2.0.0 Social Media Strategy: Potential for Business 1

The topic Social Media Potential for Business provides an initial overview of the potential of social media for businesses.

Reading time of the learning unit: approx. 7 minutes. The learning unit has no exercises. After that, you can move on to the next session.

The learning objective is to

  • Provide the social media performance potential for businesses as one of the foundations of social media strategy development.
  • Learn about the use of social media for business objectives.
  • Get an initial overview of social media usage formats.
  • Getting started in identifying and understanding competitive positions.
  • Identify and understand the business benefits from social media.

Exercises: The exercises for this lesson are in the PDF of all exercises. Download it from here.

The individual social media usage formats and their application will be presented to you more comprehensively in the respective topics. There you will also find the corresponding exercises.

Basics

Definition of social media potential

We use social media performance potential for companies to refer to the benefits that the company can generate for itself from its social media use / its social media strategy – in other words, a potential.

The corporate benefit from social media is the part of the social media performance potential for the company that should be used by the company as part of its social media strategy.

The social media performance potential for companies consists of the social media usage formats, in which we lay the structural foundations for our social media usage, and the social media impact elements, which at the same time form the basis for our strategy components.

Strategic importance and differentiation of potential and corporate benefits

The social media performance potential for companies describes the possible performance potential of social media. This does not take into account restrictions on the use of this potential arising from the company’s situation.

The corporate benefit builds on the performance potential of social media and the definition of the social media strategy and, as a strategy component, describes the benefits that the company can actually derive from social media (performance potential) or wants to derive (strategy component). The strategy component CompanyBenefit thus indicates which part of its potential from social media the company actually wants to use.

First, we develop an overview of the possible benefits for our company (the performance potential of social media for companies). In our strategy, we define the benefits we want to derive from this for our company (the company benefits).

Types and levels of potential of social media for companies

Below are some brief notes and examples of the performance potential of social media and an impact for and on business models. This topic is covered more comprehensively in separate topics. The aim here is only to provide a first impression of this and to create the necessary sensitivity for the importance of the topic.

We classify the performance potential of social media in its type according to

  • Support: here social media supports without changing potential (for the business model, components of it or activities for it).
  • Change: Social media supports the business model, but at the same time has a potential for change (for the business model, components of it, or activities for it).
  • Destruction: here, social media has the potential to destroy an existing process of a business model, a part of a business model, or a business model altogether.
  • Rationale / creation: here social media has the potential to create or enable a new business model.

The levels in which we test and apply the social media performance potential are

  • the business model as a whole
  • the individual modules of the business model

We check the social media performance potential in these levels by analyzing

  • whether and how thebusiness model as a whole can be changed, endangered, destroyed or supported by social media.
  • whether and how the individual modules of the business model can be changed, jeopardized or supported by social media.
Change and destruction of business models through social media

The transformation and destruction of existing business models through social media is taking place before our eyes, even if we currently see it more as an exceptional situation than as a permanent real threat.

In order for social media to have this effect on business models, it requires a corresponding social media performance potential and an offer in social media that triggers this effect. Without this offer, an existing potential for change or destruction has no effect. If we currently perceive little in the way of change potential and the destruction of business models through social media, this is not least due to a lack of social media offerings that can develop this effect.

Examples of the destruction of business models as a whole by social media

We may be familiar with Wikipedia from our daily use of the Internet. Wikis are children of social media. Your content is created by social media users.

The destructive effect of Wikipedia on the business model of encyclopedias is easy to understand. Users do not have to purchase expensive books or subscriptions to look up knowledge and can use Wikipedia instead. The Wikipedia platform is financed by donations and is largely based on the free collaboration of social media users. This economic basis (donations and free collaboration) is hard to beat with conventional business models.

The question for companies is whether the potential of this “Wikipedia effect” is also relevant for their business model as a whole or for modules of their business model.

Change and destruction of business model modules through social media

We know examples of the change of a business model through social media via the evaluation of services (as an independent business model through evaluation portals or as a function) from various industries such as tourism, gastronomy, etc., etc. These examples describe the impact of social media on the value proposition module of a business model.

The customer relationship module of a business model can be transformed by social media because more comprehensive and intensive customer relationships are possible with social media. One form of social media’s destruction of customer relationships lies in its skimming through social media offerings. If a supplier (from outside the industry) succeeds in positioning itself between the company and its customers, it disrupts or destroys existing customer relationships. Social media, because of its power potential and the relatively low cost of it, contains this potential for change and destruction. In practice, we can find starting points for such potential more easily than we may realize. For example, if a social media provider collects the interested parties of a sport under its umbrella, it has the basic potential to establish itself between providers and consumers. Even if this potential is not (yet) being fully exploited by the established social media giants, it is clearly there. As long as it is enough for these providers to market the potential via advertising, the entire potential for change or destruction of social media will have no effect.

Business goals for social media

Social media can support a colorful array of traditional business goals, which can be found the following categories:

  • Market
    • Market development and preparation
    • Market cultivation
    • Securing the market
  • Competition
    • Competitiveness
    • Competitive position
  • Business model
    • Support for the business model
    • Securing the business model
    • Expansion, update or adaptation of the existing business model
Company goals Market for our social media strategy

We take corporate goals from the market level once from our business model – via the customer segments we serve there.

At the same time, we analyze our markets for their social media affinity. From this analysis, other possible business goals for market development, cultivation, and protection through social media may emerge, e.g., if we want to identify and exploit additional opportunities for this area in the process.

Corporate goals Competition for our social media strategy

Corporate goals for the competitive situation / competitive design as a task for our social media strategy result from the general corporate goals – i.e. how the company wants to shape the competition.

The company’s options for shaping the competition with social media can result in further requirements for the social media strategy for shaping the competition if the analysis of the company’s social media options for action in the competition reveals corresponding indications of possible competitive advantages through social media. This can involve securing and improving the company’s competitiveness through social media, as well as actively shaping its competitive position through social media, e.g., by building sustainable competitive advantages.

Company goals from the business model for social media strategy

Business objectives from the business model relate, for example, to the customer segments served by social media, the value propositions supported by social media, the use of social media to build, secure, and maintain customer relationships, or the use of social media to support the channels of the business model. In addition, other corporate goals from the area of cost and revenue structures, the support of key partners and key activities are possible.