It’s white-hot. It’s sexy. A feature film about the founder of Facebook is coming soon to a theater near you. Social media is all the rage, yet businesses are still trying to figure out how to make money from it. Despite the current economic headwinds, companies continue to invest in social media, and budgets for social venues online have actually grown significantly since 2008, according to a new study from the Direct Marketing Association.
The study, titled, “Deploying Social Media to Cultivate Customer Loyalty,” based on responses from 369 executives with either all or partial responsibility for social media spending, was conducted by the Direct Marketing Association and market research firm Colloquy, to get a sense of how marketers are using social media today.
Social Media Objectives and Growth
Three goals surfaced as top priorities for social media spending:
- building brand awareness, identified as the top goal by 28% of respondents
- increasing loyalty and engagement from existing customer (25%)
- acquiring new customers (19%)
Companies appear to be getting the biggest bang for their social-media buck through cultivating existing customers. From 2009 to 2010 customer loyalty/social media budgets increased by 293%, whereas brand awareness and customer acquisition budgets rose by 189% and 214%, respectively. Companies with an objective to cultivate customer growth/loyalty spend an average of $88,000, compared to $53,000 for brand awareness and $30,000 for customer acquisition.
Social Media in the Marketing Mix
Although there has been solid growth in social media budgets, it’s good to keep in mind that they still represent just a tiny portion of a company’s overall marketing budget. Asked what percentage of their company’s overall annual marketing budget was spent on social media initiatives, 24% of the respondents didn’t know; 17% allocated only 1% and 16% allocated 4% to 5%. “There’s continued resistance [to social media] because it’s hard to quantify,” said Yoram Wurmser, acting head of research at the DMA. “Companies are setting aside budget [for social media channels], but still want to quantify the affect and the revenue impact.”
As with other marketing vehicles, one size does not fit all when it comes to using social media. Cultivating loyalty among existing customers is most likely to be among the top marketing goals for large companies and the product industry while small companies are more likely to deploy social media for customer acquisition, the study said. Facebook and YouTube are used markedly more for brand awareness than customer acquisition, the study said, while no clear leader has emerged for customer loyalty acquisition.
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