Social Media's Issue: Does It Drive Sales?

Facebook's disappointing initial public offering has increased scrutiny throughout the social media space, including in the fashion world.

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NEW YORK — Call it the Facebook backlash.

The company’s disappointing initial public offering has increased scrutiny throughout the social media space, including in the fashion world. Brands now are analyzing their social media efforts more than ever and asking a key question: What’s the return?

“The next 12 months are the make or break time for social media, but I do think the investments have been there. People have sizable communities and want to make them ROI [return on investment] positive. We will really see if the metrics prove one way or another,” said Maureen Mullen, New York University think tank Luxury Lab, or L2, director of research and advisory.

At this point, observers say, few brands, if any, are seeing significant sales result from their postings on Facebook, Twitter, Instagram, Pinterest and other sites. Social media hasn’t been about driving transactions; it has been about building brand awareness and a “community” that will be devoted to a brand and, thus, buy it. Social media isn’t about sales today; it’s about driving sales in five, 10 or 15 years as the Internet-mad generation of twentysomethings matures.

Every leading company with a good to great social media presence is on the requisite platforms: Facebook, Twitter, Pinterest, Instagram, Tumblr, YouTube with e-commerce, a blog and elaborate editorial content on their own digital flagships. Burberry, Christian Dior, Chanel, Gucci and Louis Vuitton all having fan bases on the platform that surpass 5 million. The more money brands pump in to their social media efforts, though, the greater the pressure for them to begin showing a return on the investment.

There’s only one problem: For now, there isn’t a universal metric to measure the ROI. That, coupled with Facebook’s IPO flop, is starting to give social media a bad rap, Mullen said.

She cited Burberry, which has more than 13 million Facebook “likes,” as an example of social media’s impact.

“The halo of innovation that they’ve gotten from investment in social media and all these platforms has almost become a pillar of their brand,” said Mullen. “If you look at Burberry 10 years ago, it meant British and plaid, [but] now it means British, plaid and innovation. Largely at the heart of that, in addition to great merchandise and creative, it’s been a real commitment to social media and technology that resonates with the younger consumer. On a one-to-one basis attributing fans to ROI, I don’t know if it’s there, but I think as a great affect on their business, it’s been there in spades.”

She does see that brands with strong social media communities drive significantly more traffic from Facebook and similar sites to their digital flagships. Again, she points to Burberry, noting that the 1.9 percent of traffic that came to from Facebook in 2010 exploded to 29 percent one year later. She expects that a fraction of this traffic is incremental and that the brand wouldn’t have gotten it otherwise — unless it paid Google — and this is exactly where the company begins to see the ROI.

She also notes that some brands have opted to invest in Facebook, Twitter, Pinterest and Instagram in favor of building a robust e-commerce site or search engine marketing. Mullen warns, though, that in the short term, a superior e-commerce business will generate more business for fashion brands than a “mediocre to good social media presence.”

“There’s definitely been a lack of attribution modeling across the media mix to show what effect it has in terms of driving brand awareness, driving sales in-store, complementing broader media investments, and it’s very difficult to measure. But again, if you look at traditional media — print or TV, to an extent — oftentimes that same sort of limited measurement exists. Social media is just held in a higher regard because you can get information quicker and measure clicks through engagement and other metrics,” Mullen said.

Facebook’s IPO didn’t help matters. “The whole IPO thing made people wary. They asked if social media works, if the IPO didn’t. It’s a vicious cycle,” said Jennifer Vlahavas, ComScore Inc. senior director.

She explained that the uniqueness as a marketing channel — one that’s metric for measuring success, thus far, has been fan acquisition — is often overlooked by retailers specifically. What Facebook allows, she said, is for companies like Macy’s and Wal-Mart to have a true dialogue with their best customers, and, most importantly, provides high-value customers a platform to evangelize a brand.

“But it’s so unique that valuation is where the people are confused. The parallel is that because it is so unique, retailers have had a hard time determining the hard metric to measure success,” Vlahavas said. “[And if] retailers have a hard time measuring the value of Facebook and the investment they have in Facebook, why is it so shocking that Wall Street and the investor community had a hard time valuing it? I see an analogous relationship between those two things.”

In her view, social media is living up to the hype.

Late last year, ComScore profiled the average spend at Target stores across the general population, compared to the average spend from Facebook fans and friends of fans. Research determined that fans of Target on Facebook were 97 percent more likely to spend at Target, and friends of fans were 51 percent more likely than the average population to spend at the retailer (the brand has over 18 million “likes”).

“Of course you would accept that fans spend more because they have proactively raised their hand and said ‘Yes, I’m a fan of this brand.’ It’s typically more than the average, but it might be more for some retailers than others,” Vlahavas said, pointing out that profiling the habits of friends of friends is “earned media” — an amplification effect that quantifies the “virality” of the medium. “That idea that because of my relationship with you and your relationship with a store, I am more likely to be open to that store’s messaging and ultimately buying because my friend is a fan.”

A corresponding study from March used a test and control methodology that aimed to quantify incremental purchase behavior that could be attributed to social media exposure. Research showed that fans who were exposed to Target’s messaging versus fans who weren’t exposed were 19 percent more likely to buy at Target. Friends of fans who were exposed to the retailer’s messaging were 27 percent more likely to buy at Target than those not exposed.

“The second numbers prove that consumer exposure to branded media on Facebook drives incremental purchase behavior,” Vlahavas said.

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