Consumer research: How social media influences purchasing decisions

July 22/29; Volume 27/Number 7

By K.J. Quinn

When a consumer is looking to make any type of product purchase, think about where she usually turns for advice or reviews. Gone are the days of flipping through paper directories to search for the nearest retailer as most information is now just a finger swipe away on a smartphone. The latest re-search reveals an increasing number of consumers utilize social media connections and ask friends and people with whom they are connected to share experiences relating to specific products or brands.

A 2011 study by digital marketing agency ODM Group found nearly three-quarters of consumers polled rely on social networks to guide purchasing decisions. Taking it one step further, roughly one-third of shoppers surveyed in a study by the Advertising Research Foundation (ARF) said social media has either introduced them to a brand/product or changed their opinions during the buying process. What’s more, 22% of shoppers surveyed by ARF said social media was “important in [a] final purchase decision.”

Indeed, social media platforms such as Facebook and Twitter allow easy access to brands, but they also help guide product decisions and purchases. According to a published report, 53% of consumers on Twitter recommend companies or products in their tweets and of those, 48% follow through with the intent to buy that product or service.

In addition, shopper reviews are generally considered more trustworthy than retail sales associates. When selecting the top three sources to guide decisions, online product reviews are useful to 42% of American web shoppers, according to a March 2010 Nielsen survey of Internet users. As a result, 41% of online users indicated they would share a negative product experience online via Twitter or by writing a review.

Ironically, posts by businesses can have as much of an impact on consumer buying decisions as their friends’ posts do, according to a study from Market Force Information. The study, released in May 2012, found 81% of U.S. consumers are influenced by their friends’ social media posts, while a comparable 78% are affected by vendors’ posts, suggesting company-driven social media content is surprisingly powerful in influencing buying decisions.

What’s more, 30% of social media shoppers respond better to offers when they have been posted by a friend and 38% of moms are more likely to buy from brands they “like” on Facebook than other women, according to a published report.

Social media marketing played a major role in enabling retailers to hit record sales during the 2012 Thanksgiving shopping weekend. Offerpop, which helps retailers such as Amazon, Sears and Walmart run social marketing campaigns, reported seeing a 40% increase in these programs by clients for Black Friday shopping weekend over the previous year. On the flip side, social media made up less than 1% of online traffic and sales on Black Friday last year, a figure that was down from 2011, according to IBM Smarter Commerce, which tracks sales for 500 of the top retail sites. This is based on shoppers who were referred to a retailer’s site through social media and resulted in a purchase made that day. (Retailers such as Target have been reported to reward customers who tweeted about the company with electronic gift cards.)

Social media channels create an ideal, two-way platform for direct conversations with customers. By using social media monitoring tools, observers said brands can mitigate the downside by pulling negative comments into a private conversation and maximize the upside by giving consumers an easy way to engage. The end result is companies in all industries are said to be developing social media programs aimed at influencing consideration, customer loyalty and driving sales.

While social media has revolutionized the world of online commerce, there is still room for improvement. Competitive pricing, the ability to purchase online and speed of delivery were cited as the most important factors that determine a customer’s decision to buy, according to the Market Force Information study. Advice received via social media sites impacted just 18% of transactions. A Forrester study that examined 77,000 of online transactions between April 1 and April 14, 2012, found less than 1% of them could be traced to social networks.

The Forrester report represented a small sampling and did not include small businesses—where Forrester asserts social media is a bigger sales driver—determining how web activity influences sales is not an exact science. Forrester discovered 50% of repeat customers and about one-third of new customers connect with multiple touch points prior to purchases, an indication that traditional promotional vehicles such as display advertising and e-mail may be undervalued.

What is known, experts say, is consumers are becoming increasingly comfortable with using digital technology in the shopping environment and presumably will more frequently measure a retailer on how well he supports this change. The challenge for retailers is how well they can adapt, how wisely they can make spending decisions on new technology, and how best they can use technology to continually connect with their greatest asset—the consumer.