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Socially Challenged

Smaller companies are lagging behind in developing social media strategies.
Alix Stuart, CFO.com | US
May 19, 2011

Social media strategies are rapidly gaining favor in Corporate America. Platforms like Facebook, blogs, and community Websites play an increasingly important role in a variety of functions ranging from marketing to customer support.

Yet there's a considerable gap in social media use between big companies and small. According to communications firm Burson-Marsteller's second annual survey of social media use at the 100 largest global companies, 84% used some form of social media, up from 79% last year. (For U.S. companies, the adoption rate remained unchanged at 85%.) Those companies mainly use Twitter and Facebook, with corporate blogs about half as popular.

By contrast, only about half of companies in the small and midsize business universe use any form of social media, and only between a quarter and a third use it in any structured way, according to a recent study of 750 executives at companies with between 1 and 1,000 employees by SMB Group, a market-research firm. For smaller companies, Facebook sites and postings are by far the most used format, followed by industry-specific community groups. Fewer than 20% are using Twitter regularly, and a full 31% of small businesses and 26% of midsize ones say they have no plans to use social media in the near future (see chart below).

Why the great divide? In general, it's not the cost of entry, which is low, but rather a lack of time and creativity, says Sanjeev Aggarwal, founder and partner of SMB Group. Starting out with social media is "very company-specific," he says, "and companies need to engage with their customers to find out what might be right for them."

Businesses that sell to consumers have some of the most obvious opportunities to use the platforms. One example: Johnny Cupcakes, a $4 million producer of iconic T-shirts, tweets near-daily blog posts from founder Johnny Earle to more than 48,000 followers. The posts are mainly a way of brand-building, ranging from pictures of new products or speaking engagements to Earle's family videos.

social media use

Business-to-consumer companies can also use tools like coupon services, such as Groupon, to reach customers, a tactic that generated high levels of satisfaction from users in the SMB survey. "Coupons are easy to do and you see immediate results, whereas building a Facebook community takes time," says Aggarwal. (Still, fewer than 10% of the businesses surveyed are using the services, indicating that smaller companies are taking their time even on the easy plays.)

But businesses selling to other small businesses can find creative ways to use the media as well. About 20% of companies buying spots on iwearyourshirt.com, which does a social media blitz for a different sponsor every day, are now B2B companies, says Jason Sadler, founder of the site. Recent examples include Scribendi, a professional proofreading service, and e-online data, a payment-processing firm.

Meanwhile, Cortera, a $10 million commercial credit monitoring service, has tried out a number of social media functions, including setting up a free online community for smaller businesses to rate their customers' payment patterns. The approximately 25,000 online members can also set up their own subgroups to discuss customers for a particular industry, or even within a single company. (To protect itself and clients, a Cortera product manager and an attorney check the site regularly for inappropriate postings.)

"Big companies have discussed their customers like this for years, face to face, in a very official way," says Alex Cote, vice president of marketing for Cortera. "But there was nothing out there for the smaller companies, or the office manager with no credit department." Ultimately, the company hopes the site will help drive sales of its more robust credit reports, although it "acknowledges not everyone [who uses it] will become a paying customer."

Indeed, measuring returns on branding tools such as community Websites or Twitter feeds can be difficult, leading some CFOs to wonder what the point of such activity is. One area that shows some promise for making social media pay for itself in hard dollars is customer support. Only about 9% of customer inquiries now come through a social media platform — currently lower than the volume that comes through the postal service — but Aggarwal notes that such avenues may one day allow companies to replace pricier forms of communication. "The world is moving away from phone and e-mail, since the cost of those solutions is much higher than the cost of social media," he says.

Social media has the benefit of getting customers to work for you, too, if online community members can answer one another's questions about a product or service, à la Amazon.com or Yelp. And among larger companies, it appears this evolution is occurring as well. Burson-Marsteller's data indicated that a significant number of companies are now responding to Twitter messages (66%, up from 43%) and Facebook posts (72%) rather than simply pushing out information.

About two-thirds of the small and midsize businesses surveyed by SMB Group have formal budgets for social media. Of those that do, and have structured social media programs, 62% of small-business users spend less than $10,000 per year and 59% of midsize businesses spend less than $50,000 per year.


One more incentive to try out a company Facebook page or the like: the report shows a tantalizing correlation between having a social media strategy and higher revenue projections. Better than 70% of those companies that use social media on a regular basis were expecting revenue growth in the coming year, compared with about 50% of those that have no plans to use social media. While it's hard to prove the two are linked, Aggarwal is confident there is a connection. Companies with strong social media usage, he notes, are "getting more customers, more leads, and creating better customer experiences — and all of those contribute to revenue growth."




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