jim.hamill@energise2-0.com

Social Media serious business channel or place for chit-chat?

Jacques Derrida the French philosopher once said his favourite questions were “Why? and, What makes you so sure?”.

A few recent reports have posed these questions of Social Media. Is it a serious channel for business or just a place for chit-chat?

  • A recent Forrester study [1,2] analysed 77,000 online transactions and found less than 1% of purchases had originated from social channels.
  • This followed on the heels of a report by Monetate, the e-commerce platform, which found that whilst Facebook was providing a high level of referrals to e-commerce sites, half of visitors left right away and only 0.5% made a purchase [5,8].
  • Both studies concluded that “search” was a far more effective tool for 'driving' e-commerce sales.

These reports received much publicity in e-marketing and social media channels. For some they have provided the proof needed that social media is not a serious channel for business.  For others, they have served as a useful and timely reminder to question what we know. These results demand attention rather than denial, they demand context and understanding.

Social Media is here to stay – sorry naysayers

It has never been our belief that Social Media is a panacea nor have we ever advocated replacing everything else that went before with Social Media – we live in a multi-channel world. However, our world is becoming smaller through our social connections and Social Media provides effective, low-cost tools and platforms for businesses to engage and energise their customers.

Businesses of all sizes have voted with their time and money stating emphatically that Social Media is here to stay:

  • More than a $1bn in ads is spent targeting social media users every quarter or $4.4bn a year, 14% of all online ad spend ends up in social media [8]
  • Aberdeen Research found 84% of B2B marketers use social media in some form [13]
  • Our own State of Digital Scotland Survey (unpublished) puts that figure at 90%
  • A recent McKinsey report found 39% of companies are viewing social media as their 'primary digital tool' right now and this is set to grow to 47% in 4 years [7]
  • According to a CMO Survey, marketers currently allocate 7.6% of their budgets to social media. This figure is set to rise to 18.8% in 5 years [13]

Social Media and Sales – show me the money?

While some studies and published statistics suggest Social Media is directly contributing to sales – Booz & Company state online sales from social networks will grow 93% per year within the next four years [12] – evidence is on the whole sketchy.

Much of it relates to the comparative performance of social channels [6,11] e.g. a recent Shopify study found traffic from Pinterest was 10% more likely to make a (higher value) purchase than from other social channels [6]. Others cite case or anecodotal evidence where companies like Zappos [12], Bottica [8] and even Dell have demonstrated direct (albeit significant) $value financial benefit from social.

With exception of the Forrester and Monetate surveys, there is limited research on the direct impact of social on sales and as compared to other online marketing tools (e.g. search and email marketing).

What there is, is a growing wealth of research which alludes to a more subtle but equally important relationship between Social Media and sales:

  • Altimeter Group in 2009 found that the most socially engaged companies were also the fastest growing in terms of revenue [15]
  • Neilsonwire found that approximately 46% of online users count on social media when making a purchase decision [12]
  • McKinsey stated that a high-impact recommendation from a trusted friend conveying a relevant message is up to 50 times more likely to trigger a purchase than a low-impact recommendation [13]
  • Ipsos found that 20% of Facebook users have purchased something because of ads or comments they saw there [14]

Looking for the right answers in the wrong places?

The Forrester and Monetate reports are very much welcome particularly when seen as part of a growing volume of data on social and sales. They help shape our thinking. I would argue that the Forrester and Monetate results are almost exactly as expected, for the following reasons:

Social Media users do not like:

  • To be driven from the channel we're in
  • To be sold to, we prefer conversations
  • Adverts, we hardly notice them on Social Media (sorry Facebook)

But, we do like:

  • To form opinions on brands based on how they engage us and what our friends think
  • Great customer experiences, we also like to tell others
  • To use a range of channels not just social. We also Search and respond to emails

With what we know, why should we expect a direct relationship between social channels and sales? Put another way…

  • Why would jumping from Facebook to an e-commerce channel as a result of a piece of interruption marketing (that appeared in a newsfeed or in an ad most of us missed) be considered normal consumer behaviour?

Rather than spending more time trying to prove direct links between sales and social that are counterintuitive to how we use the social web, why not focus our collective attention on the following:

  • Understanding the subtle and complex relationships between social and sales
  • Understand how we use the range of channels now available (online and offline)
  • Define the influences and motivations of increasingly connected, social customers

Perhaps something to develop, Forrester. If you need a steer perhaps speak to Charlene Li, Josh Bernoff and your other former colleagues now at the Altimeter Group.

The implications are more profound than simply – does Social Media work? What we are witnessing is the collision between two competing business philosophies:

  • One has been around for many years and involves creating products and then marketing the differences to as wide an audience as possible in the hope that some will listen and then buy. This approach involves broadcasting, targeting, driving and selling. Social Media is seen as another platform to sell.
  • The other is based on building relationships with our most valuable customers and networks, relationships which can be leveraged to create business growth. This is marketing as a conversation in the places where our customers hang-out. The marketer's role is to add value rather than sell.

The themes within this article are also relevant to the discussion currently taking place around the positioning of e-commerce within Scotland, we've detailed our views within Scottish Enterprise e-commerce report: our response

Your comments are as always greatly appreciated.

Alan

Sources

(1) Mashable: Social Media Sales
(2) Forrester: Less than 1% of purchases come from social channels
(3) Practical Ecommerce: A social media marketing paradox
(4) PWC: pwc-us-multichannel shopping survey
(5) CNet: social still can't beat search in online shopping
(6) Shopify: how pinterest drives e-commerce sales study
(7) McKinsey Quarterly – demystifying social media
(8) Business Insider: This Deck Shows Whether The Billions Pouring Into LinkedIn, Facebook, Twitter Are Worth It
(9) Neilson: social media report spending time money and going mobile
[10] EConsultancy – How do B2B companies use social media?
[11] Return on now: intriguing social media statistics
[12] Mashable: e-commerce statistics
[13] Hubspot: 33 stats that paint a picture of the future
[14] Hubspot: 21 internet marketing statistics that will blow your mind
[15] Altimeter Group: Deep brand engagement correlates with financial performance

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One Comment

  1. Jim Hamill
    November 24, 2012 at 9:38 am

    Alan, thanks for the excellent post – especially the very detailed research and list of studies provided. I think your last two bullet points summarise the issues very well.

    Do we live in an era where customers are still passive sheep just waiting to be driven to and make a purchase from an e-commerce site? Alternatively, do we live in an era where power now lies with the constantly connected customer?

    If the latter, then radical new approaches to sales, marketing and customer management are indeed required – see previous post ‘ RIP Marketing – Long Live Social’ http://energise2-0.com/2012/08/14/marketing-is-dead-–-long-live-social/

    The issues you raise are indeed critically important to discussions currently taking place regarding the possible launch of an MSc in eCommerce in Scotland. Are we really going to go back in time to 1997?

    Thanks again.

    Jim