How to Use Facebook to Drive Higher Sales

As Facebook has grown to more than 600 million users, many companies have been struggling to figure out how to leverage it to help their businesses.

Most have limited themselves to advertising or establishing company pages on the platform only to discover that while these methods allow them to engage their Facebook fans in a dialogue and increase brand awareness, they do not necessarily lead to increased sales. Some companies have opened up storefronts on Facebook, but these efforts have also met with limited success.

So what should firms do? I recommend developing a two-part social strategy that is very different from what firms are doing now. First, the strategy needs to build closer relationships among the people on Facebook. Second, it should allow individuals to undertake tasks for free on the company’s behalf in the process of becoming closer with their friends.

If you want to see a good social strategy in action, look at eBay’s Group Gifts service, which employs Facebook platform technology.

To use Group Gifts, users log in with their Facebook credentials, which loads up the list of their Facebook friends. The user can then choose the friend for whom she wants to get a gift and then proceed to look for an appropriate item. The site can offer generic gifts, but a savvy user can ask the application to look at the gift recipient’s list of Likes on Facebook and recommend a set of items that match the recipient’s interests.

Once the gift is chosen, the user can decide how much to contribute herself and how much to leave for others to chip in. Then, she can automatically post a status update on Facebook that alerts others that they can contribute to that gift. (Facebook privacy controls can skillfully hide the status update from the recipient.) When these friends see the update, they can click on it to go to the Group Gifts site and add their contributions. Once the sum of all contributions equals the purchase price of the gift, the transaction is executed and the recipient receives the gift, a list of all the friends who contributed to it, and brief notes from them.

So what is so amazing about this simple business model?

It is truly social. It overcomes some real off-line difficulties related to group gift giving — like having to solicit people directly and risking embarrassment when you ask someone to contribute who does not want to do so. The online application simply puts it out there for people to contribute if they wish. Also, it seeks to strengthen relationships between friends. Just imagine getting a $700 iPad from 10 of your friends. Wouldn’t you feel grateful?

It also has real strategic benefits for eBay. The company can sell a greater volume of more expensive items. And since individuals are, in essence, advertising the service to their friends, it lowers eBay’s cost of acquiring customers.

In other words, this kind of social strategy produces a win-win for Facebook users and a company.

What other kinds of social strategies can you envision? Do you have a social strategy?

culled from Harvard Business Review.