• by Nick Smith , December 7, 2010

To capitalize on social media, companies must change their mind-sets and revise some long-held beliefs about building and managing customer relationships. Social media have fundamentally changed the traditional "four Ps of marketing," namely Promotion, Product, Place, and Price.

When the four Ps were created, customers primarily gathered information about their purchases through direct contact with sales channel providers (such as retailers) and information provided directly by the manufacturer (like product labels or advertising). It made sense for marketers to manipulate promotion, product, place, and price to find the right combinations that would entice customers to buy.

Although these four Ps still apply, social media require the addition of a fifth P: People. Adding the "people" element recognizes the new collaborative nature of the customer-company relationship made possible by social media. Prior to social media, people were on the receiving end of a company's actions while, today, they have joined the conversation and play a more active role.

Within this context, we can view the fifth P, people, as having five key elements -- the "five Rs," namely, Reputation, Responsibility, Relationship, Reward, and Rigor. These five Rs are guideposts for how companies can re-engage their audiences in today's collaborative world:

Reputation: In today's highly transparent world, an organization must excel at using social media to demonstrate that it delivers on the promises of its brand. It must engage in a dialogue with critics and unhappy customers to correct inaccuracies and address concerns in a very public way, or risk its reputation being damaged deeply and quickly.

Responsibility: This is a twofold issue. On one hand is the concern about privacy and the steps a company must take to be responsible with customers' information -- especially given the public nature of social media and the myriad opportunities for exposure of details that are not meant for widespread consumption. On the other hand is the extent to which a company is socially responsible. Today, more than ever, consumers are evaluating their providers with the social responsibility yardstick and those that don't measure up in their eyes risk being taken to task and exposed for all the world to see.

Relationship: When engaging customers via social media, companies must recognize the balanced nature of a true conversation, as opposed to the one-way characteristic of a broadcast. Historically, marketing used to be about conveying a functional benefit at the right price point. This functional approach has evolved into an emotional one, where the message has transcended merely "solving a problem" to making people feel better about themselves. The collaborative and conversational nature of social media creates an exciting opportunity for companies and brands to take that emotional connection to an entirely new level.

Reward: This relates to the value organizations can both add to, and derive from, their conversations with individuals via social media. Until recently, companies typically relied heavily on transactional data -- especially purchase history -- to paint pictures of their customers that could help them match their offerings with customers' needs more effectively. With social media, companies have access to a whole new world of external data they can use to augment the data in their customer databases -- and, thus, create even more highly personalized (and therefore more rewarding) products and services for customers. Doing so will, in turn, result in more value for the organization as it benefits from greater advocacy and share of wallet among its customers.

Rigor: This involves the consistency and reliability of a company's operations and how those operations deliver the right customer experience via social media. Inconsistency is instantly visible to consumers and can demonstrate anything from incompetence to insincerity. But unlike traditional channels in which companies can use a "test and learn" approach to experiment with a select, small group of customers, each and every social media engagement must be personal to the individual -- a segment of one -- but is then instantly experienced and scrutinized by potentially millions of people around the world. Thus, an organization must balance carefully thinking through its actions with being able to hold a conversation in real time.

As with the classic four Ps, when organizations embed the five Rs in their operations, they must ensure that they strike the right balance among them. Too much or too little of any one of the dimensions will very quickly and very publicly expose the organization's lack of authenticity and, ultimately, undermine not just the social media opportunity, but also the brand.