Hear That? It's the Sound of Everyone Jumping on the Bandwagon

There's an old maxim in marketing that, "in tough times, you should spend more on advertising."

It makes sense: in a quiet market the squeeky wheel gets noticed.

Of course, this rule is rarely obeyed, as advertising budgets are usually the first to get cut. It's hard to justify such spending to those tasked with keeping whatever money is left, under lock and key.

But a new study by the e-commerce consulting firm the e-tailing group and online customer review firm PowerReviews suggests that recession-strapped companies are starting to realize the power of social media when fiscal prudence is the order of the day. It found that three-fourths of the 117 survey respondents have committed some degree of time and money to social media in the past six months.

And they were rewarded for it. The companies that had the highest levels of social media activity and engagement increased revenues by as much as 18 percent over the past year, while those that didn't saw a six percent decline in sales.

The companies that scored highest have dedicated teams working the channels they use. These teams can be as small as one person, but the point is that someone is strategically managing the effort. And the most successful of these companies have also spread the gospel of social media internally, creating advocates all across their organizations.

Said Lauren Freedman, the president of the e-tailing group, "The integration of community and social networking within e-commerce has reached critical mass and as such is now a benchmark that we will be tracking annually. Customer engagement has become a metric to be reckoned with, where failing to engage consumers via community and social media will have brand and bottom-line implications.

"All merchants must test and understand how to effectively deploy it for their brands to retain customers, encourage sales, and avoid abandonment to competitors who've better embraced its marketing potential."

The study identifies three things that are driving the exodus to social media:

1- Brands want to be able to put their own spin on products and services and mitigate "brand degradation" from consumers already using sites like Facebook.

2- They want to be seen as up-to-date in their online presence.

3- They're afraid their customers will leave them for competitors with more socially engaging experiences.

Finally, businesses are realizing that they can drive massive amounts of word of mouth and brand loyalty effectively, efficiently and measurably, through social media – at a fraction of the cost of traditional methods.

Which means that the old maxim needs to change to "in tough times, you should spend more on social media."

With this kind of data, even the folks watching the budgets can't argue.

– Mark