Business Uses of Social Media

Social media can be used for many different commercial purposes, including advertising, promotions, educating consumers, educating personnel, customer service, market research, new product development, public relations, human resources management, investor relations, and so on. The list can be much longer than this, as “anything” that has been done on the Internet can now be done through social media.

Currently nineteen out of the top twenty social media–related books on Amazon are related to business uses of social media, and global social media advertising expenditure reportedly hit $4.7 billion in 2012. The question is, why do companies pay this much attention to social media? Perhaps the answer is its superiority over traditional media channels, as explained in the following two tables:

Facebook and Business

At the time of writing, 95% of the top U.S. brands and 58% of Fortune 500 companies have been actively using Facebook for varying purposes. Motivations to use Facebook can range from customer service to public education and promotions to market research.

It is reported that Toyota used Facebook to listen to its customers during the recall crisis in 2010 and managed to turn the crisis into an opportunity by increasing the number of its fans. Similarly, BestBuy asked its fans on Facebook to rank vampire movies, which increased sales of that genre, and Chase Bank improved its brand image by allowing Facebook fans to Decide the charities the bank will donate to.

Facebook is not only an ideal tool for brands to communicate with their fans, but also to attract new fans that may increase the sales. For instance, Dairy Queen gathered more than 100,000 new fans with the help of the $5 Tasty Treat giveaway campaign, which offered a $5 coupon to each fan that liked the brand’s Facebook page.

The value of a Facebook fan is estimated to be $136.38. This number was calculated based on the fact that fans spend more, are more loyal to the brand and more likely to recommend a brand, have higher brand affinity, and carry a certain earned media value.

The study also found that fans on average spend $71 more than non-fans.6 A similar study7 that surveyed 1,700 customers of a bakery shop (DG) in Texas after they became Facebook fans of the brand reported that:

Though they spent about the same amount of money per visit, they increased their store visits per month after becoming Facebook fans and generated more positive word of mouth than nonfans. They went to DG 20% more often than nonfans and gave the store the highest share of their overall dining-out dollars. They were the most likely to recommend DG to friends and had the highest average Net Promoter Score—75, compared with 53 for Facebook users who were not fans and 66 for customers not on Facebook. DG fans also reported significantly greater emotional attachment to DG—3.4 on a four-point scale, compared with 3.0 for other customers. Additionally, fans were the most likely to say they chose DG over other establishments whenever possible.

People who follow brands on Facebook seemingly have different motivations. Two different studies identified slightly different reasons to follow a brand. Mashable reports that the top reasons to follow a brand are

1. to receive discounts and promotions,
2. to give social endorsement (show one’s support for a company to others), and
3. to get a freebie.

According to a report released by the market research company Lab 42, the top reasons people follow a brand are:

1. prompted by an ad (online or offline) or invitation from the brand,
2. invited by a friend, and
3. personal research.

Meanwhile, 69% of Facebook users have an experience of Liking a brand after seeing their friends’ Likes on the brand, and 46% report that they have no intention of buying anything from a brand(s) they Liked on Facebook, either because it is expensive or they Liked the brand just to get a freebie. The same study also indicates that 22% of the people feel uncomfortable giving Likes to brands from certain categories (adult novelty, weight loss, etc.).

Despite the fact that only 16% of brands’ posts actually appear in fans’ timelines (for instance, if Coca-Cola posts something on Facebook, 84% of Coke fans usually don’t see that post unless they go to Coke’s Facebook page), more than two-thirds of Facebook users reported that they are more selective when liking a company than they were a year ago, and 81% of them have Unliked a brand on Facebook because of a cluttered newsfeed or irrelevance to personal life. The unfollowing rate on Twitter, however, is a much lower 41%.

At the same time, the direct effects of Facebook on sales may be limited. Studies showed that social media drive only 2% of sales, and only 2% of the people say they’d buy something on Facebook (a.k.a. fCommerce). What is more, a study that analyzed the way people are influenced by communication in social media found that 12% of social media users were negatively influenced by their friends product-related posts (particularly for the fashion category, as some people may not want to wear what everyone else is wearing) and 48% were not influenced at all by their friends’ posts.

Worse still, engagement on Facebook may be limited to super-active core fans only. A study that analyzed fifty-two brand pages with a total of 31.7 million fans for eight weeks found that only 6% of fans engage with brands. The twenty most active fans of each brand generate most of the content on brands’ walls and their activity is seventy-five times higher than that of a normal fan, though these active fans tend to get more likes and comments from other fans.

Twitter for Business

Besides being used as an internal communication tool, Twitter can be utilized by brands in several ways, including announcement of sales promotions, sharing company and product news, researching consumer needs, and actively engaging in dialogues with consumers. Similar to Facebook, brands use Twitter for three major reasons:

1. news,
2. special offers, and
3. dialogue with existing or potential customers.

By the same token, consumers follow a Twitter account for three reasons:

1. they are already customers,
2. they want to be the first to know about information about the brand, or
3. they want to get discounts.

It is argued that today’s consumers are more individualism-driven, demand more information from brands, and want to have customized products and services. Twitter, which turned passive consumers into active content creators, comes in handy when answering all these needs.

By 2013, 95% of the top hundred American brands have been reported to have a Twitter account, and 86% tweet on a weekly basis. A significant portion of the top brands use Twitter to engage with their customers, as the study found that within a week 67% of the brands used a hashtag (the # sign used to chat with customers), 74% sent a message directly addressing a customer, 52% retweeted (shared) another user’s tweet, and about one third asked a question to its followers.

One important aspect of Twitter is its capacity to personify brands and make them reachable all the time, which may pave the way for friendship between brands and consumers. In order to establish a personal relationship with consumers, brands all around the world personalize their Twitter accounts by using human faces, personalized accounts (e.g. @MikeatXOM instead of @XOM), use personal pronouns in tweets (e.g. I, we), and post tweets that include emoticons and abbreviations (e.g. -, OMG, LOL).

Many companies, including JetBlue, GM, and Home Depot, also search Twitter’s public timeline to find messages that include their brand names and then respond to those posts with coupons and offers, which boosts customer loyalty, brand image, and sales. There are reports that Dell made $3 million in 2009 just by tweeting about refurbished computer campaigns.

On the other hand, misuse of Twitter is very risky for companies. A blog post by the CEO of HootSuite gave examples of how brands trying to take advantage of disasters faced a consumer backlash, and how employees and spokespeople sending out tweets on behalf of brands caused problems.

Social Media Models

Unfortunately, no scientifically tested social media models exist. However, recently several social media bloggers coined new terms and introduced new models that hypothesize how social media works. The first is the owned, earned, and paid media model.

As seen in the figure below, paid media represents paid advertising channels and owned media stands for a brand’s social media space. Social media is considered owned media because brands have full control of what happens on their own social media pages.

Earned media is considered the most effective; it stands for user-generated content that involves brands. In other words, when someone posts a picture of his Coke tattoo, that blog post is considered earned media, as it promotes Coke by someone who is not associated with the company. Earned media is the most effective way to promote a brand, as consumers trust other consumers more than they trust brands.

The second model is introduced by Dentsu and is quite similar to the century-old AIDA (attention-interest-desire-action) model. Dentsu’s model starts with attention, followed by interest, search, and action.

The last step in the model is share; that is, instead of just consuming and disposing of products, consumers share their experiences in social media. This step did not exist before the age of social media, and it is a process that shifts the balance of power from brands to consumers.

If consumers have a negative experience, they complain about the brand in social media. If they have a positive experience, they turn into brand advocates.

The third model was introduced by a research team from the University of Bremen. This model proposes that if a social media page provides information, entertainment, and economic value, we are likely to follow that brand page.

When we follow a fan page of a brand, we develop more positive attitudes toward the brand than we previously had. We can also conclude that if we have more positive attitudes toward the brand, we are more likely to buy it. Unfortunately there is no conclusive evidence that this model holds true, as it is very difficult to experimentally test.

Social Media Campaigns

A German study found that 51% of all communication initiated by brands on Twitter were dialogues, followed by news (32%) and campaigns (17%). Since dialogues and news are hard to categorize, we looked at what kinds of campaigns are shared in social media.

In August– September 2012, my seminar student analyzed the latest fifty Facebook campaigns and fifty Twitter campaigns featured on the three major social media monitoring sites in Japan. The results were quite insightful; however, there were not many “original” social media campaigns.

Only 4% of the campaigns were related with check-ins and there were no campaigns that involved using QR codes, collecting points, treasure-hunting, forming interest groups, urging consumers to learn more about the brand, or gaining more friends in social media. Most of the campaigns consisted of an invitation to answer a question or send a photo/video in social media.

Interestingly, about three quarters of the campaigns were not directly related to the sponsoring brands. Perhaps, because of the popularity of Celebrities on TV, there were a significant number of celebrity-related social media campaigns.

Social Media Content

Since there are few studies on what brands communicate through social media, a student of mine coded the last 10 Facebook posts of the most popular 10 consumer good brands from Japan and the USA in April, 2012. As can be seen in the following graphs, she found that Japanese and American brands have different content strategies.

First of all, American brands tend to have more social media based advertising campaigns and highlight their social media fans more whereas Japanese brands use social media to promote their offline campaigns and don’t feature any ordinary brand user (perhaps as a result of the collectivistic nature of the country). On the other hand, Japanese companies post more frequently about their employees and their logos/mascots.

The most interesting finding emerged from this study was the similarity between the appeals used in Facebook posts and advertising messages. Supporting the findings of past studies on Eastern and Western advertising, the results indicated that Japanese Facebook posts have more emotional content compared to American posts that usually have rational content.

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