Is Social Media Necessary for Your Bottomline?
A recent HBR blog decried the amount of resources spent and talk by marketers on social media. Some of the criticisms included:
—–Is social media adding to the bottomline? #NOPE
—–Is there an opportunity cost to using social media?
—–The metrics for evaluating social media are wrong
—–Sixty percent of U.S. adults who use social media say that social media sites have no influence on their purchase decisions and only 5% say that they have a great deal of influence
—–Technology changes fast – look at MySpace and Friendster
I would like to address the points raised by the author of the HBR blog in light of historical changes, context, and data.
Is social media adding to the bottomline? #YES
A tweet does not maketh a purchase. Here I would like to quote, John Wannamaker – considered the father of advertising – who said “I know I am wasting half of my advertising dollars, I just don’t know which half.” You do waste some of your dollars or viewership of posts in social media. The difference though, as in all digital formats, is that you can measure how much you are wasting and how much you are gaining. The number of followers or likes or retweets is certainly not a measure of direct addition to the bottomline. It is a measure of awareness and level of gained attention. There is an entire psychological process that the customer goes through before awareness turns into purchase. How many times do you check out a product before you decide to purchase, especially one that you have never purchased before?
Is there an opportunity cost to NOT using social media?
Absolutely. Like any other channel, there is an opportunity cost to using or not using any media. The fact of the matter is that customers are spending more time at digital venues, including social media channels. The amount of time on social media sites is increasing across different demographics. There are always tradeoffs involved when choosing different media. These tradeoffs are between how much to spend between traditional and digital, how much to spend between different digital channels, and how much to allocate in resources between different social media channels/efforts (blogging is generally placed in the same category as social media, although it is technically content). However, as I said in my book, content – timeless and timely – is the currency of social networks. These tradeoffs are no different than what has always been the case when deciding on optimal allocation (optimal being the word of consideration here) between traditional channels of Television, Radio, Print etc. The choice of channels needs to be strategic, as does the combination of channels. Social is a long-term customer relationship building strategy as much as it is about creating awareness and facilitating social discovery – in other words, increasing reach.
The metrics for evaluating social media are not wrong but need extension to attribution, and….
The metrics for evaluating social media need to be extended (not necessarily wrong) – mainly to extend it to attribution. If the choice is between spending time and /or dollars between only email and social, there is a way in which you can integrate the two by providing something of value so you receive something of value (i.e. email address). This continues the relationship building process and of course, measurement, that connects the different stages of the sales funnel for better attribution. Email is still checked more often than social media channels, but social offers reach that can extend beyond your current audience.
What you gain from investment in social media is not always purely about numbers (structured data). It is also about what you gain in terms of unstructured data that could turn into valuable information. While a product rating of 1 or 5 tells me that a certain customer is happy or unhappy, it does not tell me why. Social media conversations can yield insights that reflect lack of internal checks and balances in place. Historically, sociologists recognized the role of word of mouth communication in the spread of products and ideas. This was captured by Everett Roger’s model of product diffusion to show how early adopters of products tend to be different and lead the way to an early majority of adopters. Social word of mouse is no different except it can be tracked (an advantage) better than word of mouth communication. On the other hand, to measure word of mouth communication, researchers needed to turn to surveys of self-reported behavior. Email does not give you this rich resource of information that social media conversations do due to its lack of easy interactivity.
Forty percent of U.S. adults using social media are influenced in their purchase behavior by it
The author says that 60% of U.S. adults using social media are not influenced in their purchases by social media conversations. This means that 40% or 4 in 10 are influenced in their purchase decisions by social media sites. In fact, 68% percent of survey respondents responding to a survey by Nielsen said that they trust consumer opinions posted online, up 7 percentage points in 2013 from 2007. As we all know, data needs to be always evaluated in the context of the respondent population and the phrasing of the question. Depending on who is reporting the data, anywhere form 37% to 53% of Television viewers reported being influenced in their purchase decisions by Television advertising. Given that social media is a new medium, an influence rate of 40% is remarkable.
Technology changes fast – Look at time shifting
Technology does change fast and marketers need to keep moving along with that, while investing in channels that are likely to last longer, channels that still have a wide reach, and emerging channels that are likely to grow. Television, while claiming a larger audience, is not a growth medium in its current form. Instead, paid for – advertising free media – like Netflix is gaining an audience. Cable television services are now being replaced by online services. Time shifting is adding another element of challenge as well. In such cases, it is valuable for companies to develop their own audience that they can actually communicate with, while continuing to widen their reach. Unlike traditional broadcasters, Netflix knows who is watching what program at an individual level. That should change as traditional networks enter streaming entertainment as well.
Television did not make companies successful. Their creative strategies in using the medium did. Social media is the same way. It is a channel. Success depends on fundamental marketing principles. These are to create awareness, interest, and desire to bring prospects to the Website, make them purchase, re-purchase, and make recommendations to others. These fundamentals should still be driving your social media strategy and your investments in social media.
Sujata Ramnarayan, Ph.D. is a Marketing Consultant focused on improving performance through data-driven insights and strategy. She is a former Gartner Group Analyst/Professor, and the Author of Marketing in a World of Digital Sharing. Her writings have been published at MarketingProfs.com and other publications. Follow Sujata on Twitter @mktgnugget and check out other articles by her here.