Think Social Media is a Bust That Has No Impact on Business? Think Again!

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Like a first-round NFL draft pick struggling to take off in the pros, social media has all the industry optimism in the world but a limited array of evidence confirming its worth.  There are early success stories providing some hope, but there is also widespread concern about whether it will ever truly live up to the enormous hype.

But before you write off social media as customer management’s version of Ryan Leaf, consider how findings from a new IBM study can impact your bottom line.

The technology giant, which surveyed 4000 European adults as part of its Smarter Commerce Initiative, found evidence to support the impact of social channels on consumer purchasing.

Though the study also revealed some noteworthy limitations about social commerce, it still confirms the channel’s inherent ability to drive product sales.  And as long as that is true, the burden will fall on organizations and their customers—not simply the networks themselves—to translate social media activity into business success.

How social media factors into purchasing

According to the report, 50% of Internet-connected respondents between the ages of 16-64 use social networks to assist with purchasing decisions.  35% of those likely to follow a retailer will use social media to read and/or contribute product reviews and rankings, while 25% stress the importance of social media on buying decisions.

Skeptics might cling to the absence of a majority in support of social media as an important resource for helping with buying decision, but the aforementioned breakdown indicates the support level is not an inherent flaw of the channel.

Insofar as 50% do, in fact, use social communication to help with their purchasing, it is clear that a significant portion of consumers want to use social media in their decision-making.  The limitations, evidently, come not from interest in using the channel but from the value of material being conveyed through social media.  Companies that more actively work with their audiences to provide valuable product resources on Facebook and Twitter, in theory, should see these networks more greatly drive purchasing.

Another potential hurdle for social commerce is also independent of the channel itself.  IBM’s study reveals that for 57% of adults, the ability to receive free trials or product discounts is the primary reason for following a company.  If that reality negatively impacts companies’ abilities to turn social media followers into full-fledged customers, it is a flaw of the marketing strategies that made giveaways a fixture of corporate social media strategy.

As long as marketers feel discounts and free trials are a way to “hook” potential customers (a philosophy that exists inside and outside of social networks), they have to own the positive and negative consequences of that strategy.

What about measuring the results?

Based on IBM’s research, the issue of tracking social commerce still exists.  The aforementioned statistics imply that social media might be only one of the resources customers use when shopping, so it is likely that many businesses may struggle to directly trace sales to social engagements.

And, since four-in-ten online shoppers ultimately buy the product from the brick-and-mortar store, a sizable chunk of purchases that might have been generated by online channels will be credited to the in-person retail experience.

Even though those limitations can also be chalked up to the very nature of e-commerce and do not actually discredit the potential of social to influence buying, they should not be used to excuse complacency in social media strategy.  Effective social engagement must involve a commitment to e-commerce, creating the confidence, urgency and enticement customers need to buy online… immediately.

Though boosting awareness and excitement for products is important, a channel’s worth should not be limited to back-of-mind influence.  Allowing ‘hooked’ customers to mull over the product and then visit resources that might make them question their interest is counter to the ideal of a revenue-generating strategy.

If you manufacture televisions, and your Facebook channel has a lengthy discussion about how one model has an amazing screen and picture quality, would you really want your followers to go to Best Buy and get dazzled by the screen on a competitive model?  Thanks to the weight of social conversation, your brand should have all the ammunition it needs to drive direct e-commerce.

At the same time, social strategists should not feel obligated to view ROI only as a function of the direct, online revenue generated from the networks.  Though not all-important, the aforementioned lingering influence matters, especially since customers are using social media to research and shop for new products.  The influence that comes from social comments from friends and trustworthy peers is hard to replicate elsewhere, providing a unique, unparalleled opportunity to capitalize on those customers who are in a “buying mood.”

Social strategists should also point to the insight gained from online conversations.  Since customers who converse via social networks are often looking into purchasing the brand’s products, the feedback should prove instrumental in improving the sales, marketing, customer service and product development functions.

No, maybe social media will never be Peyton Manning, but all indications are that with the right “coaching,” it can become a meaningful role player for your organization.

Want quick strategies for attaining Social ROI?  Customer Management IQ’s Social CRM Go Live links you with speakers from Verizon, Foursquare and Domino’s who know what it takes to succeed socially!

Contributor:   Brian Cantor

You Should Check Out:

Social Media ROI Part III: Craft a Social Media Campaign for Maximum ROI

New Social CRM Strategies for Google+

Social Media ROI Part I: Enhance Company Buy-In, Brand Management

Social Media ROI Part II: Structure the Ideal Social Media Program