Tuesday, May 3, 2011

Does social media really work?

Mashable recently posted an article, Social Media Has Almost No Effect on Online Retail Purchases, which sparked an interesting debate within the comment section.

You can check out the full article here, but the report from Forrester Research and GSI Commerce basically reaches the conclusion that, “… social media rarely leads directly to purchases online.”  The data indicates that less than 2% of orders were the result of shoppers coming from a social network, with email and search advertising being much more effective mediums for converting browsers into buyers.

What hit me the hardest however was Fiona Dias’ personal conclusion:

“It’s been a mystery to me why the media is excited about social media. From a retail and commerce perspective, it seems to have no effect.”

Things to bear in mind before we all run away from social media:

How do we measure the effectiveness of social media effectively?

We don’t know how this data was gathered. Sure, a person might not click on a link posted on Facebook but what about those who use Facebook and Twitter as a conversation tool?  What if someone just asks others what they recommend?  Have Forrester and GSI Commerce taken this social aspect into account?

In short, social media isn’t always measurable (or should I say, “social media isn’t always EASILY measurable.”)  Here’s an example:

I’ve seen a friends posting about a new artist and how great their album is.  No link is provided to purchase the album directly, but they have liked the bands page and I take a look at it.  I’ve then searched for this album on iTunes or Amazon.com and purchased.  Although the cause for me buying the album came through Social Media, wouldn’t the statistics show I used search to purchase.  It’s serious food for thought.

What was the return on investment in regards to this 2%?

2% does sound pretty small, but what was the revenue generated from this 2% compared to the money spent gaining it?  If I’m using social media to sell homes and it only takes one person to run the Facebook page or Twitter account, then a 2% increase is pretty damn good.  If it takes four people working full time to gain a 2% increase on sales of 99-cent pencils then Dias’ criticism might be warranted.  This is the kind of data we need to know before we condemn social media.

Are we just missing the point entirely?
Is social media a waste of time?  Is social media just another bandwagon, blown out of proportion by the media?  In short, NO!

Social media is about engagement.  How many customers who purchased Dell computers are retained because of the companies amazing use of Twitter when dealing with customer’s problems?  How many customers have AT&T retained through engagement on their Facebook page? (I had personal experience with this, and believe me; if it weren’t for their Facebook page I wouldn’t be using them now).  Are we only looking for new customers or are we looking to retain?  This is all money in the bank.

One comment left by another reader sums up my personal philosophy:

“Social media is how you build brand loyalty and provide great customer service. Brand loyalty and customer service doesn’t track easily to new purchases in the sense that User Click Ad – User Sees Product – User Buys Product.”   AMEN.

Another comment also gives us insight into the importance of social media and how its effectiveness is sometimes subtle:

“Social media isn’t going to lead to direct purchases a lot of the time — BUT if you have no social media presence, chances are you’re not going to keep my attention very long. I hate e-mail newsletters clogging up my inbox from retailers. But Facebook and Twitter? Yeah, I’ll tolerate some quick info from you.”

The Future of social media?
I guess we need to hear from Forrester Research and GSI Commerce on the methods used, the companies participating and the criteria.  Was this a simple “add a link to a Facebook wall and see how many sales we gain from it?”  I hope not, but I’m suspicious of the findings here.  Social media is more than direct sales.  It is used to retain, engage and build meaningful brand relationships.  This also leads to money in the bank.

Where does this leave us?
The results of this research leave us asking more questions and looking for better ways to monitor our activities.  This is no bad thing.  But to dismiss the effects of social media from a direct sales point of view, in my opinion, misses the point entirely.  I also find it very hard to believe that social media ad spending will hit $8.3 billion in 2015, according to a new report, if companies are not seeing some positive ROI.

Let us know your thoughts!


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