Many companies are investing money in social media to advertise new products. But they could be paying a hidden price for those ads.
Wang, Shuting and Greenwood, Brad N. and Pavlou, Paul A., Tempting Fate: Social Media Posts by Firms, Customer Purchases, and the Loss of Followers (July 10, 2017). Fox School of Business Research Paper No. 17-022.
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A whole lot of companies invest a whole lot of money in social media. It's a powerful and pretty cheap way to advertise new products or services. But new social science research finds that companies may be paying a hidden price for those cheap ads. NPR social science correspondent Shankar Vedantam talked about it with our co-host, David Greene.
DAVID GREENE, BYLINE: So I could imagine this being a problem if you're a business and you're on social media and you're like, you know, posting offensive stuff. But you're saying there's something fundamental here that the businesses might not realize?
SHANKAR VEDANTAM, BYLINE: That's exactly right. I think the fundamental problem is that even as social media draws people who are potential buyers, it runs the risk of potentially harming the long-term relationship between the organization that's doing the post and its audience. I was speaking with Shuting Wang. She's a Ph.D. student at Temple University. Along with Brad Greenwood and Paul Pavlou, Wang analyzed a Chinese fashion company that used the Chinese equivalent of Facebook, a platform called WeChat, to sell its products. Wang found that the post did increase sales, but this turned out to be a short-term benefit that was more than counterbalanced by long-term pitfalls.
SHUTING WANG: The increase in short-term purchase may induce firms to intensively post and invest on social media, but our findings show that the firms may be misguided.
GREENE: Misguided. OK, so the firm not realizing what the long-term pitfall might be. What is it?
VEDANTAM: Exactly. The long-term pitfall is that even as promotional messages attract some buyers, they also annoy other people. In fact, they might annoy many more people than those who act on the message to buy something. Wang and her colleagues find that posts increase sales by 5 percent. So this is a visible benefit the company sees in the short term, but it also increases the likelihood that people unfollow the company by 300 percent. Over the long term, the researchers find that social media promotional messages actually might decrease sales.
WANG: For some consumers, those postings could be very annoying and interactive. However, we're not saying that firms should not post on social media. Instead, we suggest firms to be more strategic and they should consider who to target, when to post and what to post.
GREENE: OK. I think I'm getting this, Shankar. So I might see something in social media. It might be a new product. I might go buy it. But if this company sends me four posts a day, I'm like, get this out of my feed. I'm going to unfollow you now.
VEDANTAM: That's exactly right. And, you know, so companies might actually need to do a better job targeting people for when they want to buy something and also what state of mind they're in. One of the things the study finds, David, is that the negative effect of social media are strongest in big cities and at busy times. So these are the people who are most annoyed with promotional messaging that they do not find relevant. There's an old joke in advertising, David. I know half my advertising budget is wasted, I just don't know which half.
VEDANTAM: This research suggests, you know, at least on social media, half your budget might not just be wasted, it might be cannibalizing what the other half is doing.
GREENE: Interesting. Well, it's a serious thing for businesses to think about.
GREENE: Shankar, thanks.
VEDANTAM: Thank you, David.
GREENE: Shankar Vedantam is NPR's social science correspondent. He brings us stories like that one. He's also the host of a podcast that explores the unseen patterns in human behavior. It is called Hidden Brain. Transcript provided by NPR, Copyright NPR.