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Social Proof Is The New Marketing

As I’ve written about before, we’re in an amazing period of the consumer Internet.  Despite a shaky economy, many web companies are in hypergrowth.  This is reminiscent of the five-year period over a decade ago when companies like Amazon, Netscape, eBay, Yahoo, Google and PayPal were built.
One challenge, which isn’t new, is the battle for consumer attention.  If you’re looking to grow your user base, is there a best way to cost-effectively attract valuable users?  I’m increasingly convinced the best way is by harnessing a concept called social proof, a relatively untapped gold mine in the age of the social web.
What is social proof?  Put simply, it’s the positive influence created when someone finds out that others are doing something.  It’s also known as informational social influence.
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 other words, people are wired to learn from the actions of others, and this can be a huge driver of consumer behavior.
Consider the social proof of a line of people standing behind a velvet rope, waiting to get into a club.  The line makes most 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.
Professor Robert Cialdini, a thought leader in social psychology, has many examples. In one study, his team tested messages to influence reusing towels in hotel rooms.  The social proof message – “Almost 75% of other guests help by using their towels more than once” had 25% better results than all other messages.  And adding the words “of other guests that stayed in this room” had even more impact (also an example of how A/B testing of small details matters). 
In another study, a restaurant increased sales of specific dishes by 13-20% just by highlighting them as “our most popular items”.  SP also works on your subconscious – it’s the reason why comedy shows often use a laugh track or audience; people actually laugh more when they can hear other people laughing.
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.

Building Your Social Proof
Will one form of social proof work best for your company? Maybe, but companies like LegalZoom have found that a “mixed salad” of various types of social proof is most effective.  The beauty of the web is you can test, learn and iterate quickly to find what works best.
To note, I don’t think a social proof strategy will be effective if you don’t start with a great product that delights customers, and that people like well enough to recommend.  How do you know if you have a great product?  Track organic traffic growth, reviews, ratings and repeat rates.  And measure your viral coefficient – if your site includes the ability to share, what percentage of your daily visitors and users share with others? How is the good word about your product being shared outside your site on the social web?  Do you know your Net Promoter Score, and your Klout score?
In the age of the social web, social proof is the new marketing.  If you have a great product waiting to be discovered, figure out how to build social proof around it by putting it in front of the right early influencers.  And, engineer your product to share the love.  Social proof is the best way for new users to learn why your product is great, and to remind existing users why they made a smart choice.
P.S.  FOMO, or the psychological phenomenon known as “Fear Of Missing Out,” is also a form of social proof.  As people are wired to learn from others, they are also wired to want things in short supply.  FOMO is a great forcing function on decision-making, as evidenced by the incredible growth of ecommerce flash sales. A friend at another venture firm has posted on his office wall “Is it FOMO, or is it real?” because it also happens in venture financings.  Maybe a topic for a future post.