‘Does Social Media Work?’ Is A Dumb Question

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In a blog post titled Dumb Marketing Question #1 – Does Social Media Work? the author argues that the question in question is a dumb question because word-of-mouth is a key driver of business and that much of WOM occurs through social media these days:

“The million dollar question that every company wants to know is this: ‘Will my investment pay off?’ ‘Will social media be an effective communication channel for my business?’ Asking the question in itself shows a complete lack of understanding of the communication revolution which we are experiencing.

I have yet to work with any business that has not acknowledged that one of their most important lead sources is Word Of Mouth; in other words, recommendations and referrals from existing customers, or those people who have been ‘touched’ positively by your business in some way. The truth is quite simple: Word of Mouth Went Online.”

The Ron Shevlin Take:

First off, the author’s “million dollar question” is not only two questions, but they’re two very different questions. It’s quite possible that a social media investment you make won’t pay off. But that wouldn’t necessarily make social media an ineffective communication channel for your business.

Second, nowhere in the article does the author make a credible case for why social media works. The fact that WOM is an important lead generator, and that WOM increasingly occurs online (and through social media, more specifically) doesn’t prove that a company’s investments in social media improves the volume and quality of word-of-mouth recommendations.

In fact, there are some high-profile examples of companies whose social media efforts backfired on them and resulted in a huge amount of negative publicity and word-of-mouth  (I don’t really need to find you these examples, do I?). By the blog post author’s logic, that would prove social media doesn’t work.

Why Social Media Is A Strong Tool for Financial Marketers

But the author is correct in asserting that the question “Does social media work?” is a dumb question.

It’s dumb because the appropriate question to ask is:

Will social media work better than other approaches for the particular objective we’re trying to achieve?

Marketing investments involve opportunity costs and should be evaluated relative to alternative uses for the funds.

If making a $1 million investment in social media were to produce 1,000 new customers, would you conclude that “social media works” if that same $1 million investment in TV advertising or email marketing produced 50,000 new customers?

The problem with the so-called, self-appointed social media experts’ view on social media ROI is the lack of explicit recognition of different objectives throughout the marketing chain (awareness, preference, purchase) and the lack of understanding how different marketing channels and approaches influence and impact those marketing objectives.

If you accept my question as the better question, then there’s some not-so-good news for the social media gurus who want to discard social media ROI as a performance criteria.

eConsultancy reported on a study which asked marketers to rate the effectiveness of various marketing channels and approaches.

eConsultancy graph: Financial marketer perspectives on marketing channel effectiveness

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According to the marketers surveyed, 10% rated social media ROI as excellent and 31% rated its ROI as “good.” That’s basically no different than the respondents’ perspective of the ROI of direct mail, which so many people (not just social media morons) have written off as dead.

So the question “Does social media work?” is a dumb question, but not because it’s a forgone conclusion due to word-of-mouth.

A Social Media Follow-Up Question

Although I believe (not surprisingly) that my proposed question is a superior question to the “does SM work?” question, it’s not the only question to ask. The second question to ask is:

Why does one channel or approach work better than another for achieving a particular marketing objective?

Marketers don’t seem too interested in this question. They seem content to find a statistic that demonstrates the superiority of their preferred channel/approach and rely on that stat as proof of their dominance, and the need to direct investment to that channel or approach.

The chart shown above from eConsultancy raises questions in my mind: Why do only 10% of marketers think social media ROI is excellent? and How is the percentage of marketers who think social media (and other channels’) ROI is excellent changing over time?

It’s quite possible that the reason that only 10% of marketers think social media ROI is excellent is that few know how to use the channel effectively. Or it could be that many are using the channel to achieve objectives that would be better addressed by other channels or approaches.

Consider The ‘Big Picture’ of Social Media in Banking

Like many of the social media gurus, I too am fast coming to the conclusion that the social media ROI debate is a stupid debate. 

But not for the same reasons. 

It’s not because social media ROI is a foregone conclusion. And it’s certainly not because social media investments are somehow excused from being evaluated in the same way other investments are. (The only investments excused from producing a direct ROI are infrastructure investments). 

No, the reason the social media ROI debate is stupid is because the logic and rationale offered by some (many?) to dismiss the debate is just plain stupid.

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