Businesses invest heavily in engaging with customers online but until now there has been little evidence of the value of their social media efforts. Now a research project has found a way to measure the impact and offers some lessons on how best to use it.
With around 2.5 billion people now linked up on social networks like Facebook, Twitter and Instagram, it’s no surprise that businesses are keen to join them. Social media is considered an essential ingredient in any marketing strategy and even small firms devote many hours each week to posting messages and trying to engage with their audience online.
But are their efforts worthwhile? Measuring the results from social media has long been a challenge and even many practitioners remain skeptical about its value. Now for the first time a research project has been able to measure the return on investment.
Dr Sunghun Chung, an IT specialist at UQ Business School, who took part in this and other social media research projects, says: “Until now, there has been relatively little research about the impact of social media. While some studies have shown that consumer reviews or blogs can influence a firm’s market value, we have known little about the returns on firms’ own social media efforts. There has been nothing to explain how social media can influence a firm’s performance, and limited guidance on how to use it strategically.”
The research team collected detailed data from the Facebook pages of 63 companies, drawn from the ranks of South Korea’s top 100 stock market listed firms, and compared these to their financial results.
They found that a firm’s social media efforts can positively affect its performance; however, quality matters more than quantity. The volume of posts in itself was not significant - the impact depended on the richness of information provided and the extent to which the firm responded to consumers’ messages (responsiveness).
“Our findings provide a rationale for firms to invest heavily in their social media,” adds Dr Chung. “We found that a firm’s social media efforts can improve consumer engagement and attention, which in turn, result in higher market performance.
“By providing regular information and interacting with their followers, firms can increase engagement with customers and potential customers and engender greater trust and loyalty. “Likes” can also affect the stock price of the firm because they send a strong signal of a company’s health to investors, who often look online for further information.”
The research contains some key lessons for social media managers. Dr Chung offers the following advice:
Don’t post for the sake of it
The volume of posts has only an indirect impact on company performance, and it could even be damaging as recent reports suggest that indiscriminate posting can cause ‘digital fatigue’ in consumers.
Focus on quality
‘Richer’ messages are more likely to be noticed and shared because they are more engaging and informative. Ensure content is tailored to consumers’ interests and needs, and make use of ‘rich media’ like pictures and videos which require less processing effort. Because they are easier to understand, more information can be communicated, which results in more engaging and valuable content.
Respond to and engage with customers
While it takes more time and effort to monitor and respond to customers’ comments, it is critical to building strong social capital. Whereas standard posts will only be seen by the consumers who subscribe to your feed or like your page, high levels of engagement can create the ‘social contagion’ effect which means that your messages will be seen by people in your subscribers’ network and spread virally to reach a wider audience.
Engagement is also a sign of customer satisfaction, which leads to repeat buying and increased market share. ‘Likes’ can serve as positive word of mouth recommendations to other consumers, and can also influence investors.
Consider ways to drive web traffic
The findings suggests that social media engagement can increase traffic to the firm’s website, but only for those who are selling online. Other firms will need to tailor their social media strategy or find different ways to increase their website traffic.
Benchmark against your competitors
Dr Chung suggests that firms can adapt the approach used in the research project to collect data from competitors’ social media sites, analyse it in terms of the three dimensions of volume, richness and responsiveness, and use it to inform their own social media strategy and improve return on investment.
Customer satisfaction
Social media is a valuable indicator of customer satisfaction and metrics such as ‘likes’, testimonials, reviews, complaints and blogs provide ongoing feedback that is more up-to-date than information from customer surveys. Dr Chung recommends that companies could use it to complement existing customer satisfaction indexes such as ACSI.
He adds: “Social media provides an opportunity for firms to interact with customers from all over the world. Our research highlights the business value of being “connected” in a digital economy in which people are increasingly networked.”