The Impact of Social Media on Marketing

Social media has democratized the tools of self expression, transforming the relationship that consumers have with brands, products and services.

Traditionally, marketers have used the metaphor of a funnel to think about the consumer buying process. Consumers would start at the top with multiple brands and would narrow their choice down to a final decision somewhat linearly. In addition, Companies traditionally used paid-media to “push” their messages at a few well-defined points along the funnel to build awareness, drive consideration, and ultimately inspire purchase. In this model,  marketing has largely been a one way communication process. 

As a result of social media, this metaphor (i.e. the notion of a funnel) is increasingly irrelevant. From being passive and depending on brands to communicate with them, empowered consumers have taken charge. Consumers now have instant access to a wealth of information and they are leveraging social media to make buying decisions often without even engaging with the brand itself. In addition, network effects create the potential for 1 disgruntled consumer to influence the purchase decisions of millions of other consumers.

Clearly most marketers are rapidly figuring out how to buy ads within social media. The more innovative marketers are developing their own content (“owned media”), building online communities of brand ambassadors and building social sharing tools into their web-sites. And this is just the start. Empowered consumers will continue to increase the influence they exert over a brand’s messaging and communication, and brands will respond by innovating on ways to co-opt consumers/consumer messaging.  The most innovative companies (e.g. Modcloth) will leverage social media to reinvent their product, co-opting consumers into the design process. I would go so far as to say that social media will catalyze the creation of entirely new brands. The Huffington Post is a great example of such a media brand; the question is whether social media will enable the creation of entirely new CPG, automotive and financial services brands ?

About Ashu

General Partner with Foundation Capital. Areas of interest range from digital media, mobile and internet infrastructure to all things related to India. Currently on the board of TreeHouse, Aspire, Conviva, Agni and TubeMogul.
This entry was posted in Internet, Marketing Technology, On-Line Advertising and tagged , , . Bookmark the permalink.

17 Responses to The Impact of Social Media on Marketing

  1. basab says:

    an example of a bank that is building itself in the image of today’s customers is Simple. Their twitter account is bold and honest @simplify. Their products are uncomplicated. I think social media and the expectations of a new generation of customers who have only used today’s consumer technology is going to most impact industries that rely on quasi-monopolies created by high fixed investment or regulatory walls. Banking, Mobile service providers, airlines are a few that come to mind.

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  4. David Zinger says:

    I completely agree with this article. The evolution of social media is priceless upon the residual effects on the marketing counterparts such as SEO. If you look at the logistics today with the effects SMM has on SEO, you will be shocked… Synergy!

    David Z.

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