Marketing executive Erich Joachimsthaler defined the concept of "social currency" in 2009. In his words, it is the amount of success that an individual or business has in convincing customers to identify with a particular brand. This way, displaying and discussing the brand becomes an important part of the way that people interact with each other. A brand's social currency is a good measure of its potential for growth.
In the 1980s, the French cultural philosopher Pierre Bourdieu proposed an idea that he called social capital. In his way of thinking, social capital was a kind of status. It was defined by resources made available to an individual through networks of family, friends, and other kinds of associations. These resources could be used to explain success in certain social situations where money was not the sole determining factor.
Like money, social capital can be earned, spent, and passed on as a kind of inheritance. According to Bourdieu, social capital is only limited by the amount of resources available in an individual's network, and by that individual's ability to exploit those resources for their benefit.
Another of Bourdieu's ideas that is important to understanding social currency is what he called cultural capital. Bourdieu described cultural capital as a kind of status currency. It is created and exchanged when individuals seek out particular products as a means of showing off social status that is not directly tied to their networks. Cultural capital can help explain why, for example, people wait in line to buy new smartphon models or sneakers labeled with the names of basketball players.
The Internet Makes Social Currency More Important
Joachimsthaler's definition of social currency in 2009 updated Bourdieu's concepts. He accounted for the invention of the internet. Joachimsthaler also communicated these ideas in ways that were helpful for business and marketing professionals. The dawn of smartphones and social media in the 21st century has given branded companies an unprecedented ability to target the individuals and groups they are hoping to reach.
In the past, traditional advertising in print and on television was largely limited. Advertisers had to identify what kinds of people read certain magazines and watched particular shows, as well as how often they were able to reach these potential consumers. Now, however, sites like Facebook, Twitter, and Instagram have become increasingly important in the social lives of consumers. Brands are able to interact with and advertise to social-media users online. Companies are also consistently able to reach consumers repeatedly and on a daily basis. This is a new way of reaching potential customers who might be convinced not only to purchase a product but also to share information about that product with friends and family. This new method requires a new model to understand these social interactions. Social currency provides that model.
A New Concept in the Field of Economics
Social currency is being studied more as a concept of economics. As with cash or property, the economics of social currency are defined by a gap between the number of people who want access to a particular resource and the ability of the resource to fulfill that want. This means that social currency is defined by what economists call scarcity. Generally, the more a resource is scarce, or limited, the more valuable it becomes. In this case, scarcity affects both producers and consumers. Producers seeking to accumulate social currency need to compete for consumers' attention on platforms that have dozens, or even hundreds, of other companies seeking that same resource. One way to measure how well brands are accumulating social currency is to look at the number of followers they have built up on social media.
There are scores of ways that brands try to use their online presence in order to grow their follower counts and, hopefully, their social currency. One method of fostering communities of users is to play up the exclusivity, and therefore the scarcity, of the products in question. This is a particularly important strategy for luxury brands. They use the expense and low supply of their products to stimulate demand for them. Because of their exclusivity, purchasing a luxury product, for example a diamond watch, increases a consumer's cultural capital, but only if they use that product publicly. Such consumers are therefore inclined to share information about those products as a means of expanding their cultural capital. They can do this either by talking about their products with the community of others who have them or discussing them with those who do not. In this way, such brands are easily able to build social currency and, therefore, desirability.
The Goal of Going Viral
Luxury and exclusivity are not the only ways of building social currency, however. Smart brands sometimes attempt to advertise their products in such a way that their advertisements will "go viral." That means they are shared not only by people within communities of brand followers but also by people who are outside those communities.
What makes people share viral content is not an exact science, but it appears related to social currency. Just as people like to talk about being part of exclusive communities, they also like to share other things that reflect well on them. If businesses are able to create advertisements or other kinds of content that their users want to share not only with each other but also with their other networks in order to make them look smart, cool, or hip (among other things) brands are able to expand their communities. This can increase the number of people willing to purchase their products.
