Blogs, tweets, posts, pokes and likes are just a few ways that consumers engage with brands and with each other today. And to track what consumers are saying online, businesses are spending millions of dollars.
But do they know what to do with that valuable customer feedback? Do they know how to use the social buzz around their products to proactively tailor their marketing resources in the most effective ways?
Marketing professor Sri Venkataraman and his colleagues at the University of Chicago and the University of Utah set out to address these pressing questions. Their research shows how firms can quantify the effect of online social media on product sales offline.
But more importantly, it also shows how companies can use those insights to choose which markets to roll out a product first and how to coordinate traditional advertising and social media. While they investigated these questions for the movie industry, their findings can be applied across a wide range of industries.
“There’s an old saying that there’s no such thing as bad publicity – all you need are a lot of people talking about you, whether good or bad,” Venkataraman said. “Our research shows that idea is not necessarily true. Not all buzz is good for business. Bad buzz hurts. But the good news is that companies can combat bad buzz through clever market entry and targeted advertising."
Venkataraman and his colleagues began their work when they noticed academic studies repeatedly showing that product sales depended more on the number of people talking about the product online, rather than what people were actually saying about the product. “These studies kept confirming the ‘all buzz is good buzz’ conventional wisdom, but my colleagues and I were puzzled,” he said. “When we were deciding on a movie, smartphone, vacation destination or a shiny new automobile, we never counted the number of people who talked about it and didn’t read every single post. We glanced through the first few and cared more about what people said about the product and whether their opinions varied.”
One reason that earlier researchers found volume (the number of people commenting about a movie on social media) mattered more than valence (the rating viewers gave it) was that they drew their conclusions from national-level aggregate data that masked many interesting features, Venkataraman discovered. When he and his colleagues broke the data down into local markets, which are quite heterogeneous, they saw that the viewers’ ratings – not the volume of the ratings – had more effect on first-day box office performance than in later-release markets.
“Once we outlined a way to quantify social media influence on a market-by-market basis, we set out to show how firms can use these findings more proactively going forward,” Venkataraman said. They drew up a two-by-two matrix with varying degrees of how much consumers are influenced by peers and/or by advertising, or neither. “Once we pegged each market into one of the four conditions, we could help determine where to enter early, where to enter late, what to stay away from and where to concentrate limited advertising dollars.”
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[This article has been reproduced with permission from research from the UNC Kenan-Flagler Business School: http://www.kenan-flagler.unc.edu/]