Let’s have some fun with my buns.  Cinnamon buns, that is.

One of the myths we recently discussed on {grow} was the claim that every business needs to use social media in its marketing strategy.

So what determines if the social web can be used effectively in any company?  One key is industry structure.

Marketers are actually quite limited in the number of options they have based on the competitive structure of their industry.  Social media is just one marketing channel, and its opportunity for use will be determined by the marketplace, not the hype you read on the Internet!

To illustrate this concept, let’s look at how four companies — with four very different competitive structures — may or may not use the social web to sell the very same product: cinnamon rolls.

Flat Rock Village Bakery, Flat Rock N.C.

The Flat Rock Village Bakery is a small, family-owned cafe that serves its customers wood-fired pizzas and artisan pastries. They have a single location in a tiny mountain town. Why would somebody buy a cinnamon roll from this bakery?

  • Convenience of central location amid relatively little competition
  • Ambiance of tree-lined community setting
  • Community involvement and reputation of the company
  • Consistent quality of artisan products
  • Appeal of non-chain, local ownership
  • Attentive Service

As a marketer, we want to increase sales by promoting these points of differentiation.  The social web can certainly enhance the reputation of the bakery but probably won’t significantly drive more traffic to this store — They essentially already have a captive audience. Their focus should be on increasing sales per customer at the actual point of purchase. What is their risk of NOT participating in the social web?  Low.

McKee Foods, Chattanooga, TN

Now compare that to a national bakery like McKee Foods whose Little Debbie brand is found in grocery and convenience stores throughout the country. Little Debbie will sell you a cinnamon roll based on

  • Low price, which is enabled by efficient operations and distribution
  • Large selection of products in a grocery store aisle
  • Coupons and promotions
  • Brand awareness
  • Consistent, but low-quality, product with a relatively long shelf life

Unlike the cozy competitive climate of the Flat Rock Bakery, competition in the grocery aisle is fierce and Little Debbie would ignore the social web to its peril.  The bakery giant can certainly use social media to:

  • Monitor customer conversations about its products
  • Build brand awareness cost-effectively
  • Coupons and promotions
  • Involve consumers in its brand
  • Create new products
  • Facilitate customer service
  • Monitor competitor activities

Can you begin to see how these dramatically different competitive structures influence marketing strategy?

Panera Bread, everywhere

Panera has built its successful business by establishing clean, bright stores that serve as community meeting places. You might drive to Panera to buy a cinnamon roll because:

  • It’s a spacious, convenient place to meet colleagues and friends
  • They have bakery-quality food at reasonable prices
  • Free Wi-Fi
  • A recognizable national brand with predictable quality

Panera faces a host of competitors offering similar value.  Compared to the first two examples, its business model is more easily duplicated, so finding ways to connect to customers is key.

There are lots of opportunities to do this through the social web, especially if it could master location-based apps like Foursquare that reward frequent visitors.

Cinnabon, a mall near you

Although Cinnabon also serves up cinnamon rolls — in fact that is basically ALL it sells — it represents a radically different competitive dynamic.

Cinnabon bases their competitive advantage on one thing — location — and the opportunity to sell you through an impulse buy. They are usually located in malls and airports so if you are hungering for a fresh-baked goodie, you really have no choice.

Their price point is set high, and they don’t need to use coupons or other promotions because they’ve got you right where they want you – captive.

They have a Facebook page and a Twitter account but is this where they should spend their primary marketing effort?  No.  As a marketer I would probably spend money on fans to blow the heavenly cinnamon smell out onto the airport concourse!

Putting this to use for your business

Obviously in the space of a short blog post I had to do a simplistic comparison to make a point. I realize the industry structures are more complex than what I present here.  Still, I think it’s a useful example illustrating the widely different dynamics in selling even a simple product like a pastry.

Where do you go with this as you make your decisions about social media?

  1. Begin with the fundamentals including market research, customer interviews and competitor analysis before jumping into any marketing initiative.  Spending money without knowing the competitive structure of your industry will create disastrous results.
  2. Use clear-eyed intellectual honesty when assessing the social media opportunities for your company. There is a natural tendency to want to climb onboard Facebook or YouTube because everyone else is … but take a hard look at what effort is going to be the most effective use of your resources.
  3. Look for channels that allow you to emphasize your competitive advantages and how they match customer needs.
  4. Measure every effort to constantly adjust your efforts to the changing marketplace.

What is the competitive structure of your business?  How many “stars” would you give your social media opportunity and why?

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