Customers Via Social Media Are Less Profitable Than Those From Search

customers social media

If you run an e-commerce business, you should know that how a customer finds your site makes a difference in how much they spend with you.

A recent study by Custora, a predictive analytics platform for e-commerce marketing, says customers that find your site through search engines provide the greatest lifetime value (PDF), 54 percent above average.

That’s just a fancy way of saying that these customers will spend more at your online store over a longer period than other visitors who might make only a single purchase and never return.

CPC and Email Also Effective

Other high performers as far as delivering customers of above average lifetime value to your e-commerce business are Cost Per Click advertising and e-mail marketing, the study said.

Customers reaching your site through Cost Per Click ads represent 37 percent above the average lifetime value to your website.

Meanwhile, e-mail marketing delivers customers who are 12 percent above the average lifetime value to your e-commerce business.

Social Media Lags Behind

And where did social media place in the ranking based on the Custora study?

Well, not too high, as it turns out. For all the fuss made over social media, customers visiting from these sites can actually represent relatively low lifetime customer value for e-commerce.

In fact, Facebook visitors represented only 1 percent above average customer lifetime value for e-commerce merchants. Worse yet, the lifetime value of customers acquired through Twitter was 23 percent below average.

Conclusions

So does this mean social media marketing has no value to e-commerce businesses at all? Gary Shouldis of 3 Bug Media doesn’t think so:

No, it’s just that marketing to people on social media is usually a top of the conversion funnel activity while search and PPC customers are usually at the end of that conversion funnel, with wallet in hand. Understanding where potential customers are in the buying cycle is important when creating your marketing plan.

Using Google Analytics tools, Custora conducted the study by looking at 85 retailers and tracked about 72 million customers who were making purchases online.

Image: Custora

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Joshua Sophy - Staff Writer


Joshua Sophy Joshua Sophy is a staff writer for Small Business Trends, covering technology and business news. He is a journalist and editor with 15 years experience in media. A former newspaper reporter and editor, Joshua also serves as President of the Board of Directors of a curling club and is editor of a regional newsletter focused on the sport of curling in the Eastern U.S.

12 Reactions

  1. Can you really compare these directly? When building a brand, unless you already have a name out there social media can be used to build your brand or loyalty amongst potential customers. It’s used as a way to communicate or educate potential customers so they know where to go once they need your product. So just from the well designed social media campaign with realistic goals stand point the two aren’t exactly comparable.

    If a person has been targeted by a social campaign and they covert, they probably won’t be waiting for your Facebook ad to show back up in the list of ads on the side.

    What % of searchers knew to look for your company or went looking for your website after being targeted by a social media advertisement campaign? You can’t measure it but my point is the two go hand in hand. Does brand loyalty still exist in this day? Not like it did.

    Search is “what people do directly before buying regardless of how they heard about your company, concluded they need your product etc”

    Where social is the most accessible way to communicate with a mass of people since we moved from a “3 TV station” setup to cable TV.

  2. I don’t know how accurate this is when you view the sheer number of impressions social media can generate.

  3. Our observations in working with dozens of Seattle area businesses over the past 15 years corroborate the findings of this study.

  4. To back up what Kelsey pointed out, Social Media isn’t primarily designed for advertising at all. It is a platform with the foremost aim for people to engage with other social users through online content.

    That said, marketing and advertising now play a key role which companies are beginning to recognize. 20% of Facebook users have bought something BECAUSE OF ads/comments they saw on the site. Another survey shows 67% of Twitter users are more likely to buy from a brand they follow.

    With 22.5% of internet users’ time spent on social media, it is no wonder why 87% of fortune 500 companies are on social platforms today; they recognize the potential impressions they can be making on the 1.1 billion Facebook Users, 500 million Twitter users and even more on a multitude of other websites.

    If that does not convince anyone of the importance of social media, this absolutely will: in 2012 USA accounted for $226 billion in online transactions (50% of which was spent by only 17% of buyers – “The Golden Shoppers”). If the above results are anywhere near accurate, 1% of that customer base is still a hefty $2.26 billion piece of pie.

    Finally, recent results show Facebook Retargeted Advertisements are revolutionizing online advertising – they are earning 21 TIMES more CTR than standard retargeted ads at 79% less cost!

    [Edited by Editor]

  5. There is a big confusion with social media marketing. Social Media is not the channel you go to to increase sales in fact, you can not directly measure sales increase from social media. Social media is a way to humanize your brand and directly engage with your target audience. Social media is your shot at capturing your audience and gaining commitment.

  6. The study from Custora may be right but my question is: Aren’t e-commerce businesses promoting their products via social media? I have seen many big names in e-commerce doing massive promotions in different social media platform. So if social media is not bringing that much of a sale as per the study shows, then why these businesses are still going after social media marketing?

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