Social media can boost the bottom line

U. BUFFALO (US) — Customers who participate in a firm’s social media visit the business about 5 percent more frequently than those who don’t.

And those socially savvy customers mean more money for the company, says Ram Bezawada, assistant professor of marketing in the School of Management at the University at Buffalo.

“There have been doubts about the effectiveness of social media for business because the link between a firm’s efforts and the return on investment hasn’t been established,” explains Bezawada, who is co-author of a study scheduled for publication in Information Systems Research.

“Our results show that when customers engage with a business through social media they contribute about 5.6 percent more to the firm’s bottom line than customers who do not.”

The study used data related to individual customers’ participation on a Facebook page and combined it with their actual purchases at a large specialty firm in the Northeastern United States.

Bezawada says there are a number of ways businesses should engage customers to achieve the best results.

“Social media activities help strengthen the bond between the customer and the firm—and boost financial performance,” says Bezawada. “When building communities, businesses should craft personalized messages, encourage member contribution, integrate knowledge about customers from both online and offline interactions, and create specialized sub-communities for customers looking for premium and unique products.”

Researchers at Aalto University and Texas A&M University also contributed to the study.

Source: University of Buffalo