashion designer, cre-
ated shoppable videos in the #missadventures series (youtube.com/user/katespadenewyork).
For the opportunities for business created by social commerce, see Drell (2014). For new models in the fashion industry,
see Hope (2016) and businessfashion.com.

Concerns and Limitations of Conducting Social Commerce

Although social commerce presents many opportunities for organizations, its implementation may involve some potential
risks and possibly complex issues such as integration of new and existing information systems. Representative risk factors
are difficulties in justification of SC initiatives to upper management, security and privacy issues, possibilities of fraud, legal
concerns, quality of UGC, and time wasting by employees during work hours. Companies also risk loss of control over their
brand images and reputations in social media conversations and product review sites, which can affect product sales (Pownall
2015). The major barriers to adoption of Enterprise 2.0 are resistance to change, difficulty in measuring ROI, and difficulties
of integration with existing IT systems and security.

SECTION 8.3 REVIEW QUESTIONS

1. List the major benefits to customers.

2. List the major benefits to retailers.
3. List the major benefits to other companies than retailers.