May 3, 2011, 9:01 AM

Retailers place hopeful bets on social marketing

Retailers will spend more this year on Facebook and other social networks, a report says.

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Nearly three-quarters, or 72%, of retailers plan to spend more on marketing via social networks this year than in 2010, according to survey data from Forrester Research Inc. and Shop.org. Only search marketing—this includes paid search and search engine optimization for natural search—beat out social networks for anticipated increases in marketing spend in 2011. 75% of retailers plan to spend more this year on search marketing.

The results come from the annual State of Retailing Online survey  conducted by Forrester Research Inc. for Shop.org, the online retail division of the industry trade group National Retail Federation. The first wave of the two-part report, released today, is based on a survey conducted in March and focuses on marketing, social networks and mobile commerce. The second section of the report will cover other aspects of online retailing and be released in the second half of this year.

The survey, conducted in March, includes responses from 68 e-retailers, including web-only retailers, multichannel retailers and manufacturers who sell online to consumers. Survey respondents reported a 40% average increase in 2010 web sales compared with sales in 2009—a hike skewed upward by a 79% increase among the manufacturers in the survey. (The 40% increase compares to 2010 online retail sales increases of 11% reported by Forrester, 14.8% by the U.S. Department of Commerce, and 9.8% by comScore Inc.)

Despite the anticipated spending increases, social networks account for only a small part of marketing budgets—2% of the $5.5 million average marketing budget among the retailers responding to the survey. And only 29% of respondents say social marketing has helped grow their businesses.

Still, 18% of respondents say that a social network presence was among their top sources for acquiring new customers—tying social networks with e-mail marketing for fourth place among customer-acquisition techniques. Search engine marketing led that list with 90% of respondents, followed by affiliate marketing with 49% and organic traffic at 44%.

When asked about their attitudes toward the value of marketing through social networks, the largest group of respondents, or 82%, say they are pursuing social marketing strategies because “this is a great time to experiment and learn more about what they can do.” The next-largest group, 62%, say the returns on social marketing are unclear; and the third-largest group, 61%, say the primary benefit of social marketing is “listening to and better understanding our customers.”

When asked specifically about the benefits of marketing through the Facebook social network, brand building is cited by 40% of respondents; listening to customers, 37%; getting new fans or Likes, 16%; building the lifetime value of existing customers, 6%, and customer acquisition, 1%.   

Two analysts from Forrester will speak at the Internet Retailer Conference & Exhibition next month in San Diego. James McQuivey, vice president and principal analyst, will speak in a session entitled "The Convergence: How the coming together of the Internet and TV will change e-retailers' business." Mike Gualtieri, a senior analyst, will speak in a sesson entitled "Do your web pages need a new fitness regimen?"

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