Social Proof – psychological phenomenon that enables up and coming social driven tech companies to thrive!

People follow people.

Wikipedia describes social proof as “a psychological phenomenon where people assume the actions of others reflect the correct behavior for a given situation… driven by the assumption that the surrounding people possess more information about the situation.”

In Short – People are hard wired to learn from the actions of others, and this can be a huge driver of consumer behavior.

Consider, social proof – a line of people standing behind a velvet rope, waiting to get into a club.  The line builds nostalgia and makes people walking by want to find out what’s worth the wait.  The digital equivalent of the velvet rope helped build viral growth for initially invite-only launches like Gmail, Gilt Groupe, Spotify, and Turntable.fm Even though this has worked in the past and is still being uses as a viral aspect (example Google +) most small companies do not have the resources to promote nor facilitate this type of offering. In the event you do wish to follow the path of some of the bigger tech companies, remember to get your timeline, burnrate and funding straight first so you can explode into the market with great success.

Five Types of Social Proof

If you’re a digital startup, building and highlighting your social proof is the best way for new users to learn about you.  And engineering your product to generate social proof, and to be shared through social networks like Facebook, Twitter, Google+, Tumblr, YouTube, Pinterest and others, can multiply the discovery of your product and its influence.  Think of it as building the foundation for massively scalable word-of-mouth.  Here’s a “teardown” on various forms of social proof, and how some savvy digital companies are starting to measure its impact.

1) Expert social proof – Approval from a credible expert, like a magazine or blogger, can have incredible digital influence.  Examples:

  • Visitors referred by a fashion magazine or blogger to designer fashion rentals online at Rent the Runway drive a 200% higher conversion rate than visitors driven by paid search.
  • Klout identifies people who are topical experts on the social web. Klout invited 217 influencers with high Klout scores in design, luxury, tech and autos to test-drive the new Audi A8.  These influencers sparked 3,500 tweets, reaching over 3.1 million people in less than 30 days – a multiplier effect of over 14,000x.
  • Mom-commerce daily offer site Plum District also reached mom influencers thru Klout, and found customers referred by influential digital moms shop at 2x the rate of customers from all other marketing channels.

2) Celebrity social proof – Up to 25% of U.S. TV commercials have used celebrities to great effect, but only a handful of web startups have to date.  Some results:

  • In 1997, Priceline.com was one of the first web startups to use a celebrity endorser – William Shatner – not a travel expert, but seemingly obsessed with saving consumers money.  It has been a huge win; Priceline now has a $23 billion market cap, and the fee Shatner took in shares is estimated to be worth $600 million.
  • Trendyol, the fastest-growing fashion ecommerce company in Turkey, regularly launches merchandise campaigns with the endorsement of celebrities. This practice increases site traffic by 2.5x and product sell-through by 30%.
  • ShoeDazzle launched with celebrity Kim Kardashian as chief stylist. Her involvement helped leapfrog the company to an estimated $25m in 2010 and $70 million in 2011 sales, plus a recent $40m financing.  Celebrity endorsement by Jessica Simpson and aesthetician Nerida Joy recently helped Beautymint attract 500,000 visitors in the first 24 hours of its launch.
  • The most authentic (and cost-effective) celebrity social proof is unpaid. For home décor site One Kings Lane, a 2010 unpaid mention in Gwyneth Paltrow’s influential blog GOOP provided a 90% lift in daily sign-ups vs. the previous 4 days’ average.  Celebrity use on Turntable.fm by Sir Mix-A-Lot and producer Diplo generated viral buzz, helping the company skyrocket to 140,000 active users in just 4 weeks.

3) User social proof  – Direct TV marketers are masters at sharing user success stories. (fascination with this was actually the inspiration for this blog post).  Companies mastering this digitally include:

  • More than 61 million people visit Yelp (working on an upcoming IPO) each month to read user reviews.  And reviews drive revenue; a recent HBS study showed that a 1-star increase in Yelp rating leads to 5-9% growth in sales.
  • User-generated videos (UGVs) are a growing and important social proof phenomenon.  Early visitors to Shoedazzle watched more than 9 UGVs on average, helping catapult sales; and user testimonials on YouTube drove a 3x conversion rate vs. organic visitors for Beachbody, the makers of P90x fitness.
  • Negative user social proof is also important to track. The first negative user review on eBay has been shown to reverse a seller’s weekly growth rate from 5% to -8%. It also hurts pricing; a 1% increase in negative feedback has been shown to lead to a 7.5% decrease in sale price realized.

4) Wisdom of the crowds social proof – Ray Kroc started using social proof in 1955 by hanging an “Over 1 Million Served” sign at the first McDonald’s.  Highlighting popularity or large numbers of users implies “a million people can’t be wrong.”  Some digital examples:

  • Fashion e-tailer Modcloth enables its community to “Be the Buyer” by voting on which styles they think Modcloth should sell in the future.  Shoppers take strong cues from the community; styles with the “Be the Buyer” badge sell at 2x the velocity of un-badged styles.
  • Callaway Digital Arts finds that when any of their kids’ iPad apps is listed as a top 10 most popular app in the iTunes App Store “Top Charts,” daily downloads vault 10x over the prior week – but being the No. 1 most popular app drives 30-50% more daily downloads than being No. 2.
  • Greentech company Opower uses social proof to help reduce electricity consumption. It works: Opower sees an 80% response rate to e-mails citing how a household’s use compares with the neighborhood, which has driven more than 500 million kilowatt hours of savings so far.

5) Wisdom of your friends social proof – Learning from friends thru the social web is likely the killer app of social proof in terms of 1:1 impact, and the potential to grow virally.  Some examples:

  • Friends inviting friends to play through Facebook and other social networks helped Zynga grow from 3 million to 41 million average daily users in just one year, from 2008 to 2009.
  • Moms, arguably the most valuable demographic on the social web, rely heavily on friends and family recommendations.  A recent Babycenter study showed moms rely on the wisdom of their friends 67% more than average shoppers; and they rely on social media 243% more than the general population.
  • Friends referred by friends make better customers.  They spend more (a 2x higher estimated lifetime value than customers from all other channels at One Kings Lane); convert better (75% higher conversion than renters from other marketing channels at Rent the Runway); and shop faster (they make their first purchase after joining twice as quickly than referrals from other channels at Trendyol)
  • They also make better contributors.  People who see content from their friends on TripAdvisor contribute personal content to the site at 2x the rate of others, and are 20% more engaged than other users.

Special Thanks to TC for these 5 reference points (see original article)

Companies like Kickstarter and Indiegogo enable start-ups to get their ideas and services out there for Social Proof of Concept.

If you know of any additional Funding Processes that may be valuable to readers, please post them for others.

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One Response to Social Proof – psychological phenomenon that enables up and coming social driven tech companies to thrive!

  1. smashupgames says:

    Great Post, really inspiring. If you love football then check out our newest #football app called SmashUp Games http://www.smashup.co and @SmashUp_ – Interactive mobile app during each game. Predict your team to Win, the Loosing team, the score, touchdowns, interceptions, fumbles.. etc. Trash Talk with other users during the game, Get Live Scores, game schedules, and team stats from week to week for AFC and NFC

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