Social Media Pays Off for Businesses, Study Shows

BUFFALO, N.Y. – Customers who connect with a business through social media will go to the business more frequently and contribute more to its bottom line, according to a new study from the University at Buffalo School of Management.

The study, forthcoming in Information Systems Research, found that customers who participate in a firm’s social media visit the business about 5 percent more frequently than those who don’t.

And those socially savvy customers mean more money for the company, says the study’s co-author, Ram Bezawada, PhD, assistant professor of marketing in the UB School of Management.

“There have been doubts about the effectiveness of social media for business because the link between a firm’s efforts and the return on investment hasn’t been established,” explains Bezawada. “Our results show that when customers engage with a business through social media they contribute about 5.6 percent more to the firm’s bottom line than customers who do not.”

The study used data related to individual customers’ participation on a Facebook page and combined it with their actual purchases at a large specialty firm in the Northeastern United States.

Bezawada says there are a number of ways businesses should engage customers to achieve the best results.

“Social media activities help strengthen the bond between the customer and the firm – and boost financial performance,” says Bezawada. “When building communities, businesses should craft personalized messages, encourage member contribution, integrate knowledge about customers from both online and offline interactions, and create specialized sub-communities for customers looking for premium and unique products.”

Bezawada collaborated on the study with Ashish Kumar, PhD, assistant professor in the department of marketing at Aalto University School of Business; and Rishika Rishika, PhD, assistant professor of marketing, and Ramkumar Janakiraman, PhD, assistant professor of marketing and Mays Teaching Fellow, at Mays Business School at Texas A&M University. Arun Jain, Samuel P. Capen Professor of Marketing Research in the UB School of Management, and the school’s Research Group in Integrated Marketing, also contributed to the study.

The UB School of Management is recognized for its emphasis on real-world learning, community and economic impact, and the global perspective of its faculty, students and alumni. The school has been ranked by Bloomberg Businessweek, the Financial Times, Forbes, U.S. News & World Report and The Wall Street Journal for the quality of its programs and the return on investment it provides its graduates. For more information about the UB School of Management, visit mgt.buffalo.edu.