|This post was originally published on OPEN Forum.|
As businesses navigate the social landscape, it's important to know what social media does and doesn't do for sales.
Contrary to popular belief, it doesn't look like social networks do a whole lot to drive sales, according to a recent report by Sucharita Mulpuru at Forrester Research.
Less than 1 percent of the online transactions she tracked could be traced to a social media post, Mulpuru told us. With those kind of numbers, it seems like a waste to invest in selling products via social media.
E-mail marketing and paid search traffic were much more meaningful sales drivers, she said. That means that it might be worth business' time to invest in a loyalty program or simply ask for customers' e-mail addresses and send them promotions.
E-mail marketing is especially effective because it is low-cost in comparison to paying a search engine like Google to place a business' product first when a consumer searches for it.
Mulpuru's study also shows the difference between new and repeat customers. New customers tend to be drawn in by search traffic, while e-mailing is more effective with repeat customers who are familiar with the business' name.
A big theme of Mulpuru's study is that social networks are overhyped as sales drivers.
"While the hype around social networks as a driver of influence in e-commerce continues to capture the attention of online executives, the truth is that social continues to struggle and registers as a barely negligible source of sales for either new or repeat buyers," Mulpuru says.
That means that less than 1 percent of customers see a Facebook or Twitter ad or post, click on it, and end up buying something. The vast majority of traffic comes from searches or typing in a URL directly.
But that doesn't mean that businesses shouldn't invest in social media at all.
Businesses should have a presence on major social networks and engage with customers there, Mulpuru says. But while a business cultivates a social media strategy, it's important to remember that this will not be a big sales-driver.
The most effective method for increasing sales is getting the word out about your business' direct URL, Mulpuru says. If customers know a website, they're likely to visit and buy something.
According to Mulpuru, businesses who don't have a simple URL should change it to something consumer-friendly. This will increase traffic to the site—and eventually sales.
It's important to interact customers and make sure they know how where to find a business on social networks like Facebook and Twitter, she says.
While other forms of online marketing are more effective than social media, that doesn't mean businesses shouldn't have a presence there.
But businesses shouldn't expect sales numbers to change right away just because they're heavily investing in Facebook or Twitter. Mulpuru says: "Researchers still haven't figured out how to put a dollar value on social media, but it's still an incredibly important way to engage with customers."
Here's a chart showing revenue drivers outside of a business' website:
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