A mini revolution is underway, and it is affecting the way people communicate, socialize, interact and entertain. Having contributed to an unprecedented consumer empowerment, Social Media or Web 2.0 as it is popularly known has arrived and is redefining many paradigms. The consequences are far reaching, affecting not only technology development but also the domains of business strategy, marketing and customer service.

Decoding Web 2.0

By definition, Web 2.0 is a collection of open-source, interactive and user-defined applications empowering users to be active participants in business and social processes.  It allows users to interact and collaborate with each other in a dialogue as creators of content in a virtual community. Two key principles form the foundation of this new-age media:

• Focus on service-based, open-source solutions. Unlike the first generation of internet applications developed around proprietary software products, these applications are platform independent making use of open-source software. They are offered as a free service rather than packaged software.
• Active participation and interaction of users in new ways: not only consuming but also contributing, reviewing and editing content. Multiple users add value by increasing the size of the collective intelligence pool.

The user is a vital factor for most Web 2.0 applications and the term User-Generated Content (UGC) is often used to underline this special attribute. These applications can be put into 4 main buckets:

1. Blogs, or Web logs are online journals generated by users. Often combined with Podcasts, they are the fastest growing category of applications.
2. Social networks or sites that enable users to build personal networks and interact with other users for exchange of personal content and communication. Facebook, Orkut, MySpace are some common examples.
3. Communities, and websites which organize and share specific genre of content like YouTube, Flickr and Wikipedia.
4. Forums and discussion boards, which are sites for exchanging ideas and information usually around special interests like medicine, software development etc.

Impact on Consumer behavior

The single most visible outcome of Web 2.0 is a substantial migration of power from producers to customers. Today's online consumer has access to a previously unknown reservoir of information and knowledge as well as unlimited choice. The user actively participates in developing and propagating content, interacting with peers and making the process of taking decisions more transparent. Communication is no longer a monologue; it is now a dialogue between the brand and the consumer, more importantly between consumers of a brand, product or service. Last but not the least, the individual consumer now has a voice. If the message is powerful, customers will relay to their friends creating a value circle for the brand. It works both ways, and there are umpteen examples of individual voices spiraling into mass movements for or against a brand.

Implication for Marketing

The 2011 FICCI-KPMG report says that three quarter of the global internet population uses social media applications, spending an average of six hours a month. Users across the spectrum are adopting this media, and this holds a whole new world of opportunities and challenges for marketing.

1. Traditional media and old-style marketing are constantly losing ground as influencers of consumer behaviour. As the web user and technology mature, marketers are discovering that influencing opinion by way of new age media is easy and effective.
2. Customer Advocacy, which implies identifying ways to enhance user experience is the key to success in the future. Even in the case of product categories previously considered as generic like travel, brands are discovering that they can gain and retain customers by offering something more than only low prices. For example, Customer reviews posted in different forums or online communities like Tripadvisor are powerful marketing tools and dilute the weight of lower prices.
3. Web 2.0 media is a powerful tool to engage in direct, personalized one-to-one marketing. Brick-and-mortar firms like Nike, Disney and Coca Cola are already experimenting with social media as part of their direct marketing strategy. These campaigns offer their customer the possibility to reach the brand, exchange information and experiences. Some firms are going a step further: SONY and Frito-Lay's are examples of brands partnering with talented amateurs, who create viral films or television commercials for them. The idea behind such partnerships is that messages created by real customers reflect the genuine feelings of product users and are more credible and effective than messages created by advertising agencies.
4. The mainstream online consumer recognizes the medium as a forum of dialogue and confrontation of producers and vendors with their social, ethical and commercial responsibilities. This direct hotline to the consumer can be effectively utilized to tap into consumer sentiment, address concerns and get consumers to experience the brand first-hand.
5. The Web 2.0 domain has opened up a previously untapped market; that of ‘unsegmented’ individuals with specialized needs! Various applications and sites like Groupon and ebay allow consumers to share information and availability about these products with other consumers sharing similar interests. There is evidence that substantial aggregated demand can be created for the so-called last mile products.

In a snapshot, marketers have a brand new channel to ‘Listen-in’ to the customer's voice.  The value and quality of this information is obvious. All that needs to be done is tap into this high-quality and low-cost market information and offer an inclusive experience to the consumer.