Rice Study Gives Facebook Fanpages a Passing Grade

The return-on-investment question always dogs proponents of social media marketing. Businesses want to, no, need to know the ROI of campaigns.  Will time spent on social networks mean more customers through the door and more money in the bank?

Researchers at Rice University feel the answer is yes. At least when it comes to Facebook fanpages.

According to the Harvard Business Review, a study by Rice University finds that social media marketing using fanpages on Facebook has a positive impact on customer loyalty and purchases.

Researchers Utpal Dholakia and Emily Durham followed the change in customer activity for one business, Dessert Gallery of Houston, Texas, as it went from no Facebook presence to an active one.

The study based its findings on surveys of more than 1,700 respondents over a three-month period. Dessert Gallery customers who become Facebook fans turned out to be the store’s best customers and increased their purchases after engaging with the store online

Speaking directly to ROI those who were Facebook fans spent 33 percent more than non-fans. Also Facebook fans had 41 percent greater psychological loyalty toward Dessert Gallery, which underlies the promise social media that connections are lasting ones that will continue to benefit the business long after the account has been set up.

But there are questions that this study leaves lingering.

First, whether the results are applicable to larger companies. Since small stores already have a more people-focused, flesh-and-blood relationship, they usually have some customer loyalty to build from. Large “faceless” corporations may have tougher times building loyalty and also face customer service problems often exacerbated by their own redtape (see Lois Whitman debacle or the recent Kevin Smith vs Southwest saga as shining examples).

Secondly, will this small business be able to keep up and sustain the social media interaction it had at launch which enticed the customers to begin with. According to the article, the Facebook page was updated several times a week with photos, promotions and contests. Is that manageable for the internal staff over the long haul?

“We must be cautious in interpreting the study’s results,” Dholakia said. “The fact that only about 5 percent of the store’s 13,000 customers became Facebook fans within three months indicates that Facebook fan pages may work best as niche marketing programs targeted to customers who regularly use Facebook. Social-media marketing must be employed judiciously with other types of marketing programs.”

The promise of social media marketing has always been that conversations with engaged customers would have some real-world reward – let alone a reputation, by amplifying the impact of word-of-mouth. Now, in at least one case, that has proven to be true.

About Mike Koehler

Mike Koehler is the New Media Director for Schnake Turnbo Frank | PR, the largest and oldest public relations firm in Oklahoma. Mike consults with clients about the best use of tools on the Internet, Web strategy and social media policy. Mike blogs regularly at www.smirknewmedia.com and is working on his first book to be published in 2010. Mike lives in Oklahoma City with his wife and three kids.

You can find Mike on Twitter: @mkokc.

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