With the introduction of social search by Bing and Google on May and August 2011 a structural and disruptive change took place online, which will have a direct impact on the profit strategies of most businesses. This article describes the logic and premises of the social media economy, how it alters customer behaviour, and finally the impact on businesses.

1. Social search causing creative
destruction
By Jens Gregersen: I am passionate about turning ideas into profitable consumer and experience orientated
businesses—being new market entries, or new products in existing markets.
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With the introduction of social search by Bing and Google on May and August 2011 a structural and disruptive
change took place online, which will have a direct impact on the profit strategies of most businesses. This article
describes the logic and premises of the social media economy, how it alters customer behaviour, and finally the
impact on businesses.
The fundamental premises of social media are, first, that its content is user generated, and second, that people
use these to socially interact with their friends, family, and increasingly with organisations. As more and more
interaction take place via social media these will increasingly define and shape the users reputation. Hence, in
the social economy users, or customers, will increasingly build and accumulate social capital through actions
and expression of opinions online.
Customer Behaviour Prior To the Social Economy
Until recently companies operated with a reality of 80% of dissatisfied customers telling about his or her experi‐
ence to 10 people (20% would tell 20 people), and that a happy customer would tell just three people. This has
all changed with the reach of social media. The bad news for companies is that in the social economy unhappy
customers will tell the world, not just 10 people! The good news is that a happy customer will also let the whole
world know.
Another thing that has changed with social media is that in an effort to accumulate social capital far more cus‐
tomers will find the time and energy to express their opinions – this is especially troublesome for non customer
centric companies as until the rise of the social economy 90% of dissatisfied customers did not complaint, they
simply stopped buying. Thus, the primary challenge facing businesses today is to make sure that customers get
an experience beyond their expectations through participation and connection (recommended article: Experi‐
ence Economy: Paris Hilton Retail Shop Case Study by Jens Gregersen).
Case Study: Dell Hell
Shortly after Jeff Jarvis had purchased a computer from Dell he contacted the company’s customer service
department as it suffered from malfunctioning hardware. After basically being ignored by Dell on several occa‐
sions he created a blog called Dell Hell to share his frustration. Within a couple of weeks hundreds of other
unhappy Dell customers added their stories to the blog – highlighting fundamental service problems at Dell.
Within weeks the company’s share price and reputation plummeted and the founder Michael Dell had to re‐
turn to the company after three years absence. The following year Dell announced a 150 million USD invest‐
ment into the company’s customer service department.
The Dell Hell case happened back in 2005 when Facebook only had a couple of millions users and Twitter did
not even exist. Today (August 2011) Facebook has more than 750 million users, and Twitter users are sending a
daily average of 140 million tweets – and these numbers are growing by the day! In other words, had the Dell
Hell incident happened today the effect and speed would have been manifold.
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2. Theoretical Insight: Social Capital
In 1986 Bourdieu articulated social capital to consist of two components; group member‐
ship and social networks, and symbolic character which only exist in the “eyes of the oth‐
ers” – in other words, symbolic character is a person’s reputation. Bourdieu explained fur‐
ther, “The level of a person’s social capital depends on the size of the network of connec‐
tions that can effectively be mobilized.”.
Disruptive Business Changes
Many of the biggest companies such as Carlsberg, Johnson & Johnson, and Coca Cola increasingly understand
and handle the new reality of customers in the social media economy, but unfortunately this is not an under‐
standing shared by the majority of companies who consider social media as yet a platform for traditional mar‐
keting, hence these are operating blindly and with increased risk to their profits. During just three months of
2011 (May to August) the power of social media was subject to a significant change, a change which undoubt‐
edly will cause disruption to the business world as we know it – a change which few business managers proba‐
bly understand the full scale of and are unprepared for.
In May 2011 Facebook and Bing (Microsoft’s search engine) announced a partnership involving Facebook’s
“Like” button, which makes it faster and easier for users of Bing’s search engine to see what their social network
connections like and are sharing. This initiative was quickly followed up by Google in August 2011 with the beta
test of Google+ and Google Social Search which now include blogs, recommendations, pictures etc. in Google’s
search results. You might ask why this will cause disruptive changes to the business world – well, consider the
following:
Research conducted by Microsoft’s Bing Team has revealed that “[…] 80% of people will delay making a decision
until they can get a friend’s stamp of approval.” The team also concluded that 90% of people listen to recom‐
mendations of friends and family, 90%! Add to this that customers do not limit their source of recommenda‐
tions to friends and family; for example, when looking to make a hotel reservation customers read and consider
recommendations and viewpoints from complete strangers in the decision process.
That 90% of people listen to recommendations of friends and family are conditions businesses have operated
under seemingly always but these change when adding Bing, Google and social media to the equation. People
measure their social status, they build and maintain relations, and they accumulate social capital via online so‐
cial media – and the internet is their main source of information. Hence, with Bing’s and Google’s inclusion of
recommendations and viewpoints of people’s connections at the very top of the search results the future of non
‐customer centric organisations looks exceptionally grim – and hand on heart, the majority of businesses are not
customer centric. Thus, in a world prominently dominated by social media, businesses are hold more liable, and
crisis management is considered a failure and a last resort happening primarily to businesses without a separate
social media strategy and customer focus.
Social Capital and the Premises of Social Media
In order for businesses to navigate confidently in the social media economy they must understand the power
and logic of social networking. The core concept of social media economy is social capital, which increasingly is
being used as a metric for a person’s (or company’s) level of influence, and is based on relationships, connec‐
tions and reputation. The term social capital was first articulated by Hanifan (1916) and later became wide‐
spread know through the works of sociologists like Bourdieu (1972) and Putnam (1995).
Little has changed over the years in terms of defining social capital, which remains a combination of a person’s
contact surface (his or hers number of connections) and reputation – but not exclusively as the Dell Hell case
revealed. The Dell Hell case did not reach the proportions it did because of Jeff Jarvis’s contact surface nor be‐
cause of him being famous; he simply published his thoughts, thoughts that ended up voicing a general and
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3. widespread problem. In other words, in terms of customer service companies should be careful not to evaluate and
adjust their response based on the conception of a customer’s level of social capital. The only time companies might
want to consider level of social capital is when choosing “ambassadors” – people who can create a positive buzz
(start conversations).
In the social economy people’s social capi‐ Case Study: 47 Characters Worth 1,5 million USD
tal is based on active participation in rele‐ In July 2009 Paris Hilton sent out the following tweet: “Time for a lil
vant online communities and publishing – nap before we land. So comfy. :)” along with a picture of her in‐flight
in other words, through actions and the bed. According to Adnan Dawood, an expert in celebrity endorsement,
expression of opinions. Thus during the the value for the Emirates Airline was 1,5 million USD!
coming years people will increasingly feel
the need to have their voice heard to accu‐ Two years later, August 2011, Paris Hilton has 22 times more followers
mulate social capital, and Bing and on Twitter, a total of 4,5 million people – just imagine the value and
Google’s search engines have already effect of her tweets today. Measured against the principles of social
started giving these voices a prominent capital Paris Hilton is without doubt a high worth persona and her opin‐
position among their search results. ions and actions have an immense impact on businesses.
More Simple In a Complicated Way
As described in the introduction to this article, before the emergence of the social economy the behaviour of dissat‐
isfied customers was more nuanced, for example 80% would tell 10 people; 90% would not complain, they would
simply stop buying, and satisfied customers would tell just three people each. In the social economy things are actu‐
ally far more simple, as just about all customers will share their experiences with their network (as of August 2011
Facebook users have an average of 130 friends) – and indirectly the rest of the world via major search engines like
Bing and Google! But the simplicity ends here as including social media in businesses profit strategies by no means is
easy, to succeed the majority of companies will have to make changes to their self understanding – their culture. In
the social economy only customer centric organisations will thrive, of the rest some will be tolerated but not ac‐
cepted by their customers.
About: Jens Gregersen
Monitor Social Media Activity
This article has demonstrated the consequences of the so‐ Connect via LinkedIn
cial economy in the interrelation between businesses and
their customers, and how this will be disrupted further in I am passionate about turning
the years to come. It is beyond the scope of this article to ideas into profitable consumer
cover in detail what is required for businesses to succeed in and experience orientated
the social economy besides from the mention of the likely businesses – being new market
need for structural and cultural changes across many or‐ entries, or new products in
ganisations, but one practical advice can be given. existing markets.
With for example 750 million Facebook users (August 2011) My track record includes e.g. the introduction of Paris
the reach and existence of social media is not news per se Hilton celebrity branded products into 2,500+ shops in
but even though few businesses have social media monitor‐ 40+ countries worldwide; and the conversion of a
ing tools in place like BuzzMetrics, Radian6 etc., they are business idea into the leading B2C e‐commerce in
blindly navigating the social media universe. Small and me‐ Denmark, Saxo.com – which consequently led to 33%
dium sized businesses with limited budgets should at the lower retail prices on books nationwide.
very least use Google’s Alert function to stay updated on
the social media scene during the work of creating a cus‐ In a world clustered with products and services of little
tomer centric and experience orientated organisation. Rec‐ difference I develop long‐term competitive advantages
ommended article: Experience Economy: Paris Hilton Retail based on consumer oriented strategies – an approach
Shop Case Study. which I have implemented in diverse cultural markets
across Europe, the Middle East and Asia.
I am an experienced sales and marketing entrepreneur
with comprehensive consumer orientated strategic
planning and implementation skills.
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