Pulling in nearly $11 million dollars last Thursday, Groupon’s Gap deal was by far one of the most popular and most publicized online ‘deals’ that the consumer market has seen in quite some time. In what looked like a frenzy at times with 534 Gap offers being sold a minute during the early stretch of it’s release on the daily deal site, the Groupon Gap campaign brought in $11 million dollars and and sold 445,000 vouchers for Gap all in one day. Groupon’s Gap deal was it’s first nationwide deal and is sure to set the wheels in motion for others.

It Wasn’t Just The Deal

While the deal itself was a bargain ($50.00 worth of Gap merchandise for $25.00), what made this offer explode and go viral was through the help of social media and technology. Through a combination of Digg’s, social networks Twitter & Facebook, along with an email announcement, Groupon was able to utilize their existing networks to expand the reach of the offer.

Groupon’s ability to show the magnitude of exposure that they were able to garner for their deal is a signal of things to come for marketing as well as potential ‘deal’ sites and applications as it brings an important focus on expanding the reach of your message through social media.

The Social Media Funnel

While companies have been looking for ways to utilize social media as a direct business model, eCommerce sites and store front businesses have been slowly moving toward using social media as a direct funnel to their main sites similar to what Groupon did with their promotions. While their are instances where eCommerce stores merge with their social assets  (see Delta Airlines social commerce), social media will continue to be a hot topic as far as utilizing the numbers as  way to drive interest into other business assets like their eCommerce site or mobile commerce platform.

Personalized product recommendations can be done on any eCommerce website. As Darren Vengroff of Mashable points out, just about anyone can figure out how build an application that utilizes Facebook Social Graph to collect data for usage. He also points out, however, that not everyone knows how to leverage that data correctly - there is just too much information to be had.

The Problem for Personalization Tools

Say a merchant decides to build a personalization tool for his eCommerce website. In Vengroff’s article, there is an example of a teenage boy whose public Facebook profile shows that he “likes” the Porsche 911. It is pretty likely, considering the boy’s age, that recommending a Porsche to the boy on the front page will not lead to him buying it. This piece of data is useless in this sense. But, as Vengroff continues, the boy might potentially buy a tshirt with the image of a Porsche on it. How, then, does the merchant’s tool know when to correctly use the data that has been collected? Vengroff demonstrates the complexity of the situation with his paradoxical headers “If You “Like” It, You Might Want to Buy It” followed by “Liking Doesn’t Always Lead to Buying”; in other words, if customers “like” it, they probably want it, but, they won’t necessarily always buy it.

Traditional recommendation engines are based off of data such as previously bought items and items additionally bought by others (think Amazon). The new personalization tool is different because it gathers data from a dynamic structure whose primary aim is not for people to shop, but to connect with others within it. Merchants must realize that no matter how it may be utilized, Facebook is still a social network where people gather to interact. Information that is listed may or may not mean anything: sometimes “liked” items are purely aspirational, as Vengroff notes, or they may even be for reasons that are meant to be purely comical.

While for some pages, “Likes” indicate purchase propensity, there are many other pages for which “Likes” tend not to indicate purchase propensity.

What This Means

Context and relevance are vital to proper utilization of social commerce. Vengroff recommends that merchants continue to offer “a multiplicity of recommendations” in order to counteract possible challenges, but keep in mind that recommendations still have to be narrowed down in order for them to be useful. Tools and applications that attempt to personalize recommendations must then consistently be updated in order for the system to be able to grow and effectively weed out irrelevant information.

General vs. Social Recommendations – Getting More Personal

Ratings and reviews are consistently top-requested features by customers of ecommerce stores. In the last few years, huge companies such as Amazon have more than answered that call with sophisticated recommendation technology, and their answer has revolutionized the online shopping experience. Now consumers are able to not only see what others think of your products, but also see where else they can get the same product for lower prices. Being that online shoppers will believe customer recommendations over a company’s own brand and marketing message, this is a problem for many internet retailers. And this is where the new generation of social commerce – personalization tools – comes in to play.

A study conducted in October of last year by Brand Reputation showed that 84% of consumers were more likely to check online for reviews prior to making a purchase compared to 2008.

In the eyes of an ecommerce store owner, this could seem like a huge problem, especially if you rely on the power of your brand to sell products. Online communities influence customers on social trends and what to or not to buy. But as all obstacles, this problem is really an opportunity in disguise, for there is good news ahead.

While it is true that 70% of consumers online trust recommendations from unknown users, 90% trust opinions from people they know (Nielsen Research), and according to a Harris Interactive study conducted last month, 71% of online shoppers claim that family members or friends exert a “great deal” or “fair amount” of influence in deciding to use or not use a company, brand, or product.

So how do you utilize this influence?

Social Personalization Tools

With the implementation of the Facebook social graph, your customers will come on to your site and see suggestions specifically made for them tailored by data gathered through the people they are most likely to listen to – their friends and themselves. This shifts the focus in online shopping from what the community generally likes to what the customer personally likes. Rather than revolving shopping around what recommendation engines say are ‘hot’, personalization is about the individual. Customers get recommendations based on their own interests and actions on the web rather than reviews from others, and now can see - right on your site - what appeals to them appertaining to their own connections. Shopping has become an experience based on a customer’s social network.

How This Works

Think of your ecommerce store as it is now, but with one addition to the page: a “Facebook connect” button. If customers choose to click that button, they are now ‘signed in’ to your website through Facebook. This allows you to utilize the Facebook Social Graph, which means you have instant access to information on their public profiles. These data, including a user’s name, age, location, gender, and interests, along with their answers to some customization questions (all part of a tool built into your site), are put together to create a personal experience for the shopper unique to them alone. Basically, you are allowing a customer to tailor your website to their interests - what they see is what they want. This way, you are showing them exactly what appeals to them, and putting on display the items that they are most likely to buy. Think of the tool as a recommendation engine meets social media experience, because different customers now interact with your website in different ways. We call the idea behind this tool social driven personalization, and with social commerce becoming more and more focused on tailoring to the individual, this idea is going to be very hot very soon.

A recent study by the Harvard Business Review shows that customers value self-service, whether online or at a kiosk, just as much as they value personal customer service.  The most important factor of the study is that “By and large, this indifference holds regardless of their age, demographic, issue type, or urgency.”

What this means for the brick-and-mortar

If you’re at a supermarket, this means that shoppers have no preference between the self-checkout kiosk or the traditional checkout line.

If you’re at a restaurant, people may choose to simply order from a screen at their table instead of having to order from a waiter and pay tip.  Or imagine ordering from your iPhone app and the waiter knowing which table to bring the food to because of Bluetooth wireless.  At the end of your meal, you can simply pay the bill via your phone as well.

If you’re at an apparel store, shoppers may choose to be sent recommendations straight from their mobile app instead of interacting with a customers sales rep.  If they don’t find what they’re looking for on the floor, they can check the store inventory from their phone to see if it’s in the back stock room or if another nearby store has the item they’re looking for.  They could even just order it from their phone and get it shipped to their house.

All of these situations bypass the personal customer service and utilize new mobile technologies to offer a scalable, consistent customer service.

What this means for the online retailer

Every online publication seems to be telling us that we need to engage our shoppers and create an open, transparent brand.  We’ve seen the benefits of this from the Old Spice Youtube+Twitter campaign.  However, if Harvard’s research holds true, then we may be seeing a different trend in the online retail space.

Companies such as Olark are providing any website with the power to actively engage a reader or shopper online. They are giving the power of the customer representative to the online store.

But if we abide by Harvard’s findings, online shoppers may not care about this personal touch; instead, they may just want an easier, simpler way to browse a store by themselves and find what they’re looking for.

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If you have the capital, then by all means invest in social shopping experiences such as Olark and Shop Together.  But don’t forget that more traditional types of applications like reviews and ratings are just as effective in increasing average order value and conversion rates.

(Note: the deployment of our equipment will happen next Monday November 24th, 2010. Please don’t download the App and use it before then!)

It’s been a while since we updated on our own progress, so we wanted to share some of the exciting things we’ve been doing, particularly a new project that is getting some decent traction.

Starting RewardMe

About 2 months ago, our team started to experiment with a side project called RewardMe, specifically a mobile app that uses gaming mechanics to get customers addicted to brick-and-mortar businesses. We wanted to take the success factors of FarmVille and apply it on the offline world. So we started working Rewardme in September. We finished the iPhone version of our app in a month, as well as our hardware design we give businesses.

Setting Milestones

Based on the Customer Development process, we decided that if we could convince 10 local businesses to launch with us and adjust their operations before we had anything tangible to show them, that would be enough validation for a viable business. Most of the ideas we had in the past took for ages for us to get a handful of business buy-ins since businesses don’t want to waste their time on unproven products. So with a goal of 10 in mind, we started to talk to businesses.

Huge Success

Surprisingly to us, after 1.5 months of customer development (part-time), we signed up 40 businesses to launch with us and 50+ moving forward in the pipeline. The places that signed up with us include Wahoo’s Fish Taco, Denny’s, Coco’s, Post Bagels, Chef Chu’s, and Coupa Cafe next to Stanford. We also have Togo’s, Johnny Rocket, Noah’s Bagels, and Extreme Pizza in the pipeline. That quadrupled our goal! That’s when we realized we potentially have a big hit in our hands that could change the industry.

Raising Money

We wanted to expand aggressively so we took this to the Band of Angels to raise a $600K round. We’ve already made it to their due diligence process (3 out of 100 startups) and we thought it’s a good time to reach out to other investors to see if anyone is interested in this potential big hit.

If you own a brick and mortar store, or are an angel investor who would like to participate and add value to this exciting startup, let us know!

Japanese clothes retailer Uniqlo understands that online shopping is no longer just about buying items. The new online customer is a social shopper motivated by emotion who looks for retailers that create positive experiences. Uniqlo’s new social commerce strategy captures the essence of this by making shopping fun with 2 basic tools:

1. the Lucky Counter, a reverse-auction counter which slashes prices down every time someone tweets about a brand product, and

2. the Lucky Machine, a pinball machine game that allows customers to win discounts or cash prizes.

Unfortunately for consumers, these features are so far only available on the U.K. website, but for retailers, the focus is on the innovation behind the tools themselves, specifically the Lucky Counter, as well as the strategic timing behind their individual releases.

A little bit of background: Uniqlo has 13 stores in the UK, all located in the south-east. Zara and H&M, both big U.K. retailers with 65 and 173 stores respectively, are also switching their retail strategies by changing their U.K. websites to include online shopping. Zara launched their site a week before Uniqlo did, and H&M’s unveiling will be on September 16th. The point is, 3 big clothing retailers decided to do similar things all around the same time, and the one that was least likely to get coverage or attention was the obvious underdog, Uniqlo. But so far, the brand is doing pretty well, because it knows how to play the social commerce game correctly.

How Uniqlo Wowed Us

First, with the Lucky Counter, Uniqlo invited customers to engage with the brand while waiting for the website to launch. Rather than putting up a standard “under construction” page, it set up a sort of reverse-auction that worked like this: certain products were posted up on the page with prices marked underneath them, each product linking to a “tweet” page where consumers could tweet about the product and watch as his/her tweet instantly caused the price of the item to drop. This worked great for inbound marketing by giving Uniqlo free and honest, ‘real people’ Twitter marketing, and it brought in new consumers who were interested to see that they could directly impact prices of items they wanted. The buzz boosted Uniqlo’s brand name, so although it does not have much visibility physically store-wise, more people heard about the website through this campaign.

Second, when the Lucky Counter ended, there was immediately another fun tool to take over. The Lucky Counter was only available from September 3rd to September 9th in order for the relaunched website to be able to showcase the newly discounted items. Since the launch, the website has been allowing customers to play the Lucky Machine, a pinball-like game which awards cash prizes and discounts. This tool is linked with both Twitter and Facebook, so if customers invite friends to join in, they get more pinballs to play with. The Lucky Machine is available through October 1st, again for U.K. consumers only, but it is likely that other social commerce campaigns will be popping up soon with Uniqlo.

What You Should Take From This

As the “What You Should Take From This” section from the Starbucks Social Commerce Case Study states, use social media to create dynamic experiences for your shoppers. Uniqlo did one thing different: it strayed from the usual “under construction” page and replaced it with something interactive. An entire new world of possibilities opened up.

That brings up another lesson to be learned here: be interactive with customers. Allow them to have opportunities to express their thoughts. Perhaps we can’t all afford to let customers directly influence the prices of our items, but shoppers like to be able to see immediate results . So create opportunities for them to do so. And worlds of possibilities may open up for you.

Sources:

Advertising Age, Cision Blog, Social Commerce Today, Uniqlo

With the success of deal sites like group-buying service GroupOn, brick-and-mortar retailers may find it useful to tie their deals and loyalty programs more closely to the web and mobile devices.

Recently, Discover, Barclays, Verizon, AT&T, and T-Mobile announced that they would be working together to find a way to eventually eliminate debit and credit cards in favor of paying with smartphones. In the meanwhile, Verizon has put $400,000 into a mobile application called CardStar.

CardStar, a Boston based smartphone startup, is an application that allows users to combine their loyalty cards and membership rewards from various retailers all into one place - on their phone. Although Verizon’s investment is not particularly remarkable, it signals an interest in mobile commerce from wireless carriers. CardStar is not an application built specifically for mobile commerce; rather, it is an application that enhances “regular shopping” (physically shopping in a store). However, it emphasizes just how significant smartphones have become - people are growing to rely more and more on their cellular devices for their everyday needs. And as phones are used to do things such as aggregate deals and shop online, retailers need, as quoted above (from Reuters), to begin focusing more on the potential of optimizing themselves for mobile commerce.

Sources:

Reuters, GoingCellular, Mobiledia, CardStar

Payvment, the application that allows people to sell products on their Facebook pages, recently unleashed a new API in their launch of new tools for retailers and online product catalogs. Yesterday, the application demonstrated its ability by releasing its first export tool, which allows Payvment users to import Etsy inventories right onto Facebook for easy selling.

The Etsy import tool launch marks the beginning of a possible trend of small eCommerce businesses importing and exporting goods to and from Facebook. Retailers that do not have their own websites can create mini-stores by utilizing this Facebook application.

Payvment’s Utility to Small Retailers

For shoppers, the Payvment-Facebook experience is a typical virtual shopping cart which uses the general ‘view item, add to cart, enter payment info, check out’ process that most online stores use, which is good for smooth transitioning from traditional online shopping to Facebook shopping. While this easy switch doesn’t affect customers much, the application does make it more simple for individual and small to mid-size retailers to sell products easily. Sellers can create an eCommerce store right on Facebook, and easily enjoy the direct impact and usage of Facebook data by seeing (and being able to reward) customers who “Like” their brand. Specifically, retailers are able to offer Fan discounts, which can build brand loyalty and increase sales. Other options include allowing customers to “Share” and link back to the Facebook store page.

How Bigger Retailers Compare

While this new technology is great for smaller eCommerce businesses, Payvment is still only a Facebook application with limited options for store developers. For bigger retailers, it is wiser to have your own website, on which you can also incorporate the Facebook Social Graph to create better and personalized shopping experiences for customers.

And just in case you were wondering, Etsy is a shopping community focused around buying and selling handmade and vintage products.

Sources:

Business Wire

Mashable

Image source: Payvment

As one of the largest airlines in the world, Delta Air Lines have pushed their reach even further by introducing the first ever social commerce channel by an airline on Facebook. Partnering with Alvenda, Delta Air allows Facebook fans the ability to book flights as well as share their travel plans with family and friends on what Delta has called “Delta’s Ticket Window.” With nearly 40,000 Facebook fans as well as a presence on Twitter (@DeltaAssist), Delta continues to push along the growing trend of social commerce.

In addition to having the ability to book travel and share itineraries, Delta’s Ticket window will also be found in Delta’s current online banner ads which will encourage others to book their travel with ease on Facebooks. Additionally, future plans for Delta’s Ticket Window will include having the ability to coordinate travel plans with friends as well as groups.

Being the first airline to merge eCommerce and the social space, Bob Kupbens, Delta vice president of eCommerce, stated:

“We already know Facebook is the most used website by inflight WiFi users on more than 2,000 Delta flights every day, giving us the natural launching point for a new online Ticket Window.”

While Delta is the first airline, it won’t be long before other major airlines like Southwest will join in.

Sources

Fox Business News

Market Watch

When you have a lot of competitors, you need to build brand loyalty to ensure that your customers stay with you. With social commerce making the relationship between stores and customers more personal, it is time for retailers to take advantage of their existing resources.

Paul Marsden over at Social Commerce Today pointed out a brilliant move made by Starbucks that we just have to share with you. Recently, the international coffee chain partnered up with Gilt Groupe, a members-only retailer for luxury bounty hunters, to offer to Starbucks loyalty card holders early access to their limited-edition luxury coffee. Basically, MyStarbucksRewards holders received a VIP access email to a private sale of  a luxury coffee item (San Cristóbal coffee from the Gálapagos islands). This private sale was a day before Gilt members themselves got access, and weeks before the general public received the good. There are two main reasons why we think this was a great idea:

What Starbucks did right (Why Starbucks is amazing)

Reason number 1: it targeted people who already regularly buy their brand and rewarded them for being existing customers. It maintained its reputation as a ‘luxury’ coffeehouse by finding and offering ‘Special Reserve’ coffee, and boosted customer loyalty by offering the products first only to people who already love Starbucks.

Reason number 2: it utilized an existing social commerce platform to its own advantage with possible little or no extra cost to themselves. Not only that, but it utilized an existing platform that is known for being a luxury brand retailer, so in doing this, it also boosted their own ‘luxurious’ image.

What You Can Take From This

Build customer loyalty with deals and promotions for those who already shop with you. According to Forbes, the “additional conversion-boosting element” in online shopping is “fun,” which is built off of techniques such as “limited time or limited quantity offers, brand or product discovery, and product “story-telling.”" When you give customers incentive to return to your store, you build trust and loyalty, which in turn could create good in-bound marketing for you.

Use existing social media platforms to engage your customers. Personalize your store’s shopping experience and utilize social networks to offer deals. Customers like interaction, and are more likely to relate to your store if they see that they can log into your site using Facebook or another platform that they recognize (ecommercetimes).