There are many ways to assess the value and benefits of social media marketing. A recently released study by L2 of the beauty industry reveals relationships between companies’ commitments to digital/social strategies and shareholder value.
In its latest Digital IQ Index, L2 compares the digital and social media initiatives of key companies in the growing beauty products industry — Estée Lauder, Sephora, Limited Brands and others — with their activities a year ago. The findings have relevance for companies in all sectors.
The L2 Digital IQ Index measures brand performance across four categories — website, digital marketing, social media and mobile. Top scoring brands are labeled genius, indicating their digital competence is a competitive differentiation. Scoring scales down from genius to gifted, average, challenged and feeble.
Digital IQ = Shareholder Value
One of the key findings is that Digital IQ is significantly related to year-over-year change in stock price, suggesting that brands allocating resources toward digital see higher returns. While the relationship is not necessarily causal, a spokesperson for L2 tells me that the firm has registered similar financial performance relationships in specialty retail, auto, pharmaceutical and other industries. “Our hypothesis,” said the spokesperson, “Is that Digital IQ is a strong barometer for how innovative and nimble a company is and is a forward-linking indicator of shareholder value.”
While companies in this space have increased their digital sophistication with Facebook brand Pages and including Facebook sharing capabilities and user reviews on their websites, cosmetics continues to lead all industries in U.S. magazine advertising. “Muscle memory, coupled with limited digital understanding, has resulted in what appears to be massive marketing inefficiencies,” the report states. In other words, while taking greater advantages of e-commerce and nurturing direct relationships with their customers on social media, the beauty industry is reluctant to shift their marketing emphasis away from linear media.
Other Key Findings
The report provides in-depth examinations of each brand’s digital and social evolution, along with data comparing the companies studied. Among the general observations is that while social sharing buttons on websites are no longer scarce, social features pay dividends in boosting traffic.
Not unexpectedly, the study found many consumers are browsing brand sites and then purchasing on Amazon. Allowing consumers to purchase from their preferred e-commerce site could reduce friction in the buying process, I see brands that losing customers to other sites carries the risk of the purchaser being converted to another brand prior to the transaction.
About a third of the brands studied have mobile sites, with two-thirds of those e-commerce enabled. One would expect a greater investment in mobile by this time next year.
Flashes of Genius
L2 called out several campaigns as particularly effective:
- Origins included “surprise-and-delight” in their Facebook sampling campaign
- CoverGirl is replicating the beauty counter experience on its website
- Estée Lauder brands M•A•C and Smashbox have interactive social shopping, where users can invite up to five friends via Facebook, Twitter, email or IM to shop together
- F-commerce is being used by a number of brands, such as Olay
- L’Oréal is partnering with Demand Media to deliver original, curated content to consumers seeking online beauty advice
- Clinique and several other brands are installing iPads in their brick-and-mortar stores to enhance shopping with social media, diagnostic tools and educational videos and tips.
Neil Glassman is principal marketing strategist at WhizBangPowWow, where he delivers integrated social, digital and linear media solutions. Contact Neil by email and join his conversations on Twitter and Google+.