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New Research Shows Social Media Posts Have a Positive Impact on Companies’ Sales

Yahoo Tech

It’s the Age of Social Media, and most companies are all in. They vie for likes on Facebook; they post pictures of products on Instagram; and they collect followers on Twitter and Weibo — China’s popular microblogging site — and regularly post about new services.

And yet, even as companies continue to spend time and money on social media, many are dubious about whether all that posting, tweeting, and retweeting has any effect on the bottom line.

My collaborators from Tsinghua University’s School of Economics and Management and I have just completed a large-scale field experiment on the Chinese microblogging service Weibo with a large global media company that produces documentary TV shows. We found that when the company posted about its shows, viewership rose 77 percent. Reposts by influential users, meanwhile, increased viewership by another third. The upshot: Social media platforms, like Twitter and Weibo, can have a significant impact on sales.

This is good news for companies and their marketing departments. Many of them had a hunch social media was an effective tool, but in the end it was only a guess. According to the 2014 CMO Survey, corporate spending on social media is expected to jump 128 percent in the next five years. Only 15 percent of marketers, however, said their companies had evidence that social media had an impact.

As marketing platforms go, Twitter is a godsend. Its barriers to entry are low. It’s an egalitarian marketplace. And it’s cheap — posting is free, and adding multimedia screenshots or artwork is easy and inexpensive. But not all tweets are created equal, and our study has several implications for companies that use Twitter and Weibo.

The first is obvious: You must tweet regularly to your community. Your followers are already predisposed to your brand, which means they are naturally more open to, and tolerant of, your advertising. Use that to your advantage. When communicating with this group, simple can be effective, we found. (Twitter’s 140-character limit enforces this nicely.) But your tweets should be informative if you expect an influx of new customers. Provide a link to the specific product or service you’re promoting to bridge the gap between the customer’s intention and his actions.

A second lesson involves how companies use so-called “influentials” to reinforce their messaging. Influentials are not actual celebrities — no Justin Biebers here — but rather ordinary people who have large Twitter followings, who tweet regularly, and whose followers tend to retweet them. We found that, when an opinion leader who (and this is critical) had a big following that did not overlap with the audience of the media company reposted the company’s message, customer engagement in the form of television viewership increased by 33 percent.

Again, short and straightforward messages can be powerful. We designed the text of the reposted messages for consistency, and, frankly, none of the posts was particularly funny or clever. Rather, they said things like: “This documentary looks interesting; you should check it out.” We did, however, make to provide a link to the particular show. This kind of information caters to the expanded audience that may not be familiar with your product and brand. Considering the fact that companies experienced a 25 percent increase in sales through the Internet last year, these links are vital to driving sales.

A third takeaway concerns third-party advertising: The fact that basic company posts and reposts have the desired impact might reduce the need for it. Third-party advertising is one of the most common ways social media companies make money. The ads — which appear on customers’ timelines or home pages and look similar to other ordinary tweets or posts — are targeted through algorithms based on a person’s Web activity and browsing history. The marketer has parsed through that person’s data and determined that she is likely receptive to its message.

The problem with third-party advertisements is that many consumers view them skeptically. Not only are these posts forced upon them, but their content is also so unnervingly accurate that it often comes across as a creepy ad campaign designed by Big Brother. Our study casts doubt on whether companies even need third-party advertisements.

Finally, our research contains a lesson for Twitter and Weibo: You could charge companies for your service. It’s clear that such social media platforms provide a lucrative stage for companies to interact with consumers; they could rightfully demand a piece of the action. This charge could come in the form of a fee to open a business account, or it could be a monthly payment that allows a set number of promotions.

Twitter and Weibo are virtual ecosystems. When companies use these platforms wisely, they can make tangible improvements to their bottom lines.

The study is Tweets and Sales, by Juanjuan Zhang, MIT Sloan School of Management. Co-authored with Shiyang Gong, Ping Zhao, and Xuping Jiang, School of Economics and Management, Tsinghua University.

Juanjuan Zhang is associate professor of marketing at the MIT Sloan School of Management.