Does Social Media Actually Sell Your Product?
"People are more likely to complete a Navy Seal training program or climb Mount Everest than click on a banner ad." - Frank V. Cespedes
What can businesses expect from their social media efforts? If the bottom line is what matters, how does social media marketing fit into the equation?
Frank V. Cespedes wrote an article for the Harvard Business Review in which he expressed concern over businesses failing to measure the effect of social media on sales. He also suggests that advertising dollars are often spent on the new ideas, even when their value is not yet known.
First Cespedes explored the efficacy of social media marketing and found some sobering numbers.
According to Gallup survey, only 7% of organizations "understand the exact value at stake from digital." Cesepedes writes, "Meanwhile ... 62% of U.S. adults who use social media say these sites have no influence on their purchasing decisions and only 5% say they have a great deal of influence."
Cespedes is concerned that the most common metrics for evaluation social is likes, tweets and click-through-rates (CTRs) for online ads instead of "cause-and-effect links between the medium and market results."
Why shouldn't we trust CTRs and tweet numbers? "Farming services spike these numbers, with evidence that one in three online reviews is fake," writes Cespedes. "For $50, you can buy 1,000 Likes, 5,000 Twitter followers, or 200 Google +1s. With real people, moreover, 8% of internet users account for 85% of clicks on display ads, and 85% of social media updates come from less than 30% of a company's social-media audience."
Cespedes also worries about the reach of social messages. "A Forrester study found that posts from top brands on Twitter and Facebook reach just 2% of their followers and only 0.07% of those followers actually interact with those posts," writes Cespedes.
According to Cespedes, more than half of online display ads appear on parts of a web page that are not viewable. That means that human eyes are not seeing the ads that companies are paying for. A goal has been put forward to make sure that ads are viewable 70% of the time. "The Association of Advertising Agencies has refused to endorse the 70% goal and wants 100% viewability, which means if an advertiser buys 1 million impressions from a site, that site must display that ad as many times as it takes to ensure a million viewable impressions," writes Cespedes.
Despite these disadvantages, social media marketing has been getting more and more of the ad spend even though some marketing methods have proven to be more effective, such as email marketing. "[The] humble e-mail remains a more effective way to acquire customers - nearly 40 times more effective than Facebook and Twitter combined. Why? Because 90% of U.S. consumers use email daily and the average order value is 17% higher than purchases attributable to those social media," writes Cespedes.
The advertising market changes fast alongside technological change. According to Cespedes, the CRT for the first banner ads was 10%. But then as the market got cluttered, CTR rates fell and they fell far.
"With new media, therefore, great expectations are common and missing the goal is understandable: it takes practice and learning. But changing or dismantling the goal posts is a different story," writes Cespedes.
It is common these days for marketers to say that social media is about creating awareness and not about sales. Cespedes says this is a cop-out. "The value of any advertising, online or offline, depends on what effects it has on purchases," writes Cespedes.