I ran across a post from Altimeter today that had some very interesting conclusions from a new study. The jist of it was that there is a direct correlation between profitability growth and the use of social media. I think many of us probably figured that was true anyway, but this study actually has conclusive proof of the fact. In fact, the numbers were surprising; the more companies engage their customers though social media, the better they did. Those that did not have seen declines in profits.

“But even more interesting is that we also looked at the financial performance of the brands, grouping the companies with the greatest depth and breadth into a group called “Social Media Mavens”. These Mavens on average grew 18% in revenues over the last 12 months, compared to the least engaged companies who on average saw a decline of 6% in revenue during the same period. The same holds true for two other financial metrics, gross margin and net profit.”

In a way it’s not surprising, smart marketing today means having direct two-way relationships with customers. We have been so over-saturated with one-way advertising messages that people are simply ignoring any unsolicited marketing messages that do not give the opportunity to respond. Witness the decline of printed newspaper revenues and television commercials - they are just not as effective anymore, and therefore companies are not as willing to spend their money there as the ROI is getting lower and lower. Far better to redirect your marketing energies into cultivating direct, lasting relationships where your customer has a voice too. Otherwise, the perception you give off is that you don’t care to listen, and your competition does - and putting yourself in your customers shoes, who would you rather do business with?