Four University professors recently published a study in the Information Systems Research journal concluding that businesses that do more to promote community on Facebook have more social consumers buying their products. While this conclusion may seem quite underwhelming, there have been many studies that have failed to substantiate a tie between social activity and sales.
Despite the positive conclusion of the study, I suspect its recommendations may not be achievable for most businesses.
Is it replicatable?
The study, “The Effect of Customers’ Social Media Participation on Customer Visit Frequency and Profitability: An Empirical Investigation” compares social media engagement with purchase history to draw conclusions about the effect of social media on buying behavior. The study was focused on just one business and its Facebook fans.
From their research the authors draw the following conclusions:
- Participation in a firm’s social media efforts leads to an increase in the frequency of customer visits (about a 5% increase in visits)
- This happens more frequently when there are high levels of activity in the social media site
- Managers to integrate knowledge from customers’ transactional relationship with their social media to better serve customers and create sustainable business value
So, buying increases proportionate to social media activity and firms need to have a CRM-like system to marry online and offline activity. This makes some intuitive sense. And the fact that it can be verifed through their findings is awesome. However, in the press release for the study, one of the primary researchers explains the following:
“When building communities, businesses should craft personalized messages, encourage member contribution, integrate knowledge about customers from both online and offline interactions, and create specialized sub-communities for customers looking for premium and unique products.”
The problem is that businesses are almost entirely ill-prepared to accomplish these things through Facebook. Brands can’t initiate conversations with their followers. Member contribution therefore is content-driven, and content gets about 15% reach with Facebook’s EdgeRank algorithm. CRM solutions may be pricier than many businesses are willing to pay, and most SMBs aren’t spending enough on social media to properly integrate CRM anyhow.
Facebook may be effective if businesses budget for reach, for CRM and content. This study seems to substantiate the low likelihood that any business can effectively market on Facebook without committing additional dollars to do so.
“You’d bury yourself alive just to prove you could handle the shovel”
In the underappreciated movie “Tin Cup,” Cheech Marin plays a caddy to a talented and reckless golfer (the afforementioned “Tin Cup” played by Kevin Costner). After sabotaging some golf event, Marin tells Costner: “you’d bury yourself alive to prove you could handle the shovel.”
I have little doubt that given enough resources, businesses could see a return on their investment through social media. But when businesses have to spent budget to accomplish their social outreach, it makes sense to compare Facebook to AdWords, email, and other digital marketing tools. And maybe the bigger question for marketing research should be the efficiency of Facebook marketing compared to anything else. Will businesses continue to use Facebook to prove that they can use it, or will they start to migrate to tools that show themselves more effective.
What do you think? Do you believe that Facebook is as effective as this research indicates? Can businesses accomplish engagement goals without an ad spend? Are alternatives to Facebook more efficient?