Hard evidence that social media activity helps the bottom line

Social media activity can improve brand perceptions and customer service, but does it translate into more sales and profitability? That is the question tha06847e420ee287917c097ed3e602c23dt I am often asked. So, I was very pleased to come across two studies, recently, which measured exactly that. Here is a very brief overview of these two studies, and what the findings mean for marketers.

 

Study 1. Impact of short-term advertising campaign on sales

The first study was done by two researchers at Monash University, Peter J. Danaher and Tracey S. Dagger [1]. They studied the impact of a four-week advertising campaign on the sales of an Australian department store. The advertising campaign included television, radio, newspaper, magazine, online display, sponsored search, social media, catalogue, direct mail, and e-mail channels, and the adverts focused on the promotions taking place at that retail store during the month-long sales campaign.

 

They found that traditional media were more effective than digital media at generating short term sales, as illustrated in Table 1 [2]. Specifically, catalogues, television, and direct mail have the most influence on sales during that period, while social media has a negligible effect, only.

 

Table 1. Impact of blitz campaign on sales

Social sales 01

Source: Danaher and Dagger (2013)

 

Study 2. Impact of ongoing marketing communications on sales

The second study was done by a team of researchers based in Finland and in the US, namely Ashish Kumar, Ram Bezawada, Rishika Rishika, Ramkumar Janakiraman and P.K. Kennan [3]. As with study 1, this study examined the impact of marketing communications on sales, this time at a large, US based, wine retailer on sales. However, this study looked at a mixture of promotional and non-promotional messages. Furthermore, this study looked at both customer spending (as study 1 did), and cross-purchase behaviour (which is seen as an indicator of “the breadth of a customer’s relationship with a firm” (p. 8).

 

As had happened in study 1, this study found that traditional media were better than digital or social at generating short term sales (See table 2). However, the study also found that that advantage decreased over time… Moreover, social media were better than traditional or digital media at generating cross-purchases (which, as mentioned above, is deemed to be an indicator of the strength or quality of the relationship between the firm and the customer).

Table 2. Impact of ongoing marketing communications on sales

social to sale table 7

Source: Kumar, Bezawada, Rishika, Janakiraman and Kannan (2016)

 

Implications for marketers

Taken together, these studies show that while traditional media still plays a very important role in blitz campaigns aiming to generate short term sales, social media is clearly important in terms of developing the commercial relationship in the long term.

 

Let me know what you think about these studies. 

 

[1] Danaher, P. J. and Dagger, T. S. (2013) Comparing the Relative Effectiveness of Advertising Channels: A Case Study of a Multimedia Blitz Campaign. Journal of Marketing Research: August 2013, Vol. 50, No. 4, pp. 517-534. (here, but paid access, only)

[2] The authors think that the poor performance of online display ads is due to the fact that it is not possible for customers of this retailer to make online purchases.

[3] Kumar, A., Bezawada, R., Rishika, R. Janakiraman, R., and Kannan, P.K.  (2016) From Social to Sale: The Effects of Firm-Generated Content in Social Media on Customer Behavior. Journal of Marketing: January 2016, Vol. 80, No. 1, pp. 7-25. (final version here, but paid access, only; or pre-print version here, open access).

6 thoughts on “Hard evidence that social media activity helps the bottom line

  1. This is not surprising at all. I think people are almost conditioned to look for deals on traditional media versus social. I wonder if this will shift over time though as many opportunities to advertise on traditional media dry up. For example, I almost never see TV ads since I consume my content on Netflix etc. On the social side, you have the confounding impact of ad blockers. Thanks for the great post!

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    1. Thank you for stopping by, Mark. Yes, great point about Netflix and changing media habits. Within traditional media, I thought it was very interesting to see the effect of catalogues on sales.

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    1. Yes, that is most certainly a point to keep in mind. The other point is that, in both cases, most sales happened in the store environment – in study 1, the retailer did not sell online; in study 2, they did but the volume of sales through this channel was very small. The result for digital (which includes adwords, etc), might be quite different for a retailer with a strong digital presence.

      Thanks for stopping by, Jayne.

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