How social media can create value

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‘Generate value’ may be considered as one of the old new adages for company growth. If you are capable of creating value, more people will be willing to buy your product and your revenue will grow. Although you may be thinking it is an empty speech, actually generating value is something achievable and a real driver for company success.

In order to let you understand the concept, how social media can play an important role in leveraging value, and be able to put it into practice I am going to:

  • Explain you the company’s value chain model
  • How social media can help you create value
  • Which tool you can start using to spot value creation opportunities

 

What is value? And for whom

If you do not provide value to your customers your company will disappear. This is true; those companies that are incapable of adding value for their customers or users are condemned to bankruptcy. Would you buy something that would not bring you any benefit?

When you are setting the price of your product or service think of the value your client obtains. Who is buying your brand? How much is he paying for it? The value for your client is in line with these questions. Value is a concept you have to consider from a customer’s point of view: how much would your customer be willing to pay you for getting your product? That is the value of your product! This is, your customer is the one who has the say about the value of your product.

I know what the problem is: your customer will not tell you which is the actual value he obtains from your product. The only approximation you have is that is he is buying it, then his value is at least the same as the market price. If you knew the client’s value you would be trying to increase the price to approach customer’s value.

Further, there is another variable to consider: your cost. Obviously, you will not set a price which is lower than the cost, or your value (profit) will be negative (a loss). For knowing more about this perspective I recommend you to read this other post, where I introduce Porter’s value chain model.

However, you have to focus on the customer’s value! Basically, it is where your success will reside: set a price above his perceived value and he will not buy; have an excessive cost and you will need to set a higher price risking exceeding your customer’s value and, again, you will sell nothing.

Hopefully, social media can be your ally for avoiding this situation. Although it is totally stupid to try arguing that social media is your medicine, it does make sense to use social media marketing as a tool to improve the gap between your internal cost, the selling price, and the perceived value.

 

Create value using social media

Before you start considering social media, as you would do with some other tools or new activities to drive growth, you need to analyse your business. You should find out where the problem is before knowing how to solve it.

One of the methodologies that has been used to analyse where value comes from in a company is Porter’s value chain model (which I told you about before). Then, when you start analysing a company using this tool you realise that the value proposition and the value generation comes from the whole of the organisation; every single member or function should be focused on either increase the perceived value or to reduce the cost, so then, increasing the value. With this in mind, social media can assist you in three ways:

  1. Market research.
  2. Branding.
  3. Internal communication.

 

Then, what?

Sure! You need a guidance. Along the years many different tools have been developed that embrace Porter’s ideas while making the model approachable and usable in practice. One of the best ones is the ‘Business Model Canvas‘, which allows to map the way a business model adds value for the customer as the backbone of the company strategy. Along it, you will need to explore the key partners, activities and resources of your business plan, your customer relationships, segments, and channels; of course, you will need to review your cost structure and revenue streams.

Guess what? The journey represented by exploring your business plan will help you determine where social media can either offer you extra benefits or cost reductions. In the meantime, will you need some help? (let me be your guide)

 

* A version of this post was published first on Socialancer.com, 23rd April 2012. Original in Spanish.

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