Building Customer Loyalty — Facebook Strategy

In a day, millions of people spend several hours on Facebook. Many of them check their Social Networking website as soon as they wake up every morning. (Studies also show that millions of people check their Facebook multiple times a day.) They use the product on their own, again and again, without any coercive calls from the site. Facebooking has become a habit.

How did Facebook build such loyalty among its customers?

The research shows that several factors have contributed to the brand’s success. But one element stands out — Enticing users to invest their time and content.

It was one high impact factor for the site’s success.

Image Source:: Alamy Stock Photo

TIME AND EFFORT INVESTMENT

Nir Eyal writes that the more time and effort a user invests in a product or service or activity, the more he/she values it.

• Irrational Valuing of One’s Work — In 2011, Dan Ariely and Michael Norton conducted a study to prove it. A group of students were given the task of assembling an origami crane and asked them to specify a price to purchase their creation. The research team asked another group of students (They were unaware of who made the origami) to bid on the origami. The results showed that those who made their creation valued their work five times higher than the second group’s valuation.
• In another experiment, researchers gave a prize to a group of students on completion of a task where they had to exert effort. Then, the study team gave the same product free to another group that was named the Non-Effort group. The experimenters then invited the two groups to specify a price at which they would be willing to sell. As expected, the students who put effort developed a sense of attachment to the product and was not interested in giving it away. Some of them priced higher than the price quoted by the second group.

It is also widely called the IKEA effect. IKEA exploits the hidden benefit of making the customers invest their physical effort and time in assembling the products that they buy. As customers build the product, they began to love their furniture and value it more than its objective value. Thus IKEA builds its brand loyalty.

The above studies show that the way to build a loyal customer base is to provide opportunities/reasons for a user to spend more time with your product/service.

Small investments change our perception, turning unfamiliar actions into everyday habits — Nir Eyal.

FACEBOOK AND EFFORT INVESTMENT — Facebook has motivated users to invest effort by adding their content on the website through updating profile information, uploading photos, posting status messages, adding friends, and commenting on friend’s contents.

As more friends join a person’s network, the more valuable Facebook becomes for him/her.

Do you think a person having hundreds of friends on Facebook would be willing to leave the site and join a new social networking site? He would have to start from scratch. Nobody would be willing to waste all their previous effort.

1.0 FACEBOOK and TIME INVESTMENT

Initially, on Facebook, users didn’t have much to do other than looking at other’s profiles, read status messages, maintain their account, add friends, and poke people. Except for the status messages, no frequent changes were happening on the site. It wasn’t engaging enough. The users also had invested only a little content on their own.

Users didn’t have enough reasons to log in frequently or spend more time on the site.

Zuckerberg and his team changed that. They introduced a series of features that not only encouraged people to spend more time but also made them addictive.

Let’s see some of those critical features.

1.1 PHOTOS AND TAGS — Time Investment

The first feature that helped Facebook to race ahead of the other social networking sites was the introduction of photo albums.

How did Zuckerberg arrive at the solution?

Observing Customers — After launching the site in 2004, Zuckerberg and his team continuously monitored users’ behavior for valuable insights/patterns. They steadily learned the customer’s evolving needs. Zuckerberg used that knowledge in tweaking the Facebook design to meet those requirements. One of those observations led to the introduction of photo albums.

Research Insights — During the research, Zuckerberg and his team observed that though the users were allowed to have only one profile photo, they were frequently changing it. A few people changed the images more than once a day.

The team did in-depth research and found out that customers wanted to post more photos. For them, it was a way to show their identity.

At the same time, Zuckerberg and his team observed that photo hosting was mushrooming all over the internet. Websites like Flickr attracted a massive amount of customers.

The Launch — After a lengthy debate on the strategic necessity of getting into photo hosting and storage business, Zuckerberg and his team introduced the album feature. It allowed users to upload photos & include them in online albums and enabled others to comment on them.

The Missing Critical Link

Do you think that allowing people to upload multiple photos would catapult the website over other social networking websites? Would it encourage people to invest time on the website? Unfortunately, the photos feature was missing a critical element.

Before moving ahead, we need to understand human’s evolved nature.

People Buy A Product To Project An Identity— Humans are in a rat race to build a nest of social status, a unique identity & show it off to others to attract power, favor, or mate(s), and all our public purchases/consumption is a way of achieving those goals. Every great brand exploits this evolutionary behavior of humans.

A person may say that he or she buys things for personal enjoyment or personal needs and not for showing off, but research shows the opposite. How we behave in public and private is different.

Need For Recognition and Attention — Take the case of purchasing a car. We need a vehicle to take us from place A to place B. Almost all the automobiles have the same working mechanisms and would satisfy the need. Yet we all prefer different brands for various reasons. The car is not just a means of transport but a coveted status symbol for us whether we like to admit it or not.

In one of the focus group tests, a group of people was asked: “What would your friends think of you if they saw you driving this new car?”. They responded with an air of subtle arrogance, “I don’t care what others think of me, I just want to get from point A to Point B”.

Shortly later, the same group members were shown several car concepts and asked them about their preferred choices and the reasons behind those choices. Almost everyone chose a car that they strongly felt had the ‘head-turning’ looks. Deep down, everyone desires recognition and attention from others.

To summarise, to develop loyal customers, brands should have something in their product/service that would allow people to advertise themselves.

Example —Lighted Apple logo on Macbook. While thinking about logo orientation on the laptop, Jobs asked his team, “Which is more important — to have the logo look right to the customers before they opened their Powerbook, or to make it look right to the rest of the world when a person is using his/her laptop?”

The lit Apple Logo helped customers to advertise themselves.

One more example of Apple’s Product Stable — No doubt, Apple’s iPod was a revolutionary product, but the white earphones were a game-changing innovation. Before Apple came along, every other earphone’s cables were black.

Apple knew that iPods would be staying in pockets when in use, and there won’t be any way to grab the attention of other users. So, it was a stroke of market brilliance introducing white cables.

Once you were used to seeing black cordages, a white cord grabbed attention. It broke the familiar pattern. After this, every time you saw a white cable, you unconsciously think about the Apple Brand.

It is not about how a customer feels about our product but about how others would see, think, and feel about the customer while he or she is using our product.

FACEBOOK and PHOTOS FEATURE — So, Facebook needs to add something to the Photos feature that would help users to advertise themselves.

While developing the photos algorithm, Facebook’s team observed a critical reason behind the Flickr website’s success. It was their new feature called “tagging on photos” — It allowed users to search for images based on the tags. It revolutionized the photo hosting service.

One of Zuckerberg’s teammates, Hirsch, suggested an idea — He said, “You know, the thing I most care about in photos is, like… who’s in them.”

That turned out to be the breakthrough idea for Facebook.

Facebook introduced the feature where the names of the people could be tagged, and the marked person would receive an alert message. It was a first of its kind in the social media market.

The Opportunity To Project An Identity — After launching the tag feature, the uploading of photos exploded. The users saw it as an opportunity to convey a message, exhibit friendship, and more. Images became a form of communication.

David Kirkpatrick writes that photos had become, in effect, more articulate.

Through tags, users could reach more people.

It’s not about what our product can do for the customer but what customer can do with our product.

Flow State

If you want customers to spend quality time with your product/service, then you need to create the right environment for the user to reach and stay in the flow state.

According to Wikipedia, in positive psychology, a flow state, also known colloquially as being in the zone, is the mental state in which a person performing some activity is fully immersed in a feeling of energized focus, full involvement, and enjoyment in the process of the activity. In essence, flow is characterized by the complete absorption in what one does, and a resulting transformation in one’s sense of time.

The more a person is immersed, the stronger the loyalty.

So, what else Facebook should add to the photos feature that could keep the users fully immersed in the activity?

To help people immerse themselves in the photos viewing activity, Facebook must remove obstacles that stand in the way of a user. It means that the brand should look to reduce the time and effort taken to view the continuous stream of photos.

Reduce The Effort — So, Zuckerberg’s team introduced a feature that made it easy to see other photos in an album — A user has to simply click anywhere on the picture to see the next one. It made people keep clicking through the pictures.

Shorten The Time — Facebook also compressed the uploaded images into smaller digital files. It allowed quicker loading of files that ensured continuous clicking through the photos.

The Result — Within a short time, Facebook became the most popular site for photos on the internet.

The launch of the Photos feature gave users reasons to visit Facebook frequently. The chances of finding something new was high.

2.0 VARIABLE REWARDS — TO ENCOURAGE TIME INVESTMENT

The Crisis — The album innovation was good. Still, competitors could easily copy it. Also, a few months later, the photos, once engaging in the beginning, would no longer be attractive in the same way. It would become predictable after some time. No variability.

The Denouement — Facebook needed something that could exercise a disproportionate influence on people to stay on the website for hours to develop a habit. The site has to break the predictability — Something variable to hold their attention. Without variability in a product/service, we would become less excited by the experience. So, there’s a real danger that users would drop out of Facebook after some time.

The Idea — One reason why people are addicted to slot machines was that they never know when they will win a jackpot. The variability draws them to keep playing.

So, to immerse a user in a flow state, Zuckerberg needed to provide variable rewards to users — In other words, variable information.

The Randomness —In the 1950s, psychologist BF Skinner placed pigeons in a cage and rigged a mechanism to deliver food whenever they pressed a lever. It was predictable for the birds. Later, Skinner added a variability — The device would release food randomly. Sometimes, pressing the lever supplied the food, other times not. Skinner noticed that the variable reward increased the number of times the pigeons tapped the lever.

Nir Eyal writes that variability increases activity in the nucleus accumbens and spikes levels of the neurotransmitter dopamine, driving our hungry search for rewards. He adds that variable rewards can be found in all sorts of products and experiences that hold our attention.

What variable rewards did Facebook introduce?

Observing Customers & Research Insights — We have already seen that Zuckerberg’s team continuously observed and analyzed users’ behavior.

While observing, the team got the following insight —

• Several users often visited another person’s profile to know what was new. They wanted to know what’s happening in another person’s life. Unfortunately, the activity was a tedious one and consumed time. Facebook introduced a feature called Timeshorting. It showed which profiles had changed recently. Zuckerberg observed that whenever someone changed their profile picture, it resulted in increased page views. However, the Timeshorting feature gave information only about the profile changes.

The Insight — People are interested in another person’s life — That’s the critical insight about the user’s needs. The variable reward could be random information about the other’s activities.

Simplicity Changes Behavior — People have sufficient motivation to view other’s profiles, but it was a tedious and time-consuming task on Facebook. For encouraging a user to invest time and immerse himself/herself, the website has to find a way to reduce the time taken to view friends’ activities. At the same time, the task should require minimal or no mental effort.

How to make the activity as effortless as possible to do?

The Reversal Technique — One day, Zuckerberg thought — How about bringing those profile changes to a user rather than the customer going and searching for that information? That would drastically reduce the time and effort. Reduce the steps a user had to take to accomplish the task.

The Solution — How to bring the information to users? The answer was to build a page that showed not only the latest photos your friends had added but all the things that had recently changed on the profiles of your friends. It would show what friends liked/commented on or the group they have joined. Facebook called it NEWS FEED.

About The News Feed Feature —

• News Feed highlights what’s happening in each person’s profile — updates personalized stories throughout the day.
• Makes it easy for a user to advertise his identity — Instead of sending information about you, you update about yourself on the site, and Facebook would push the content to your friends.
• The form of automated communications made it possible to stay in touch with many people simultaneously with a minimum of effort.
• News Feed showed trends around a user.
• It enabled dramatic reach of the posts(Ability to broadcast an identity to more number of people) — It began an era of Viral Explosion.
• News Feed allowed everyone to see what a person is doing. It made people conscious of their actions. It pushed people to become consistent in their behavior.

The new tool would help users find the information that they wanted, all in one place.

THE NEWS FEED CHALLENGES

An average user had hundreds of friends. People won’t be interested in every information. Being connected to someone doesn’t mean that you enjoy the same content. Moreover, we all differ from each other in interests, likes, dislikes, and desires.

How to present engaging content? How to prioritize? Without relevant, customized content, a user would not stick with the product/service.

To move ahead, we need to understand a little more about human behavior.

1. Past Behaviors — Studies reveal that our previous actions control part of our future behavior and judgment. Also, we prefer to be consistent with our past behaviors. So, the News Feed algorithm has to monitor the user’s past behavior, find patterns, and customize the content.
2. We avoid Cognitive Dissonance — We try to avoid situations that would conflict with our beliefs, attitudes, or behaviors. A user’s likes, dislikes, shares, comments, or the time spent on reading a post, the friends they follow, and other activities on Facebook would give a glimpse of their core beliefs/attitudes/interests. The Facebook algorithm has to monitor and present content that wouldn’t result in cognitive dissonance.
3. Social Learning — Albert Bandura, a psychologist, once demonstrated that users are interested in observing and adopting the behavior of people who are similar to themselves but with slightly higher experience. The algorithm has to track people of similar interests, behavior, belonging to the same groups, and share the content they have liked, shared, watched, or posted.

The above rules helped Facebook to present an endless stream of engaging content to users. It ensures that people remain in the flow state on the website.

News Feed transformed Facebook and became the epicenter of the website’s success.

3. COMMUNITY — Time Investment

COMMUNITY — In 1983, Harley-Davidson was on the verge of collapse. Many have predicted the end of the brand. But the company turned around successfully. One factor had played a pivotal role in it — Harley Davidson’s efforts and commitment to building a community around its product — A Brand Community.

A Brand Community is a group of people with similar interests, lifestyles, and extensive knowledge about the product.

Communities have become a way to build a sustainable business with minimal effort. The members not only stay loyal but also become brand advocates.

The Why? — Brand communities work because humans are naturally social animals. Our ancestors have survived for millions of years only through cooperation and collaboration with friends, relatives, families, and communities of people. In the past, being part of a group ensured protection against predators and the food supply for the family. So, belongingness is one of our basic human needs.

Being part of the group, a person subconsciously looks for ways to strengthen the bond between him/her and the other members. A brand community leverages this evolutionary feature.

The higher the interaction between people within the group, the stronger the bond between them. The stronger bond ensures continuous patronage for the brand.

Facebook and Community Social Interaction — Facebook’s core strength is in the network of family and friend connections. Users have varied interpersonal relationships with different people on their list. They are also part of multiple informal groups in the real world. So, Facebook is fortunate to have several informal communities on its website. It simplifies the brand’s task to convert users into loyal patrons.

As we have already seen that to build loyalty, the brand has to find ways to strengthen the relationship between a user and his family & friends. One of the ways to do this is to provide more opportunities for them to interact with each other. Social games would be one of the ways to achieve that objective.

Why Games? — Games have an informal and fun environment that places less pressure on people. They also have inbuilt social-emotional elements like player cooperation, reciprocity, and the willingness to seek and provide help. Games also have rewards, progressive challenges to keep the users engaged for a long time on the website.

The Platform — However, Facebook’s core strength is to build and maintain the social networking website and not in developing social applications. So, the solution is to set up a platform where third-party developers could host applications that use social connections.

For launching a platform, the social networking site had to meet certain conditions —

• A great platform starts with an exceptional product — By 2007, Facebook, on its own, was a great product. Users loved it. Photos and events were going viral — News Feed was keeping the users engaged. So, Facebook’s service itself was the primary attraction. The social networking site met the first condition.
• A critical mass of customers — By 2007, News-Feed ensured people stay for hours on Facebook, going through the content. Millions of customers were coming back multiple times within a day. The presence of repeat users would make the potential platform attractive to third-party vendors. The platform has to create value for everyone.
• The News Feed — The platform should have a feedback loop algorithm to collect continuous user behavior and use it to improve the application, which would attract more new users. Facebook’s News Feed algorithm’s primary task is to monitor user behavior, gather insights, and apply it to organize the content. So, Facebook already has the required feedback loop feature to make the platform a success.
• Virality — Third-party vendors would like to gain value from the platform as early as possible. One of the things they look at is Virality. Facebook had answers for that — The core value of Facebook is in the set of friend and family connections. Zuckerberg and his team call it Social Graph. It is the most powerful distribution mechanism for distributing information. The photos feature became famous by exploiting this mechanism. Another factor that helped in virality is the News Feed. This feature gave a new meaning to virality.

The Launch — In 2007, Zuckerberg’s team introduced the platform concept and invited developers to build applications. The next day after the launch, Facebook encountered severe, unexpected traffic. There was a massive rush of users to try several applications. Millions of people had installed applications in the first couple of days. Zuckerberg hoped to have at least 5000 applications in the first year. To his surprise, he found 25,000 applications within six months of launch on Facebook.

Social Interaction — The games enabled a space for socialization. People could participate with their friends and family members in that virtual space, thus importing real-life social relationships into the games they play. The interaction during games fostered social relationships and maintained the bond.

As the customers installed applications, played, and got rewards, the News Feed informed their friends. The applications could easily penetrate the market. Even a modest application with no marketing expenditure could reach millions of users within a day. Almost every software and internet company rushed to grab a pie of the Facebook platform business. On his part, Zuckerberg allowed developers to make money with their applications but did not charge them anything for running the software on Facebook. It led to an exponential growth of applications. The games and other apps generated endless activities on the site. People of all sorts of ages began to spend time there.

Gradually, the applications strengthened Facebook’s market position. The competitors were falling off on the wayside.

The platform model was also one of the critical reasons for Facebook’s success. The company has become the center of an ecosystem. It helped the brand not only to meet broad customer needs but also accelerated mass-market adoption by maximizing the quantity & quality of interactions.

CONCLUSION

For developing a loyal customer base, one of the ways is to provide opportunities/reasons for a user to spend more time with your product. If possible, have something in your product/service that would allow people to advertise themselves. And, spend time and effort in building a community around your brand. The community should meet the user’s needs and not the brand’s wants.

References: The Facebook Effect by David Kirkpatrick, Hooked by Nir Eyal, Nudge by Richard Thaler, Predictably Irrational by Dan Ariely, HBR article — Getting Brand Communities Right by Susan Fournier & Lara Lee, Article — Social Gaming For Change: Facebook Unleashed by Jennifer R Whitson & Claire Dormann, Products to Platforms: Making the Leap by Feng Zhu, HBR article — Why Some Platforms Thrive and Others Don’t by Feng Zhu & Marco Iansiti, Blue Ocean Strategy by W. Chan Kim and Renée Mauborgne.