People who engage with brands via social media demonstrate a deeper emotional commitment to those brands, and they spend between 20% and 40% more than other customers on the products and services offered by the brands, according to a report by Bain & Company.
Using the Net Promoter Score* (NPS) method to measure customer loyalty, the study found that on average, customers who engage with companies via social media (e.g., following a brand on Twitter, liking a brand on Facebook, or joining a branded community) spend more buying products and services than other customers.
Interestingly, social media engagement appears to drive the highest spending lift among Passives, or unenthusiastic customers.
For example, socially engaged Promoters (devoted brand enthusiasts who buy and refer products to others) tend to spend roughly 30% more on an annual basis than Promoters who are not socially engaged, while socially engaged Passives (customers who are satisfied but unenthusiastic, and vulnerable to competitive offerings) spend roughly 40% more annually than Passives who are not engaged socially.
Even among Detractors, unhappy customers who can damage a brand and impede growth via negative WOM, social media engagement generates a 20% lift in spending.
Below, additional findings from Bain's report titled "Putting Social Media to Work."
People who engage with brands via social channels also have a deeper emotional commitment to those brands. Across 12 companies studied, the NPS among engaged customers was 33 points higher on average than the NPS for unengaged customers.
Bottom-Line Benefits
Social media can create value at virtually every stage of the sales funnel, from awareness to retention. With its Ford Fiesta Movement, a campaign in which Ford distributed 100 Fiestas to Web bloggers asking them to write about their experiences driving the car for a one year, Ford generated the same level of brand recognition it normally achieves with a TV campaign, at one-tenth the cost.
Several other companies have registered substantial bottom-line results: eBay community members spend on average 54% more annually than other customers, while social shoppers at Wet Seal generate conversions rates 2.5 times higher than other customers.
Benefits of Early Adoption
Thus far, a disproportionate share of such benefits has been garnered by large, early adopters, the research finds. Several early adopters have captured real economic value from their investments in social media, typically employing tried-and-true business principles—refined via traditional marketing, service, and operations—applied in new ways.
Though such early adopters often experiment, and sometimes fail, they don't allow themselves to fall into the trap of thinking that somehow "everything has changed" in this new world, writes Bain.
The gap between the early adopters and those waiting to take the plunge has actually widened: Though the average billion-dollar company spends $750,000 a year on social media, some early adopters (e.g., Dell, Wal-Mart, Starbucks, JetBlue, and American Express) invest far more, according to Bain.
*Net Promoter Scores (NPS) take the percentage of customers who are Promoters and subtracts the percentage who are Detractors. Promoters (score 9-10) are loyal enthusiasts who buy and refer others, fueling growth, while Detractors (score 0-6) are unhappy customers who can damage a brand and impede growth via negative word-of-mouth. Passives (score 7-8) are satisfied but unenthusiastic customers who are vulnerable to competitive offerings.
About the data: Findings are based on internal research from Bain & Company, as well as a survey of 3,019 adult consumers, conducted in January 2011.
