When Lowe’s, the venerable home-improvement retailer, was looking to boost its top line and live its tagline of “Never Stop Improving,” it naturally looked to social media. After all, these days social media is supposed to be the Rosetta stone for business success.
And Lowe’s was right—to an extent. It did generate additional revenue—about $1 million worth of net new money—by leveraging the principles of social media. But not in the way you might think.
Most companies see social media as merely a marketing tool (and expense). But Lowe’s took a more enlightened approach by applying it inside the company to foster idea generation, sharing and vetting among employees. Lowe’s was able to take this different approach to social media—one that my firm calls “social profitability”—thanks to having launched an internal social-collaboration system. This social platform enabled a front-line employee with a unique demonstration idea for, of all things, Teflon paint trays to share it throughout the company, which resulted in generating the additional revenue.
In order for you to use the social-profitability approach to achieve the same kind of results, let’s first answer the question: what the heck is social profitability?
The difference between “social media” and “social profitability”
Most CEOs believe “social media” is a tool their marketing departments use to “engage” with customers and prospects through social platforms like Facebook, LinkedIn, Twitter and Pinterest in order to create awareness, loyalty and (hopefully) sales. As a result, most other departments in a company don’t have to worry about it because it’s marketing’s responsibility.
However, at LEVEL5 we believe that the term “social media” focuses too much on marketing and the channels used, and not enough on the goal all departments should have: profitable growth and ROI. Social media’s true business purpose is to drive revenue, EBITDA (earnings before interest taxes, depreciation and amortization), earnings per share and competitive advantage—not to tweet or post Facebook updates.
As a result, we’ve flipped the traditional idea of social media on its head. In its place, we’ve coined the term “social profitability” to describe the set of technologies, processes, capabilities, behaviours and culture that relate to a brand’s social networking but have value only insofar as they positively impact overall brand health and profitability. We use the term “social networking” instead of “social media” because it denotes a process that can be used to develop a company-wide brand-building capability; not just a medium or channel dominated by marketing. Reframing social media to social profitability broadens the scope of social networking beyond marketing to the external market; it focuses on the social processes throughout the company that can be used to drive profitable growth, not only via enhanced revenues but also through reduced costs.