Consumers are increasingly skeptical of traditional advertising, more likely to trust peers for product recommendations and completely networked – and as the digital natives move out of the dorms and into the business world, this trend is only going to get stronger. What is the impact of these networked consumers on the marketing landscape?
E-commerce grows up. Social is the new currency. Established companies adapt to a new reality, and new companies have surfaced in the wake of social media – entirely to capitalize on social network marketing.
This is the first article in a series exploring social network trends in online commerce and how some Seattle companies are navigating the landscape.
It is interesting to note that some of the most successful new technologies don’t actually invent anything new: peer-to-peer advertising is in fact the oldest variety around. It precedes any mass medium. New technologies, however, make peer-to-peer recommendations more efficient, faster and with a broader footprint than the cave-man version.
According to Kathy Savitt, CEO of Seattle based Lockerz, 73 percent of “Generation Z,”–those born after 1992–purchase products based on recommendations from friends. Lockerz is a member-based web community that rewards users for listening to music, watching videos, answering questions and sharing photos. They base their whole business model on peer-to-peer social networking and “word of mouth” marketing strategies.
“Our mission is to be the homepage for men and women age 13 to 30,” Savitt says, explaining that with Lockerz, users combine a social network and curation with commerce to recommend stuff they like.
According to Savitt, the Lockerz community has grown to more than 18 million members since it was launched in the beginning of 2010. With the acquisition of Plixi, the Twitter photo sharing service in January, Lockerz now has 31 million users.
The company’s business model is to reward people for being passionate, Savitt says. Members earn points or “PTZ,” as they are called on the site, for listening to music, watching videos, answering daily questions and recommending their favorite products to their friends. Friends can help friends earn points by clicking on their friends’ content–all in hope of having the favor returned and earning more points for themselves. There are also additional PTZ available for sharing content outside the Lockerz network by inviting friends from Facebook, publishing Lockerz activities to outside social networks or uploading pictures from the Lockerz profile to Twitter. The PTZ can be used for discounts on products from retailers in the Lockerz network, or as currency in Lockerz auctions where users can win prizes they bid on.
Savitt explains that part of Lockerz’ business model is to build consumer loyalty and create a value for the partners that participate in the merchant program.
Similar practices by junk food and cereal manufacturers have been frowned upon when marketed to kids. In an article in The New York Times (April 20, 2011) Matt Richtel details how kids perceive the online activities sponsored by the junk food and sugary cereal manufacturers as games. One concern about these sorts of campaigns is that, in reality young people are being used as pawns in marketing campaigns designed to hook’em young and develop brand loyalty.
“Critics argue that such tactics blur the line between marketing and entertainment, while the companies contend that they have clearly labeled their sites as advertising,” Ritchel says in a post on the NYT Bits blog April 21, 2011.
Along the same lines, Lockerz’ young members are marketing agents for brands in the Lockerz network– rewarded for advertising to their friends. It’s kinda like a huge Tupperware party online. There is nothing new under the sun, indeed.