Inc. 500 survey on social media

Inc. 500 Companies Report Miniscule Sales From Social Media

Social media hasn’t delivered on sales for the Inc. 500, according to the 8th Annual Benchmarking Study conducted by the University of Massachusetts, the Center for Marketing Research.

Forty-four percent of respondents believe that sales from social commerce are limited to less than 1%. And only 4% estimated that more than 10% of their annual sales come from Facebook, Twitter and Pinterest.

No Planning or Measuring

Even that estimate is suspect because the vast majority of companies have no formal social media plan in place nor are they measuring actual sales from social media, says Dr. Nora Ganim Barnes, who led the study.

“When you ask them how they measure their success, they point to hits, comments, fans and followers and that becomes their definition of measurement. They can track hits but not sales,” she said.

“We consistently ask how measurement is integrated into a larger plan and we find they’re not dealing with these issues.” To illustrate, the study disclosed that 29% of companies have no plan in place, up from 20% last year. Only 7% now have stand-alone social media policies.

While security breaches have been big news in the past year, fewer than half the companies have a strategy in place in the event of an online crisis (negative attack online). In 2012, 54% of executives reported having such a strategy in place. In 2013, that number dropped to 39%.  It has continued to decline to 34% this year.

In a conversation with Dr. Barnes, she posited that we are poised to enter the third stage of social usage:

  1. Stage One. In this stage marketers are setting up the tools and platforms. Deciding which tools they should invest in is the focus.
  2. Stage Two. Marketers are placing great faith in hits, comments, fans and followers as a measure of engagement. But they are not making the case that these social signals lead to sales. Engagement is the focus and attempts are being made to quantify it using online analytics.
  3. Stage Three. Companies will elevate social media to a higher strategic level with a thoughtful plan of where social media fits into the company if it fits at all. In this stage companies consider the social media function to be an integral component of any strategic plan. Its development and growth are primary along with policies and plans to protect the company.

Discussions about payment plans and social commerce make them optimistic and hopeful that social media can become a full distribution outlet for them. But they are not there yet.

For more details about the study, and comparisons of social media usage with the Fortune 500, visit Annual Benchmarking Study. The study was co-authored by Dr. Nora Ganim Barnes, Chancellor Professor of Marketing and Director of the Center for Marketing Research at the University of Massachusetts Dartmouth, and Ava M. Lescault, MBA, Senior Research Associate and Associate Director of the Center for Marketing Research.

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Comments

  1. Kind of surprising, but kind of not. I think some companies are getting tired of “keeping up” with everything out there and returning to one site that speaks to their brand and audience, which I have always thought was an excellent strategy. It’s a time suck for sure. My clients are asking for a narrow and deep approach to social, which is perfect!

    • Laurie — It’s true, as I’ve discovered. The narrower your niche, the greater your opportunities. That sounds counter-intuitive, but people want to buy “something” not everything.

    • Michele — social media is also important for branding, which is my primary goal as I don’t sell services from my website.

  2. Jeannette very interesting research. I do believe social media does help with your business. It is hard to gauge where the sales come from. I use Google Analytics and it is hard to come up with the data to say yes this works or no it doesn’t work. If one stops social media completely, I do think you will see a drop in business. To me social media is like word of mouth of the internet. I can see that people are checking out my Linkedin page so at this point I do not plan to stop using social media to get across my business model.

    • Arleen — sometimes you have to take on faith that social media is creating awareness and leading to sales. You’re fortunate that in your business you are selling discrete products where you can track your sales. I don’t think it’s as easy in a service business.

  3. I am going to go the opposite of everyone else’s opinion on this. I have seen reports similar to this. Basically, the conclusion has been that these big companies are not gauging the sales from social media, and they need to have more of a social media presence.

    What if these companies are right? Maybe it is the social media that is getting it wrong. What if social media has a little impact on these larger companies sales?

    I would like to see more studies done comparing company size. I have a feeling that social media is more important for small to medium size companies than it does to larger corporations. I bet there is a correlation to the success of social media and the size of the company.

    • William — you may be right about the size of the company being a factor. UMass also surveys the Fortune 500 and that study should come out in September. It will be interesting to see how the studies compare.

  4. I have long suspected this to be the case Jeanette. It’s nice to know I’m not so off the mark in terms of thinking. While I think branding via social media is essential, the connection between sales, likes, hits is tenuous and impossible to track. This was a great article!

    • Thanks, Jacquie. I personally use social media for branding and that, to me, is just as legitimate and important as try to use social media to boost your sales.

  5. I am surprised and I am not surprised by the content of this article Jeannette. Surprised because how can a company measure sales via social while relying on hits as a baseline. That is like measuring all other sales by including everyone who looked through the window. Not surprised because as social media becomes way more competitive it gets a bit mind boggling with all the choices. Some will shy away altogether while, as you say, others will settle in on one platform and dig deep.

    • Tim — agree that hits don’t necessarily lead to sales. It’s like a salesperson who makes his required 10 sales calls a day but never makes any sales. Just calling doesn’t necessarily translate to sales.

  6. I found this article very informative. I especially liked the third stage: In this stage companies consider the social media function to be an integral component of any strategic plan. I’m actually a little surprised that the large companies haven’t done this already. They could certainly hire people to take care of this part for them. It will be interesting to see which platform will be the ultimate choice.

    • Lenie — it is surprising, but sometimes I think we forget that social media is still in its infancy. LinkedIn started in 2003 and Facebook in 2004 — just a few short years ago. I think companies are still finding their way.

  7. Good article. Social media is very good for word-of-mouth – which used to be in the form of in-person or phone conversations. We can reach so many more now with social media. Hopefully it eventually leads to sales but at least we can encourage people to know, like and trust us.

    • Beth — I think social media is especially important for smaller companies. We don’t have the advertising budgets of the big companies so social media is a great tool for also giving us the ability to get in front of our target audiences.

    • Meredith — That’s the big question: when will social media pay off for advertisers if at all? The jury is still out on that one.

  8. Jeannette, not surprising and in particular as your reporting on it reveals several issues. First, blogging declined in corporate. Being that more than ever what people are online for, including in the “social” aspect of things is to get quality, top notch information. Taking that away is like blowing out the candle. Second, and I learned this from you, while being present online is important to get us known and for our branding, it’s not going to necessarily track or turn into sales. Maybe, there is an opportunity for people who now make this kind of focus their work!

    • Patricia — I think that understanding social media is not necessarily the silver bullet is something that all of us have to accept — including small and big companies. Like any other sales funnel, whatever works!

  9. Am not surprised. You wrote a similar post in the past with more or less the same findings. Linkedin should be the prime choice for most of them. Unless they are into consumer goods Facebook will not deliver.

    What I find alarming is that companies are now less prepared than they were for being hacked. Not only companies, but all website owners in the world, have to get their act together in that respect. This morning when I was reading the news one headline was that ISIS had hacked the food section of a tabloid newspaper in Sweden and posted a picture of their symbol + the text ”Hacked by Islamic state (ISIS). We are everywhere ;)”.

    Needless to say they will hack not only Inc 500 companies but companies all over the world. Large as well as small. Not to mention government sites. And they will succeed until the problem with hackers are taken seriously. Another problem in this respect is that ISIS can carry out cyber war and cripple say, electricity in Washington D.C. and demand that some ISIS member in US custody should be released in order to turn it on again. Don’t give that kind of people power when they can be stopped by spending money on being protected against online attacks. Employing hackers would go a long way.

    • Catarina — I couldn’t agree more that all companies — entrepreneurs like us as well as small and large companies — need to do more to protect ourselves. There are some bloggers who are still using outdated WordPress themes, for example. One problem is that the government and companies can’t keep up with the hackers. They are too smart and always one step ahead. And don’t forget that countries like China have buildings filled with hackers who are stealing not only government secrets but also the intellectual capital of Western companies. Not surprising that their fighter jets are clones of ours in the U.S. A very serious and troubling situation.

  10. Finally Someone said it. Thank you so much Jeannette. LinkedIn is different because people mean business. It’s not made to be COOL!

    Personally, I prefer that to other social media sites. Above that, I think SEO is such a great means of attracting who is looking for you. They want what you have to offer, look for it and ask you to sell it to them! Isn’t this amazing? Of course, I’m sure everyone knows several other factors like website design, usability, unique content (blog posts, photos, videos, etc), are also involved.

    • Rahman — LinkedIn is my favorite network, too. Other studies have shown that people prefer to visit a company’s website to make a purchase rather their social media sites. So, as you mention, optimizing your site for search engines is critical.