Does Business Use of Social Media Do More Harm Than Good?
By Graham Jones
You cannot move for advice on using social media. Almost everywhere you look these days someone (probably me) is sharing information about the power of social media, particularly for businesses – such as the Top 10 Social Media Tools.
You can find case histories of companies that have achieved huge sales following a social media campaign. You can download guides on how to use one network or another to generate sales leads. Plus you can join any number of webinars all geared to demonstrating how to use each social network to improve your business.
But it turns out that we are all wrong.
New research from Temple University, Philadelphia, shows that while social media can improve business in the short-term, in the long-term it actually harms sales.
The study is not yet published and is currently being peer reviewed. But if it stands up to scrutiny it could set alarm bells ringing in businesses across the world.
Here’s what the researchers discovered. They found that when a company posts something on social media that leads to a sale, there is an immediate 5% increase in sales through followers on a social network. However, after a while, it appears those followers get fed-up with the social activity of the business and stop following them. This can take many months to occur. What the research revealed was that five months after a social media post that leads to sales, there is a 20% reduction in followers. The situation was also worse in cities – it appears that geography has some kind of impact too.
Go back to basics
One of the oldest adages in business is “you make more money from existing customers than from new ones”. It costs you more money to generate a new customer than to encourage an existing customer to buy something else. The 80-20 rule shows that businesses make 80% of their profits from 20% of their clients. Centuries of business experience shows that concentrating on existing customers and selling more to them is the most profitable thing a company can do.
The world of online social media, though, is changing the way businesses think. It is driving them to find new customers all the time. There is a constant demand for “more followers”, or “higher numbers of likes”, or “more traffic”. The only way a company can achieve this is to ignore the existing customers and seek new ones.
It appears that this does work – in the short term. Those new followers on social networks see an offer from the company and then are attracted to buy the item or service, leading to a 5% uplift in sales. However, after a number of months, these new customers become disillusioned with a never-ending stream of information from a company that they have little real connection with. Hence, they unsubscribe.
Companies, of course, are unaware of what is going on. That’s because five months down the line when 20% of people have unsubscribed, the firm has spent considerable efforts in attracting new Go to the full article.