Marketing budgets are under attack, earning less of a percentage of company revenue in 2017, coming in at 11.6% (according to the Gartner CMO study). According to the study, the decrease has to do with the heightened focus on results; buoyed by P&G’s Marc Pritchards now infamous rant about measurable results. The decrease in budget doesn’t necessarily mean that decreases in performance will be tolerated. Marketers are asked to invest in channels that produce the highest return on investment.
Since its inception, social media has been one of the channels that has gotten a pass from a direct response performance standpoint. Citing numerous studies, social media rarely drives direct conversions, and it shouldn’t necessarily be the driver of direct conversions.
Why Social Media isn’t Built to Drive Conversions?
Social media is often thrown into the same bucket as traditionally direct response mediums, such as Search Engine Marketing, SEO, email, and affiliate, however, it is more inline with passive mediums such as print, out of home, and broadcast TV; it just happens to be digital in delivery.
One reason is that Social Media is a lean back medium. Consumers rarely open their social media app of choice and instantly seek out an answer to a product related inquiry; choosing a search engine for that activity. Consumers use search in a very transactional manner, while social media is a medium often used to pass time, update themselves on the day’s activities, etc. The mass audience rarely shows up to social media with an inherent intent to seek answers to a question; the fundamental task in which search is utilized.
Social Media’s role in Conversion Process
A myriad of studies have highlighted the low rate of purchase intent a consumer has while on social media, however, marketers continue to allocate funds into the medium in an attempt to drive what is called Social Commerce (eCommerce via social media). The social platforms themselves are also looking to drive marketers to allocate funds to the platform, by adding features such as buy buttons (they have been around for years), product takeovers, product tagging, and more. And allocate funds marketers have, as marketers have invested more than $30 billion in social advertising in 2016 alone. 2017’s metrics are estimated to be significantly higher.
Social Media is for Discovery, not Conversions
I feel the primary issue with looking at social media as a driver of direct sales is that we are lost in the attribution model. Much like broadcast TV is not seen as a direct contributor to sales (meaning you will not watch a commercial and then immediately get in your car to go purchase that roast beef sandwich), social media is about discovery. A Cowen and Company study in December 2017 highlights a finding that 38% of younger people (millennials) have discovered a brand that they ended up purchasing on social media. The trick, they didn’t purchase the product right away.
Where are they buying it?
According to the study, the consumers who discovered a brand on social media are primarily purchasing this product on Amazon (42%), which speaks to the benefit of availability. However, just behind Amazon was the brand websites in which were featured in the social media post (40%). This provides a heightened awareness for the brand’s eCommerce site and ultimately leads to product purchase, just not on the initial visit.
Should you allocate part of your marketing budget for social media?
The short answer, yes. The long answer, it depends on your goal. If the intention of your social media marketing strategy is to drive awareness, discovery, and ultimately trial, then social media is a place to invest. If your goal is to drive direct response purchases exclusively, then social media is not the place to invest. Moving those funds to a more direct response medium such as search would be recommended.
As with anything social media today, a sound advertising strategy is the key to reach relevant consumers, even those not currently in your ‘like’ sphere. A well executed social media strategy is less about how much you spend and more about how well you are targeting your intended audience. If you need help building that strategy, we would love to chat.