You can generate significant commercial value by giving customers – and employees – ways to shape their online reputations.
In the consumer market, people provide data or other value in exchange for ways to distinguish themselves. It’s our individual desire for visibility and recognition that drives, for example, millions of people to post reviews on Amazon. (The top 10 reviewers alone have contributed more than 62,000 reviews, with an astounding half a million people voting them as helpful).
But this source of value isn’t limited to internet companies. Even financial services firms, regulated and reluctant when it comes to social media, can benefit from creating reputation systems.
“What’s a fitbit?”
The key is to think broadly about social equity – “the perceived value of an individual’s…reputation and following online” – and about ways to drive behavior.
The fitbit is one of my favorite consumer examples.
It’s a tiny social pedometer that allows me to constantly monitor how many steps I take. By tracking data over time, I can compete with myself. And by sharing my activity levels over the web, I can compete with my friends.
It’s simple. Yet, just because I’ve exposed my “fitness reputation,” I’ve increased my walking by over 40%. And, with more users contributing more data, fitbit’s value as a “fitness network” is increasing.
$600 million reasons why foursquare matters
foursquare uses a very different reputation system. It started off as a novelty, with people checking-in to places just to get points, badges, and mayorships.
Now, though, with check-ins from over 10 million users, foursquare can provide useful recommendations. And that user base has enticed companies of all sizes (including, notably, American Express) to provide specials to foursquare users.
All those individual quests for virtual recognition have made foursquare worth more than $600 million.
The success of fitbit, foursquare, and other social services demonstrates that on-line reputation can be a powerful force for driving behavior and, in the process, creating valuable corporate assets.
Next, some financial services examples show that even traditional businesses can augment what they do with reputation systems to create significant value.
Using customer reputations to increase commissions
You might think that traders would be the last people who’d share their ideas.
Yet E*TRADE, TD Ameritrade, Charles Schwab and others all have communities that let you “exchange trading and investing ideas with other customers” or “copy the trades of others who you follow.” (Covestor has even built their entire business on sharing. It’s “a world where great investors will let you automatically mirror their strategies, trade for trade.”)
For the individuals, being rewarded with “Top Performer” status or similar designations provides access to job opportunities in addition to bragging rights amongst people that matter to them.
For the firms, it’s an easy way to drive up volumes and commissions. In one trial, the “copy trade” button generated, on average, another additional trade for every trade that was posted. (Most trades are ignored but those of top performers are copied many times.)
That firm projected the associated bump in volume “could mean an extra $100 million in revenue.”
Using broker reputations to improve portfolio performance
At a sales or trading desk, hundreds of people may contact you every day with ideas. It can be overwhelming.
One hedge fund found a simple way to actually solicit more ideas and quickly identify the best contributors. They created a platform and a competition to let people shape their online reputation.
To do business with the fund, you have to submit your trading ideas (“Buy IBM”) to their on-line system (instead of via email or phone). The system tracks how well every idea performs and aggregates performance ratings by person and by firm. You can compare rankings between firms and between individuals within a firm. (Only the hedge fund can see every idea.)
The firms with the best-performing ideas are rewarded with significant commission revenue.
Individuals, by doing well in the contest, bring in revenue for their firms and a bigger bonus for themselves. And, as one participant said, “it really helps build my resume.” That’s social equity they can take with them wherever they go.
The hedge fund now has access to more ideas than ever – more than 1600 individuals trying to improve their rankings every day. And they can find the best people and the best ideas with just a few clicks.
How will social reputations help your company?
These examples are wildly different. Yet each involves a way for people to shape their reputation, motivating them to contribute something of value. A number of steps. A check-in. Trading transactions and ideas.
It remains an art to create the environment that makes people consistently want to contribute. (The trick is in figuring out which reputation systems apply to which kinds of people and behaviors. Next week’s post will help with this.)
But it’s an art that more and more companies are practicing.
So, now is the time for your firm to take a step. To give customers – and employees – ways to shape their online reputations, motivate contribution, and tap into whole new veins of revenue growth and productivity.