Social recommendations influence an average of 26 percent of purchases across all product categories, according to new research from management consultancy McKinsey & Co. And in 2014, consumers made 10 percent more purchases on the back of social-media recommendations than they had in 2013.
Across 30 product categories studied, roughly two-thirds of the impact was direct—recommendations played a critical role at the point of purchase. The remaining third was indirect, which means social media had an effect at earlier decision-journey touch points—for example, when a recommendation created initial awareness of a product or interactions with friends or other influencers helped consumers to compare product attributes or to evaluate higher-value features.
“The impact of social media on buying decisions is greater than previously estimated and growing fast,” says Jacques Bughin, a director in McKinsey’s Brussels office. “But its influence varies significantly across product categories. Moreover, only a small slice of social influencers are creating the buzz.”
The findings are based on an examination of the purchase decisions of 20,000 European consumers, across 30 product areas and more than 100 brands, in 2013 and 2014. Respondents were asked how significantly social media influenced their decision journeys and about instances when they themselves recommended products.
Among the findings:
- Consumers access social media to very different degrees in different product categories. At the low end, only about 15 percent of our respondents reported using social media in choosing utility services. For other categories, such as travel, investment services, and over-the-counter drugs, 40 to 50 percent of consumers looked to social recommendations.
- A small number of active influencers accounted for a disproportionate share of total recommendations. These power users are even more significant for product categories such as shoes and clothing, where 5 percent of the recommenders accounted for 45 percent of the social influence generated.
- Product categories tend to have their own discrete groups of influencers. The overlap of recommenders between any two consumer categories was very small—a maximum of 15 percent for any two categories.
- Timing matters as well: a first-time purchaser, for example, is roughly 50 percent more likely to turn to social media than a repeat buyer.
- While the role of digital influence is expanding, the analog world remains important. Among the more than 100 brands studied, about half of the recommendations were made offline—in person or by phone. Offline conversations were up to 40 percent more likely than digital interactions to influence purchase decisions of products such as insurance or utilities.
“Our research suggests that online articles written by journalists prompt consumers to seek out social media to further inform purchases—and that public-relations spending to generate such articles may be a worthwhile investment,” says Bughin. “Television advertising, by contrast, tends to act as a substitute for social media rather than complementing it. Relatively few customers were prompted to seek out social influences after viewing a TV spot.”