Profit: the bottom line of social media engagement

by Steve Seager

I often get asked by clients why ‘engagement’ is so important to succeed in social media. By ‘engagement’ we mean actively working social media to build real relationships with your stakeholders. I’ll write more on engagement soon.

Meanwhile, here’s an analysis of a report [PDF] from Altimeter and WetPaint which might help put this ‘engagement’ issue into context.

In the 2009 report the 2008 BusinessWeek/Interbrand Top 100 brands were studied to see if there was a correlation between social media success and a brand’s financial success. And the results sure are interesting.

Bottom line social media engagement

The findings

1. The most-engaged brands significantly outperformed their competitors across industries. In both revenue and profit.

2. All of the top 10 brands who are actively engaging in social media have driven financial success. Even in recession!

3. The most engaged brands saw their revenue grow over the past year by 18% while the least engaged brands saw losses of negative 6%.

It’s important to bear in mind this is a correlation, not a causation. But! There are over 100 companies in the study. And the findings were consistent. So it does seem very likely that social media had a major impact on their bottom line.

The conclusion

The brands that gained the highest gross and net margins were either ‘Mavens’: those who the report classified as actively engaged in many channels or ‘Selectives’: those who were engaged in fewer channels, but were fully engaged in the channels in which they were active in.

‘Butterflies’, who had many social media touchpoints (channels) but were less engaged in them, had larger revenues than ‘Selectives’, but ultimately, were not as profitable. ‘Wallflowers’, who were active in less than 6 channels, were the least profitable.

Strategic recommendation for starters

If you are just getting started, start small. Be a Selective! Build a manageable social media infrastructure. One you can use to connect with your audiences, and create enough content to keep the conversation flowing. Be sure to delegate responsibility to the right part of your organisation. Encourage internal ownership. And work those few channels well.

A final note

Starbucks, the brand with the highest engagement, only have a team of six people allocated to social media. And their approach was not to consider social media as some new fangled addition to their marketing. Instead, as Alexandra Wheeler, Director of Digital Strategy put it:

We live in the physical world with thousands of natural touch points, so when we laid out the vision for our social strategy, it felt like home for the brand. It’s about the relationships we form with our customers, not marketing.

An interesting thought. So how do you consider social media? A marketing tool? Or is it all about relationships with your targeted audiences? Perhaps your bottom line rests on it.

Previous post:

Next post: