Social media create market transparency. That is, in a nutshell, effect of social networks on companies in any industry. Putting it in a nutshell, however, doesn’t equal trivialising it. Indeed, it is precisely this market transparency that destabilises many companies. Market transparency is an issue for all industries: No company is “safe† from ratings of its customers.
Taking a closer look at praise and criticism given, three sets of properties can be identified along which products and services are rated: hard (and quantifiable), soft (partly quantifiable) and human (not quantifiable) factors. Market transparency, in turn, is defined by these three categories.
The hard factor of transparency: Cost
The first dimension is made up by all “hard† properties along which products and services can be compared factually and objectively: price per unit or energy consumption per hour, for example, or other clearly definable quality criteria. The ratings can be ranked unambiguously; the worst and the best offers are identified quickly. Comparing hard facts is the original realm of comparison portals; they make it possible to query a sheer endless source of data information and to provide rankings based on the users specific needs.
To differentiate products solely along hard factors very often doesn’t make sense: only totally standardised generic products can be evaluated purely on their price. All other products show soft and human factors too, along which they can differentiate themselves from the competitors.
The soft dimension of transparency: Convenience
Soft factors often contribute greatly to the purchase decision. They can be placed under the heading “Convenience†. Services delivered (before and during the transaction), availability (in terms of time and place), after-sales-services and warranty terms are part of this dimension, and so are manufacturing quality, durability and meeting promises made prior to the purchase.
Soft components may well be compared and sometimes ranked. But frequently these factors interact differently for each product rendering a fair comparison difficult.
The human component of transparency: Confidence
Human factors cannot be ranked; still, they drive purchase decisions significantly. Values like hospitability of a hotel, friendliness, willingness to help, competence, interest for the client or transparency will be expressed based on emotions rather than anything else. But they are crucial in how confident we feel towards the supplier and whether we would recommend or choose him again.
Of course, soft and human components can be rated. But the number of stars next to a product rating is not as telling as the image or the text that goes with it, or even what’s written between the lines. It will also be relevant who penned the rating: when selecting a product, it is advisable to put more weight on ratings of customers with similar needs than those of others.
Soft and human factors create uniqueness
Critics of customer ratings complain that clients today are rating things they know little about. This may well be correct in the eyes of the supplier. In the eyes of the client the reverse is true: to the potential client, only someone judging from a client’s perspective will be relevant. And, from the client’s perspective, soft and human factors are often decisive.
This might once in a while be frustrating for the supplier: the more complex a product or service, the more decisive soft and human factors will end up being. They make a company or product distinguishable – they determine its reputation.
To billions of users, social networks serve as highly effective platforms for exchanging their experiences. Social media and the subsequent market transparency, in many instances, have shifted the market powers from the supplier to the buyer. Whoever wants to survive and thrive in a transparent market place is well advised to set theirselves apart (in a positive way). Soft and human factors are the key to it.
Christian Gartmann, gartmann.biz