With Social Media being the big buzzword today, it’s easy to jump on the bandwagon without properly thinking about why and how it’s so powerful. Brands today have to fight to attract the attention of the average consumer. As the pace of technology quickens, older forms of media start to obsolesce.  What we’ve known for the past few years is the potential economies of scale that can be realized with this type of digital media.  We are only beginning to see the actual business results of these interactions, however.

We would expect that all brand managers and CMO’s would be quick to adopt the prevalent online media platforms that are consuming the public’s attention. However, in our experience, we have been surprised by the number of brands that don’t yet leverage these new and powerful communication outlets.  This resistance has been driven by a perceived lack of hard evidence to support a proper allocation of marketing spend.  Every day, business owners and CMO’s are demanding to see the solid link between Social Media and higher sales. Fortunately, the facts now speak for themselves.

Social evaluation firms such as Vitrue have taken it upon themselves to explore the very heart of the issue: How does one monetize social media? Social Media platforms such as Facebook and Twitter have become unprecedented user engagement tools. Users are able to publically support anything in their lives that they use or enjoy – a product, a brand, a campaign. This engagement and endorsement of brands is then virally shared with their network of contacts. One’s friends, fans, or followers are able to instantly click and learn more about a particular brand or product. When compared to traditional forms of advertising, social media clearly connects brands and consumers at touch-point where they can take instant buying action. When Vitrue looked at Starbucks, they found that the company’s 8 million+ community of “fans” on Facebook boasts a value of $20.7 million in annual page value. Skittles, with over 4.4 million “fans,” derives $7.7 million in annual page value*.

Facebook further demonstrates its value by converting active users into key influencers.  Facebook “fans” are open supporters of a brand and thus classified as “power users”. A Syncapse Inc. survey on fans of the top 20 brands on Facebook found that on average, fans spent an additional $71.84 on a supported brand’s products.  Fans were also 28% more likely than non-fans to be continuing users of particular products and 41% more likely to recommend those products to friends. The viral effect of these key influencers is exponential because the recommendation is based on trust and relationships. In fact, one word of mouth conversation on social media platforms has the impact of two hundred television ads**.

Why is this type of social media engagement so important? Engagement drives traffic to company and brand websites.  Most CMO’s would agree that a certain percentage of site traffic translates into leads, which then convert to sales. Marketers can quickly begin to see the link between effective social media usage, site traffic, and monetization.  Social Media platforms and campaigns act as “brand magnifiers”- the more Facebook fans you have, the more traffic your site will see, the more sales leads come your way.

In today’s digital world, social media platforms allow brands to reach an unlimited consumer base in a highly cost-effective manner. The more engaged the users become, the more the brand is multiplied throughout the digital space.

In our next post, we will discuss a few methods for maximizing user engagement within these communities.  Stay tuned!

* These both assume a proxy CPM value of $5

**Source: YouTube.com fact sheet