DO LIKES FOOT THE BILL?

Does social media generate more sales?

BY Jayashantha Jayawardhana

Brands aspire to maintain a strong presence on social media and marketers spend pots of money on elaborate efforts to make it happen. But does a strong social media presence necessarily translate into tangible business results – an uptick in sales or increased brand equity?

Does the money that marketers pour into social media really pay off? Do likes or followers count as much as they’re believed to do?

Let’s explore the answers to these questions…

Facebook is the most preferred platform – 80 percent of Fortune 500 companies have active pages on the platform. Every day, a torrent of brand content is unleashed on Facebook pages and on other platforms too. It’s all designed to entice people to follow, engage and buy brands.

Writing in the Harvard Business Review (HBR) of March-April 2017, Leslie John and Daniel Mochon et al reveal that even the US State Department was enamoured with acquiring followers and spent US$ 630,000 from 2011 to 2013 to collect Facebook likes.

Marketers justify such investments on the basis that attracting social media followers and increasing their exposure to a brand will ultimately result in increased sales.

If this logic is to hold, then those who socially endorse a brand by liking it on Facebook will spend more money than they’d otherwise do and their endorsements would encourage friends and others to shop – creating a cascade of new business – since Facebook shows those likes to a subset of their friends.

At first glance, the evidence seems to support this rationale and many brands have discovered that customers who interact with them on social media spend more money than other customers.

An influential study by Comscore and Facebook found that compared with the general population, people who liked Starbucks’ page on that platform or who had a friend who liked the brand on it, spent eight percent more and transacted 11 percent more frequently over the course of a month.

However, researchers reveal an important factor: “That study and others like it contain a fatal logical flaw. They confuse cause and consequence. It’s possible that getting people to follow a brand on social media makes them buy more. But it’s also possible that those who already have positive feelings toward a brand are more likely to follow it in the first place and that’s why they spend more than non-followers.”

In 23 experiments conducted over four years and involving more than 18,000 respondents, the researchers had used an ‘A/B’ testing method to explore a vital counterfactual – what would followers have done had they not followed a brand?

Considering the millions of dollars in marketing budgets that flow to social media, the distinction is far from trivial. It has ample implications for marketers’ resource allocations and how they manage their brands’ social media presence.

Researchers had proceeded to test four increasingly interactive ways in which Facebook may affect customer behaviour. They tested whether liking a brand on Facebook – that is passively following it – makes people more likely to purchase it and whether people’s likes affect their friends’ purchasing decisions.

And researchers also checked if liking affects things other than purchasing. They tested whether boosting likes by paying Facebook to display branded content in followers’ news feeds increases the chances of meaningful behavioural change. Although their study is limited to Facebook, researchers believe that their findings apply to other popular social networks too.

The findings were clear. Social media doesn’t work the way many marketers think it does. The mere act of endorsing a brand doesn’t affect customers’ behaviour or result in increased purchasing; nor does it stimulate purchasing by friends.

However, supporting endorsements with branded content can yield significant results. One reason Facebook advertising can be effective is that a brand’s social media page reaches a highly desirable audience and the likes blaze a trail for targeting ads. This is most effective when customers take the trouble to seek out a brand themselves.

Further, since social media pages are gathering places for loyal customers, they can provide brands with a unique source of customer intelligence and feedback, which marketers can use to craft new and more effective social media strategies. Savvy brands already capitalise on their customers’ social endorsements to drive their marketing.

There are many meaningful ways in which a brand can engage with its followers and drive marketing. For instance, LEGO uses its social media channels to garner customers’ ideas for fresh offerings and tout new product lines.

The trick here is to view the larger picture rather than simply going after those likes alone!