Social Proof is the trust built in a brand or individual based on what others say about it.
It could be customer testimonials/reviews, a celebrity endorsement, an expert’s stamp of approval, an article in the media, or a massive crowdfunding campaign.
How is social proof linked towards the strategy of starting a business?
The link is between the idea, whatever future forecast exists for the business, and the best way to use some form of social proof to accelerate that forecast.
How is social proof linked towards growing an existing business?
A lot of modernized Conversion Rate Optimization (CRO) for eCommerce companies relies on how to present the requisite social proof in the best possible way to increase trust in the brand. Consequently, the goal is to increase conversion.
- A Social Proof Strategy for Startups
- Conversion Rate Optimization & eCommerce
- 3 Dimensions of Social Proof – What, How, Where
- Case Studies Cited
A Social Proof Strategy for Startups
What we see when we observe the patterns of a lot of startups and new business ventures is an over-investment in either time or money in one or more of the following prior to product-market fit:
- product design or development
- marketing & sales
- fundraising from major investors
In the end, all three are directly related to one another, as the product has to be at least designed visually to drive sales, and investors will want to typically see revenue + growth before investment. Most individuals can’t self-sustain a business without additional funding, and so it becomes a vicious circle.
Imagine that the initial goal – based on some form of business model prepared using any of of the tools in the Business Model Toolkit – was oriented around social proofing:
- Focus strategy on getting customer reviews (not revenues, as pricing is affected)
- Focus strategy on getting expert feedback (not product development, as design decisions are affected)
- Focus strategy on raising equity crowdfunding (not VC capital, as barrier to entry can be lower)
For each of the following, we provide an example of this from in-the-wild (real life) and how it worked out.
Native Cos Natural Deodorants > Customer Reviews
Native ‘natural deodorants’ was founded in 2015 by Moiz Ali and was acquired by P&G for $100M USD without ever selling a single stick of deodorant outside of their DTC (Direct to Consumer) website.
By his own admission, Moiz knew almost nothing about the deodorant space when he founded Native – but he did know a little about business, and a lot about people.Blueprint
They were hyper-focused on customer reviews.
Customer feedback was not left to a passive inbound email address, but actively pursued through email and social media outreach. The 15,000+ 5 star reviews which today feature prominently on the brand’s website a legacy of this early willingness to test and learn.Blueprint
These same reviews still feature prominently on the company’s website, which now features new categories of products within the ‘personal body care’ vertical.
More on the ‘social proof’ of reviews for established eComm’s below, but for now, the strategy lesson is relative to how the original founder was hyper-focused on customer reviews as a CPG (Consumer Packaged Goods) launching a new product. He didn’t sell a single stick wholesale, and in the end, he walked away with a cool $100M in two years for his efforts.
CPGs and Transferwise > Expert Stamp of Approval
The most common place to see the ‘expert stamp of approval’ as a social proof for startups and new businesses is in the CPG (Consumer Packaged Goods) sector through outreach to different types of experts depending on the product. Examples include:
- endorsed by a certain dermatologist for a new skincare product line
- endorsed by a certain chef for a new organic food product
- endorsed by a certain athlete for a new type of beverage
The more common strategy for technology companies is based around using an ‘expert stamp of approval’ by showing what people from other companies (or investors) are involved in this company, as a way to create trust.
In this case, the Transferwise homepage started with ‘From the People Who Built Skype & PayPal,‘ two of the most prominent tech successes in that era (~2012).
The (Partners) page evolved as more ‘social proof’ emerged.
But the original was simply that ‘people from Skype and Paypal are building this new forex payments system,’ which helped establish consumer trust in a market where a lot of it is needed.
Revolut Digital Bank > Equity Crowdfunding
Revolut is a somewhat controversial, very aggressive digital bank who are the true definition of a ‘challenger bank‘ because they test the limits with everything they put out.
Originally, they pushed the limits of equity crowdfunding the UK and raised what would have been by far the biggest fundraise on an equity crowdfunding platform in (global) history at that point.
The startup opened pre-registrations for the campaign on Monday, with the aim of raising £1 million once the campaign went live. Would-be investors have smashed that target, pledging £10 million in just 10 hours. By Tuesday evening Revolut had £12.9 million pledged from over 6,600 investors.Insider
The previous record was £3.99 million for another fintech called GoHenry, which had happened about a month before Revolut launched. In the end, Revolut opted to only take the first £1 million.
Revolut’s original strategy was all about community. They farmed the initial ‘social capital’ they built with their community to raise an important equity crowdfunding round. It is necessary to note that Revolut syndicated the round with VCs at this juncture, which is not uncommon.
That additional ‘investor proof’ helped boost the validity and valuation for Revolut, but it isn’t essential to have VCs in order to raise a successful equity crowdfunding rounds. In some cases, it can even be detrimental depending on the market and who the crowdinvestors are.
The good news is that unlike other methods of social proof, the equity crowdfunding investors made bank off of this round, earning 1900% in just two years.
Crowd investors who backed Revolut, Britain’s first digital banking unicorn via Crowdcube, have now realised returns of ~19x on their original investments.Crowdcube
Equity crowdfunding is time and resource-intensive, but in certain cases it is a better strategy than chasing more traditional or institutional investment capital. Community size and loyalty are the major factors to assess, in addition to the various regulations and platform rules in each jurisdiction.
Conversion Rate Optimization & eCommerce
CRO (Conversion Rate Optimization) is all the rage these days for eCommerce companies, as it is the emerging ‘science’ of how to place what elements – where – in order to increase trust and thus conversion. Naturally, it is not exclusive to eCommerce companies, but it is where we see the majority of the conversation these days relative to CRO.
There are numerous studies and data points to demonstrate how important reviews are to consumer’s decision-making process around what products/services to buy.
Reviews vs. Personal Recommendations
88% of consumers trust user reviews as much as personal recommendations.Hubspot
# of Reviews Before Making A Purchasing Decision
The average consumer reads 10 online reviews before making a purchase decision.Hubspot
How much does customer proof matter?
Placing the logos of business customers on a company website can increase conversions by as much as 400%Hubspot
Do the Majority benchmark reviews before purchasing?
57% of consumers will only buy or use a business service if it has at least a 4-star rating.Hubspot
The major theory in relation to eCommerce is that placing social proof in the right places on the main pages can make a dramatic difference in conversion %. If this rule applies to eCommerce, we would expect that it would apply many other places online as well.
Examples of CRO & Optimizing for Social Proof
There are many, many new agencies specializing in CRO (Conversion Rate Optimization) or at least stating that they do. Either that, or CRO is a bundled service provided by those agencies who have worked with a lot of eCommerce companies in the past.
Search for 'CRO Agency' or 'CRO eCommerce'
How to determine who is the best – or what the best practices are – is difficult at best, as there is always a level of subjectivity in a field like this that is more based on behavioral science than anything we would consider more of a hard science like physics or math.
Nevertheless, if you look at certain hashtags or accounts on Twitter, you can see some of the experts posting their ‘ideas’ on how to make CRO better for one particular brand or another.
Search under 'Conversion Rate Optimization'
Here are a few examples from Twitter.
3 Dimensions of Social Proof – What, How, Where
As we have seen in this post, there are three dimensions of social proof:
- what kind of social proof to collect?
- how to collect that social proof?
- where to surface the social proof?
There is no doubt that social proof is at least somewhat necessary in the modern digital age to increase trust at different points in a company’s lifecycle. For startups, the solutions look different than established brands.
As always, there is a nuance and personalized approach required to test different strategies and analyze (ideally with data) the results to see what works best.
Case Studies Cited
Hubspot – 20 Examples of Social Proof