You can build “capital” for the business you want to launch, long before you are ready to actually hit the “go” button. And this backing will win you real interest from potential investors if you will need serious cash capital at some point in your plan. Social capital is priceless.
What is social capital?
The Harvard Kennedy School explains that social capital is the value that is contained in networks. It grows by providing value and helping others. Its value is exponential and has completely changed the way we measure business viability, success, future growth and impact. The school defines social capital as: “the collective value of all ‘social networks [who people know] and the inclinations that arise from these networks to do things for each other [“norms of reciprocity”]’.”
That’s the esoteric definition.
Harvard Kennedy School goes on to explain: “The term social capital emphasizes not just warm and cuddly feelings, but a wide variety of quite specific benefits that flow from the trust, reciprocity, information, and cooperation associated with social networks. Social capital creates value for the people who are connected and, at least sometimes, for bystanders as well.”
Social capital is the currency of success now and you have to capitalize on this.
You don’t gain social capital by plugging your business on every social network or spending all of your time wooing fans or collecting followers and likes. You build social capital by building your community. And you start doing this by discovering and developing your brand. Your brand becomes the nexus that unites a constellation of various people.
Who will make up your community? Customers, of course, but also prospects, employees, vendors and suppliers, partners and affiliates, the media, industry regulators and government entities.
How does social capital build in a community? Through flows of information, exchanging ideas, networking and mutual aid. Social capital grows from the collective action and the shared purpose of community, from the shared identification as being members of this community.
What does building your brand and building your community do for you?
Well, your community helps define and develop your brand. Instead of telling people who you are, people in your community tell you what is most valuable about your business.
Your community provides you with social proof and influence. It becomes your marketing medium and members your promoters.
Your community gives you insights and information that allows you to continually improve your offerings, develop new products and services and reach new customer segments.
There is a direct link between the strength of your community and financial success. Research by Google and Advertising Age show that people that engage with your brand at least once a week, hyper-engagers, are “more than four times as likely to purchase a product online every day or multiple times per week.”
J. Crew reports that their online audience spends twice as much as the average customer that comes into their stores.
And people that identify with your brand and feel part of your community are your brand ambassadors…sharing your brand with others and increasing your reach and sales.
Community size is not correlated with brand strength. It’s not numbers of fans or followers you want to build; but real bonds within your community and with your brand.
It’s not selling that grows social capital but giving people information and power, allowing them to interact with each other and contribute to your community.
In a Harvard Business Review article, Bill Lee explains that gains from customer relationships come from a 4-level customer value proposition. At the first level, people see you as a provider of some product or service and price is the most important feature. As you build your brand, people begin to see you as a business that helps them get some job done or provides them with a unique solution. At the third level, customers begin to bond with you emotionally and become loyal customers. To reach the fourth level, you help your customers build their social capital.
Your community helps members build their reputations along with yours. Your community helps customers build their affiliation networks and gives them status. Giving your customers say, recognizing them and giving them (mostly non-financial) rewards for engaging in your community, amplifies social capital for everyone.