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John Fahy is the Professor of Marketing in the University of Limerick and Adjunct Professor of Marketing at the University of Adelaide. He is an award winning author and speaker on marketing issues around the world.

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Entries in Social Media Effectiveness (1)

Wednesday
Jun192013

So Investing in Social Media Works After All!

Few things dominate discussion in marketing these days as much as social media. Volumes of column inches and conference time is devoted to talking about the opportunities presented by the likes of Twitter and YouTube and the rapid growth of these platforms has been heralded as game changing in the marketing world. While some are giddy with excitement, there are also cautious and even critical voices out there who argue that behind all the hype, there is little evidence to show that putting time and money into a Facebook page, for example, has any actual positive impact on the bottom line.

 

 

 This is what makes a recent article published in Information Systems Research all the more interesting in that it shows some support for investments in social media. The study, which was conducted in the US, examined customers of a wine retailer to ascertain whether those that engaged with the firm on social media were likely to spend more with the company or not. The authors surveyed a large segment of the firm’s customer base to identify who was participating in a recently launched social media initiative by ‘following’ or ‘becoming a fan’ of the firm. They also gathered data on customer demographics and spending habits including purchases from other wine shops. In all, the researchers gathered monthly data on 394 customers over a three year period. Alongside this group was a control group containing customers with a similar demographic profile but that had chosen not to be involved in the firm’s social media efforts which enabled the comparison to be made.

 

The results were very insightful. There were no significant differences in the frequency of shop visits by the two types of wine customer before the retailer started its social media efforts. But over time those that interacted with the firm’s social media initiatives visited the retailer’s stores over five per cent more often and contributed almost six per cent more revenue than those that had not. The effects were amplified by certain types of customers. Those that posted more messages tended to buy in larger volumes, preferred special or premium products and were more loyal to the company. However, social media efforts had less positive effects on customers that are more likely to buy products when they are on sale, suggesting that these customers use social media primarily as a way to find deals and are therefore less brand loyal.

 

In short, the study supports investments in social media marketing but argues that businesses should segment their customer base carefully and recognise that not all customers will have the same response to social media marketing efforts.

 

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