STUDY: Most Companies Are Utterly Unprepared For A Social Media Crisis

I read an interesting report by the Altimeter Group and find more than half of the 144 companies surveyed say they don't have a response plan if a real-time technology crisis strikes.

"Equally as shocking, the study -- which also researched 50 mainstream social media crises since 2001, and interviewed social media strategists at Intel, Coca-Cola, and Toyota, among other companies -- found that 76% of crises could have been averted, either with more preparation or a better response to the problem."

"The average corporate social business program is three years old, and there's a huge difference between companies that have crisis-response systems in place and those who don't. According to the study: Of companies with a formalized crisis response plan in place, 96% feel prepared for a social media crisis; of those without a plan, only 22% indicate preparedness."

Here are graphs demonstrating how careless some companies are in such cases:

So, how do companies avoid a social media crisis? Based on its interviews with advanced social businesses, Altimeter Group developed a “Social Business Hierarchy of Needs” (pictured below) to help businesses achieve social business readiness. Here’s a look at the pyramid and each set of requirements:

Each segment of the pyramid is accompanied by thorough, step-by-step instructions on how to achieve excellence in each section of the pyramid. Here’s a quick overview:

• Foundation: Define business objectives. Develop four sets of policies: social media, disclosure/ethics, community and privacy. Train and empower employees.
• Safety: Appoint a team that actively monitors social media channels during office hours and beyond. Develop a triage system. Practice with “fire drills” that simulate real-life crises.
• Formation: Take inventory of all social assets and reform your teams accordingly, focusing on increased communication. Form a social media “Center of Excellence” that serves the entire company.
• Enablement: Enable business units to deploy and run social media programs on their own. Set up an internal community where employees can learn from each other, and aggregate measurement data to prove successes.
• Enlightenment: In an ideal state, businesses are able to make decisions based on real-time intelligence and use social data to inform product development and partner relations. Furthermore, “enlightened” social businesses are able to achieve real-time customer engagement by empowering all employees to use social media on behalf of the company.

Amazing Cooperation by Coca-Cola and Facebook: Create your own drink!

In August, Coca-Cola  rolled out a Facebook app that lets people mix their own Coke drink. The app is not just online-only experiment, because Coca-Cola plan to manufacture real Coke vending machines that have such function across the country.

"The Coca-Cola Freestyle app, created by digital marketing agency 360i, lets you mix a drink using 125 Coke beverages, including Coca-Cola, Sprite, Fanta and Powerade. After choosing each, you hold down a “push” button to fill a cup of your choosing. When you fill your cup, you can name it. There’s also a game designed for the iPhone [iTunes link] and Android formats."

"The Facebook Page also directs you to Freestyle vending machines in your area and lets you ask for one in your town. There are now about 1,500 such machines in restaurants like Wendy’s, Burger King and Five Guys, but Coke plans to make more noise about Freestyle next year. The company is working with ad agency Ogilvy & Mather on a 2012 ad campaign for Freestyle, according to Advertising Age. Coke would like the apps to eventually generate a 2-D barcode, which could be scanned at one of the machines to create a blend, according to Ad Age."

I think it is a great start of business between Facebook and Coca-Cola. The unique service will be a good selling point to attract customers. Both facebook and Coca-Cola have millions of loyal followers, thus marketers needn't worry about whether this idea can draw the audience's attention.

The business can be expanded like packaging, logo and other designing services for customers own. New drinks can be put into the beverage list to increase sales. Further, Coca-Cola can organize competiton show to let Facebook users vote who creates the best new drink.

Do you guys like to mix your own drink? I would like to have a try.

Why facebook deal fails?

In order to expand its business, Facebook launched Facebook deal to compete with Groupon and Google offers. Many people think it will become a killer of Groupon and even affect online retailing industry. The reason is obvious: Facebook has a galaxy of users as potential customers; it has powerful local network to
provide service and technology support to achieve consumption convience.

However, Facebook turned out to be a big failure. It didn't affect the online retailing industry and even Groupon. Acutually, Groupon did not perform very well as its competitor. Data shows Groupon's first quarter of 2011 transformed from $81.6 million in operating income to a net loss of $117.1 million with nothing more than a simple change in accounting practices.

Then, why Facebook has millions of users, wide local network and good operation system, failed in the end? I think there are three reasons:

1.  Customer Acquisition Cost > Revenue Per Customer

For example, Facebook is spending $100 for every new customer, while the average revenue per customer is $80, or $20 less than the cost of acquisition. The more people they bring in, the more money they lose.

2.  Difficult to gain loyal Customers

The above stat might be defensible if most customers ended up making multiple purchases, but that's not what actually happens. The median Facebook Deal customer makes only one purchase, and they don't care about the brand, they only care about saving money on something they already wanted. In other words, it is difficult to maintan customer loyalty. Because customers can easily shift to other online retailing websites to seek bargains, while Facebook has to expand its scale to attract more customers by endless price wars.

3.  Lack of human resource

Facebook is not a retailing company, thus it has to call many local companies for business. Since there are many groupon websites, local companies always feel messed when different groupon websites call for the same product. There should be some people to keep good communication with the companies. Further, these companies need to be informed about landscape and bright future of groupon business by sales people. How many staffs is Facebook using for this business? I guess the number is far smaller that it really needs.

Hence, Facebook should concern its next step to develop its business. At least, Groupon is not as easy as they expect.