One of the biggest challenges associated with this newfangled social media is demonstrating monetary return on investment (ROI). A properly run social media campaign can be very expensive, as it takes a lot of time to properly engage an audience. Up to this point, there has been little to link social media to ROI other than an intuitive sense from practitioners of “of course it must have value!” Fortunately, a new research study soon to be published in the Journal of Business Research finally ties social media marketing to some more tangible outcomes. Customers with better perceptions of social media marketing are more likely to purchase the brands represented there.
In their study, Kim and Ko first developed a list of luxury fashion brands to be the focus of the study. They did this by asking a team of fifteen graduate students to list three brands “that came to mind when thinking of luxury.” The list ultimately consisted of: Louis Vuitton, Gucci, Burberry and Dolce & Gabbana, and from this list, Louis Vuitton was chosen to be the focus of the study. This made sense because the next phase of the study would be conducted in Korea, and this was a high-profile brand there with a strong social media presence.
Next, researchers staked out malls in luxury shopping districts in Seoul, where they would intercept shoppers and provide them with a survey. 400 surveys were collected, 362 of which contained complete data, which asked questions about shopper perceptions of Louis Vuitton’s social media presence, and their perceptions of the Louis Vuitton brand. This enabled researchers to examine how beliefs about social media were related to brand perceptions. Study participants were shown a picture of Louis Vuitton’s Facebook page and Twitter feeds before responding to questionnaires about them.
Using structural equations modeling, the authors demonstrated that there were three mediators of social media marketing perceptions and purchase intentions/customer equity. If you aren’t familiar with mediation, the basic idea is that A affects B only through its effect on C. For example, eating candy does not itself make one happy – instead, it’s because candy is delicious that it makes one happy. Thus, candy creates deliciousness creates happiness. We would conclude from this that the relationship between candy and happiness is mediated by deliciousness.
Here are the three mediators tested:
- Value Equity. This is a customer’s assessment of how “worth it” the product is. If it’s priced well for a good product, you have very high value equity. If it’s priced badly for a poor product, you have very low value equity.
- Relationship Equity. This is a customer’s assessment of how loyal they are to a brand.
- Brand Equity. This a customer’s assessment of the added value of the brand beyond the product itself; for example, a customer with high brand equity would perceive a Louis Vuitton product to be of greater value than an identical product from another brand.
Researchers looked at two outcomes:
- Purchase Intentions. Hopefully this one’s pretty obvious. However, the scope of this was not clear from the article – intentions within the next month, six months, year?
- Customer Equity. This is a customer’s assessment of their expected lifetime value with a brand, a combination of expected total purchases, purchase frequency, purchase volume, expected purchases over other brands, and a few other features.
The researchers found a relationship between perceptions of social media marketing and all three mediators, with the strongest relationships to brand equity and relationship equity. But the relationships between mediators and outcomes was more complex: only value equity and brand equity predicted purchase intentions, while only brand equity predicted customer equity.
Overall, we can conclude that customer perceptions of social media marketing are linked to purchase intentions through their effect on value equity. Or in other words, the better a customer perceives your social media marketing effort, the more likely they are to think your products give them more for their money, and the more likely they are to actually purchase something from you.
There are certainly some limitations. First, the study is limited to the variables chosen; there may be other mediators not examined that could affect outcomes. Second, actual behavioral outcomes (e.g. purchases) were not measured; we are relying on self-report of purchase intentions. Third, and most importantly, as a survey-based study, we can make no causal conclusions. So we cannot safely say “if you increase your social media marketing efforts, more people will intend to purchase your products.” That is left to future research. But even with these limitations, this marks the first explicit tying of social media efforts to measurable cash-related outcomes.Footnotes: