The true costs of social media

Many companies jump on the social media bandwagon because they think social networks are free. However, sceptics argue that there’s no such thing as a free lunch.

In this article I identify three social media costs: One direct and two indirect. Whether these are costs or “investments” is a philosophical question, which I will not attempt to answer here and leave to the readers to decide.

Hiring cost

The direct cost arises due to resources required to use social media effectively.

A firm aiming for a meaningful social media presence needs to devote efforts in content creation and user engagement.

For instance, opening a Facebook fan page is easy; engaging consumers on that fan page by creating interesting content and continuously participating in a genuine dialogue is tough!

Companies must hire, train and retain talented employees. All of these activities require substantial cash outlays.

cost of change

The first indirect cost constitutes necessary changes in firms’ processes and culture.

For example, if customers complain about product quality on social media, the social media team should be able to communicate the problem to production department immediately, get the problem resolved, and communicate back to the customers.

Resolving customer complaints in real time may require a system that fundamentally differs from existing ones. More importantly it requires a shift in organisational culture, which is perhaps the hardest thing to do.

Cost to reputation

Finally, the other indirect cost comes from risks associated with the viral nature of the Internet.

Just one mistake on the social media can wipe out brand equity worth millions.

I document several such cases from the United States in a manuscript: In a glaring example of flaring up of social media crisis, a rogue “tweet” from automobile-maker Chrysler’s social media agency almost toppled an influential advertising campaign involving celebrity hip-hop artiste Eminem.

When Chrysler was repositioning the American city Detroit as “Motor City”, on its official Twitter account, it was caught ridiculing Detroit drivers.

Chrysler learned the hard way that social media can destroy value almost instantaneously. While social media can enable instant communication with consumers, they also lead to increased risk of magnifying small errors into gigantic blunders. Companies must account for this risk while weighing costs and benefits of social media.

To summarise, managers and owners of businesses, especially small businesses, should take into account at least the costs involved in creating and maintaining social media presence and the enhanced risks of crises due to the viral nature of social media. Indeed there is no such thing as free social media.

Prof Ashwin Malshe is assistant professor of Marketing at the ESSEC Business School, Paris-Singapore.
Todayonline 14 May 2011
Link : The true costs of social media


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