Last week, Mashable’s Lauren Indvik published an articled based on a study by Forrester Research which states that only 1% of online purchases are driven by social media. (You can purchase the full report for $499 here.) The piece’s title, naturally, was “Social media Influences Less than 1% of Online Purchases. [STUDY]“
If you find that statistic surprising, don’t worry. Your gut feeling isn’t leading you astray. We’ll come back to that. First though, let’s dive a little deeper into some of the claims made in the piece:
“Ecommerce businesses should concentrate more of their efforts on traditional online marketing tactics like search and e-mail than social media. That’s the conclusion of a Forrester study released Tuesday, which examined 77,000 online transactions made between April 1 and April 14. The study found that less than 1% of them could be traced back to social networks like Facebook or Pinterest.
Determining how web activity influences purchases is tricky; although many often credit the last touchpoint for a sale, Forrester found that half of repeat customers and a third of new customers touch multiple touchpoints prior to a purchase. As such, certain funnels, like display advertising and e-mail, may be undervalued.
Nevertheless, ecommerce websites still convert more highly than any other channel, accounting for 30% of transactions. Thus it’s smart for retailers to promote their domain names as much as possible.
Following direct visits, organic search and paid search are the two biggest drivers of purchases from new customers, accounting for 39% of new customer transactions. That’s because the web continues to be a useful tool for what Forrester calls “spear fishers” — consumers who know what they are looking for and find it through search.
For repeat shoppers, e-mail is the most effective sales influencer: Nearly a third of purchases from repeat customers initiated with an e-mail. As such, businesses should up their efforts to collect e-mail addresses, and tailor their e-mail marketing messages to each recipients’ device and prior purchase behavior.
Social media’s potential as a shopping portal has yet to be realized. Less than 1% of transactions from both new and repeat shoppers could be linked to social networks, Forrester found.
That said, the researcher believes social media can still be a powerful marketing tool, and that social media’s influence on purchase behavior likely can’t be measured in the 30-day attribution window the report examined. Forrester also asserts that social media is a bigger sales driver for small businesses, which were not included in the study.”
The study was also picked up by several other media outlets, including Business Insider, which quotes Sucharita Mulpuru – the author of the report. Her conclusion:
“Social tactics are not meaningful sales drivers. While the hype around social networks as a driver of influence in eCommerce continues to capture the attention of online executives, the truth is that social continues to struggle and registers as a barely negligible source of sales for either new or repeat buyers. In fact, fewer than 1% of transactions for both new and repeat shoppers could be traced back to trackable social links.” (Source)
“Trackable” social links.
Has you brain caught up to your gut yet? If not, let me throw a few thoughts your way:
1. The study is based on flawed assumptions: There’s a problem with the study’s understanding of social media’s role in the customer journey (paths to purchase). The study, for instance, states that direct visits to e-commerce sites drive the most sales. Really? All right. Here’s a question: How did people initially get to the e-commerce site? Before we can talk about paths to purchase, can we at least consider their path to discovery? Was the site recommended? Did it turn up on a search? How and where did retailers promote their domain names, exactly (which the article suggests they should do)? Beyond discovery, how were shoppers’ purchases influenced by peers and other shoppers, via social networks, digital or not?
The study doesn’t look into any of this. It obviously is just working backwards from a purchase by tracking clicks, and probably no more than 4-5 deep. Sorry, but except for impulse shoppers, that isn’t how things work. Shoppers don’t typically follow robotic, linear paths from discovery to transaction. So that’s one problem already, and the numbers reflect it pretty clearly. Perhaps the clearest way to explain the first problem with this study is that it doesn’t seem to measure the “Purchase Path of online Buyers” in 2012. Instead, it appears to just measure the final sprint.
2. The study is based on flawed methodology: The study’s attribution model is wrong. If you have been in the business of selling things to human beings for a few years, you probably know that it takes more than just one “touchpoint” to convince someone to become a new customer, especially online. The study, however, would have us believe that 67% of transactions from new customers were the result of just one touchpoint. (20% of those being a direct visit to the e-commerce site.)
Not likely. Even more puzzling, the percentage attributed to single-touchpoint sales remains precisely the same for returning customers: 20%. Think about that for a minute.
Again, the study appears to mistakenly assume that paths to purchase are linear and can be measured simply by backtracking clicks. That’s what the mention of “trackable social links” was all about. We have known for some time that “last click” attribution is a flawed model. For the same reasons, “last 4-5 clicks” is also a flawed model. I suspect that the methodology behind this study was as influenced as it was limited by the technology it relied on to collect its data.
From where I stand, the methodology used in this study is completely wrong for what it attempts to do. Take a look at the graphic below and give it some thought. What do you see?
3. The authors of the study misunderstand the relationship between social content and search: The impact of social media on search (and therefore discovery) is utterly ignored in this study. Given what we know of social content’s importance to search, this is a bizarre and inexplicable oversight. Social drives sales directly AND indirectly by greatly impacting search. This isn’t news. And yet…
4. The study’s scope is limited to the enterprise… but isn’t particularly forthcoming about that: As stated by Business Insider, “Mulpuru didn’t study small businesses, which she said do disproportionately well in social commerce.”
How about that.
Two questions come to mind:
First, why wouldn’t the study also look at small businesses? Surely… if you know that they “do disproportionately well in social commerce,” there must be data that supports that statement. Where is it? Why wasn’t it included in this study? Why does doing well in social commerce disqualify small businesses from being part of this study? Was the intent of the study to… convince businesses that social channels aren’t effective? I don’t get it.
Second, why would the study not make it clear in its reporting that it only looked at enterprise sized businesses? Where in this language is the general public given the slightest indication that the study’s conclusions only apply to the enterprise? Here it is again:
“Social tactics are not meaningful sales drivers. While the hype around social networks as a driver of influence in eCommerce continues to capture the attention of online executives, the truth is that social continues to struggle and registers as a barely negligible source of sales for either new or repeat buyers. In fact, fewer than 1% of transactions for both new and repeat shoppers could be traced back to trackable social links.”
Hmm. “Hype” versus “truth.” Okay… No bias there, obviously.
However, to be fair to the public, should the statement not look more like this instead?…
Social tactics are not meaningful sales drivers for enterprise e-commerce sites. While the hype around social networks as a driver of influence in eCommerce continues to capture the attention of online executives, the truth is that social continues to struggle and registers as a barely negligible source of sales for either new or repeat buyers, at least in the enterprise space. In fact, fewer than 1% of transactions for both new and repeat shoppers for enterprise-class businesses could be traced back to trackable social links.
That would be a more appropriate way to phrase all that.
Furthermore, why was this enterprise distinction not mentioned in the study’s title? “The Purchase Path of Online Buyers in 2012″ isn’t exactly indicative of the study’s focus on large businesses, is it.
If you think that is just a minor detail, see item 7, below. You will understand the full impact of this “oversight.” But first, this:
5. The study fails to understand the relationship between time, discoverability, and trust when it comes to the social customer: The study states that “Forrester partnered with GSI Commerce to examine 77,000 consumer orders made over a period of 14 days in April 2012.”
The study only lasted 14 days.
The nature of social media being what it is (relationship-based), leaving yourself only 14 days to track a social customer’s path from discovery to purchase is not an appropriate, realistic timeframe. This screams of automation and basic linear click attribution fallacies. So much for the development of online relationships, organic social integration, word of mouth, etc.
6. The study fails to take into account overlapping fields of influence in a shopper’s decision-making process: Paths to purchase are typically impacted by multiple, sometimes concurrent experiences. Some may be prompts (like an email promotion or a banner ad – which the study takes into account), but others may be recommendations from friends (online and offline), a preponderance of positive brand or product mentions on social channels, reading user reviews, social validation in the form of product or brand “likes” by trusted friends, and even direct interaction with a brand’s social channels, not to mention offline influences as well.
A study that attempts to understand and map “the purchase path of online buyers in 2012″ cannot ignore those factors. Not if it hopes to be taken seriously. By putting “trackable links” ahead of actual purchase paths, the study completely missed the mark on the role that social media plays in the customer journey – not only when it comes to mapping the path from discovery to first purchase, but also in regards to customer development as well (the path from first purchase to measurable loyalty). Poorly done.
7. Questionable reporting: Although the study is titled ” The Purchase Path of Online Buyers in 2012,” Forrester decided to market it by leading with this headline: “Less than 1% of online purchases come from social channels” (source). How did the most flagrant red flag in the study’s methodology become the study’s principal selling point? Your guess is as good as mine. The best i can come up with is that controversy sells.
Mashable covered the story using this title: “Social media Influences Less than 1% of Online Purchases. [STUDY]“
Business Insider’s Title: “Forrester: Facebook and Twitter do almost nothing to drive sales.“
Internet Retailer: “Social media posts don’t lead to sales.“
You get the picture. And so we come full circle to Mashable’s article, which gives business executives the following advice:
“Ecommerce businesses should concentrate more of their efforts on traditional online marketing tactics like search and e-mail than social media.”
This kind of nonsense gives me headaches. It really does.
Now don’t get me wrong: at the end of the day, it may very well be that social channels only contribute to 1% of online sales for many businesses. Most of us have seen strong evidence to the contrary in our own ecosystems (mostly double-digits from where I am sitting, except for category leaders in mature markets), and companies like Burberry might even disagree about that, but all right. For the sake of argument, let’s say that for the corners of the business world that we haven’t had any contact with, the number is indeed 1%. But even if that were the case, this study’s methodology would still be wrong in the way it arrived at that number. It’s just bad science, poor analysis and not particularly responsible reporting.
Most of us already know from experience that more often than not, the only thing standing between a company and its success is access to actionable market insights. Bad data or flawed analysis can lead to poor strategic decisions – from bad investments to completely missing the mark with a product or a campaign. Likewise, accurate data and insightful analysis can lead to terrific strategic decisions and score game-changing wins for a challenger or emerging brand. This stuff is important. It’s vital. There is just no room for bad science and poorly managed studies. Not when trust in your studies and market analysis comes with expectations of thorough expertise.
So the lesson here is this: Do your homework. Don’t assume that a “study” is accurate and factual just because it was done by a reputable company. Do your homework. Look for flaws, for red flags, for insights that ring a little wrong. Better yet, go find your own answers. Write your own case studies. Join our growing community of companies for whom social media is responsible for a lot more than just 1% in net new sales revenue. You’ll be glad you did.
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