While we hear about the power of social media as marketing tools, especially for those trying to bootstrap their businesses, but just how effective is it?
New research from Utpal Dholakia and Emily Durham of Rice University takes a look at this question.
The study is featured in the March issue of the Harvard Business Review.
According to this study, companies that use Facebook and its fan page module to market themselves to customers can increase sales, word-of-mouth marketing, and customer loyalty.
Dholakia and Durham surveyed customers of Dessert Gallery (DG), a popular Houston-based café chain. Prior to the study, DG did not have a Facebook presence.
The study, based on surveys of more than 1,700 respondents over a three-month period, found that compared with typical Dessert Gallery customers, the company’s Facebook fans:
• Made 36 percent more visits to DG’s stores each month.
• Spent 45 percent more of their eating-out dollars at DG.
• Spent 33 percent more at DG’s stores.
• Had 14 percent higher emotional attachment to the DG brand.
• Had 41 percent greater psychological loyalty toward DG.
According to Dholakia, the results indicate that Facebook fan pages offer an effective and low-cost way of social-media marketing.
“We must be cautious in interpreting the study’s results,” Dholakia said. “The fact that only about 5 percent of the firm’s 13,000 customers became Facebook fans within three months indicates that Facebook fan pages may work best as niche marketing programs targeted to customers who regularly use Facebook. Social-media marketing must be employed judiciously with other types of marketing programs.”
Dholakia said Facebook marketing programs may be especially effective for iconic brands, which appear to attract a higher percentage of their customer base as Facebook fans.
I was curious if this meant that they saw an increase in sales as a result of social media involvement? Are they just aggregating the clients that spend more money in the first place?
Hi Dr. Cornwell: Thanks for a great summary of the Harvard Business Review article. Do you have any information on the effects of Facebook (and/or twitter and LinkedIn) on nonprofit organizations? Thanks.
Sam,
I would say the increase in sales is minimal at first, at least what I have found with working with people. After a while with engagement with people who already are familiar with your brand, product or service this grows.
Let’s say you are not represented on FB, at first there is this awareness phase with your current clients or customers. Then comes a few more touch-points. From there with more engagement then you start showing up in their network of friends and family. This can be spurred along with targeted engagement to customers who are paying attention to your efforts.
The key is tracking this loop back and dialing it in. I know I didn’t answer your exact question but I hope that gives you a little insight.
interesting article…I would think that facebook would be a great advertisement tool and obviously excellent for word of mouth advertising
Really interesting article.
I would like to add some more generic statistics about facebook as an effective marketing tool. I hope they help:
– 65% of companies use Facebook as part of their marketing strategy.
– More than half of companies surveyed (55%) use this social networking site to improve brand
awareness and reputation. Just under half are using Facebook as a marketing channel (47%) or for
publicizing new content (46%).
I think that brand awareness is a vital point to consider when thinking of facebook as a marketing tool, and this directly relates to the research study and also the use of fan pages.
For a complete Social Media report for 2010 check out http://ecly.co/aRTaMW
facebook is incredibly powerful, I think it’s crazy that companies are actually using facebook in their tv commercials…free advertising for facebook….yet good for the companies