How Social Networks Change Business Development and Profit shows how B2B business development can increase the quantity and quality of qualified leads by interacting in social networks and online forums.
Web 2.0 and social networks are beginning to change the economics of markets because they enable buyers and sellers to find each other far more easily, but most executives have yet to discover the secret. To many, social networks and blogs seem foreign, barely legitimate and risk. However, I will outline here how social networks can enable companies to significantly increase profitability by changing their client mix. Using LinkedIn as an example, I will show how a company can find and onboard clients that align with the firm’s unique selling proposition much more quickly and consistently than with traditional methods. In turn, this enables the firm to eliminate high-cost, low value clients from the portfolio.
Market Participant Trade-offs
Buyers and sellers compromise significantly due to the cost of identifying and negotiating with partners who could meet their specific needs. For example, whether you are the president of a division, an executive looking for her next challenge or a CEO, a large part of your role is looking for certain buyers who appreciate your offer more than similar offers from competitors. To the extent that you can do this, you can increase the value you deliver and the price you can command. Similarly, buyers assess their needs and seek companies or people who appear as though they can meet them as specifically as possible. The more closely the seller’s unique capabilities fit the buyer’s unique needs, the better the fit and the more potential value generated for both parties.
In graphical form, the situation looks like this bell curve right (click thumbnail for larger view or here for the original white board version). The horizontal (x) axis represents how well the seller’s offer fits the buyer’s needs. The vertical (y) axis shows the number of participants there are in the market. The bell curve shows that most firms have clients that fit their offers fairly well, with most clients being in the fat part of the curve. On the lower left, there are fewer clients for whom the fit is not good; on the far right are the clients where the fit is exceptionally good. Clients are represented by the violet crosses. The problem is, the better the fit, the fewer market participants in the market; hence, the tendency to compromise.
Compromise is expensive for sellers; it leads to relentless price pressure, relatively high churn and elevated business development costs
Changing the Numbers
LinkedIn (and other Web 2.0 venues) enable executives to find and approach people with very specific needs and LinkedIn can enable clients to find firms far more easily. In order for this to work, buyers and sellers must overcome several barriers:
- Sellers have the trade-off assumption built into their business development processes while buyers assume compromise as well. Without definitions and purposes to find partners that map to specific characteristics, they compromise more than necessary.
- Sellers too often do not have actionable definitions of what their optimal targets look like. Usually they define target prospects in terms of size, industry, geography or similar generalities. They may also not have actionable definition of their unique selling propositions (USP).
- Services firms face the same difficulty as product-oriented firms: they are too focused on themselves. Clients don’t care how they package their services or bundle products; they don’t usually think about their challenges in terms of providers’ service offerings.
- Prospects and clients think in terms of their challenges, and they do not often spend considerable time to define what the ideal provider might look like.
Using LinkedIn to Change the Numbers
By agreeing on the USP and creating an actionable definition of specific client types, the seller can use Quora and LinkedIn to locate and engage prospects at a far lower cost than was possible previously. This is how it works:
- Think in terms of prospects’ top of mind challenges that are relevant to your USP—in their terms, not yours. Use Quora (Q&A forum) and LinkedIn Groups to learn what prospects are thinking and what they are talking about. Look for specific phrases, and test these outside of LinkedIn as well (blogs increasingly reflect emerging ideas). Clarify with prospects by asking and answering questions in the Answers forums.
- When you formulate a hypothesis about a specific problem you think you can address, verify by crowdsourcing in Answers. By asking intelligent questions, you will attract prospects as well as potential employees and business partners.
- Business challenges are interesting and can inspire people, increasing engagement. When you discuss them and show yourself to be intelligent, considerate and committed, you increase the interest of the LinkedIn community of business leaders. You can ask them who they know that is experiencing these issues. Note that you are best served by increasing engagement first before asking.
- In the profiles of your officers, employees and business partners, describe what you do and what is important to you by using some of these expressions and keywords. This will enable prospects to find you.
- Returning to the white board, the strategy here is to use LinkedIn to develop client relationships represented by the red circles: high degree of fit but there are few of them in the market. This is why you use digital identifiers to find them—and forums like LinkedIn Answers to begin conversations. Remember, when you are interacting in a digital forum, your conversation is visible to other prospects as well, not only the person whom you are addressing directly.
- As you gain experience, codify your thoughts into, first, blog posts and, second, into white papers and market advisories that are pertinent to specific client and prospect situations. You can refer to these in your responses to questions in the Answers forums.
- As you develop digital artifacts that are focused on your USP, you will attract the “red circle” clients, and your ability to do this will increase as your firm and team gain skills and experience.
- Case study on the Weather Channel Interactive: they recently sourced a key acquisition because the company found their M&A executive on LinkedIn.
- One of the largest energy holding companies in the U.S. invited CSRA to participate in an RFI for their website redesign. They found CSRA on LinkedIn due to the extensive references to Web 2.0 and social networks as well as extensive activity in Answers forums.
- Case study on Ruder Finn in which Senior Vice President Steve Shimek relates that he developed $250,000 in billings through LinkedIn.
Learn the fundamentals of using LinkedIn, for business development or another application, on October 9 in Chicago open enrollment seminars worldwide
- Also see How Social Networks Make Markets More Efficient for Buyers and Sellers