Can Facebook boost sales? New study says yes.

While we hear about the power of social media as marketing tools, especially for those trying to bootstrap their businesses, but just how effective is it?

New research from Utpal Dholakia and Emily Durham of Rice University takes a look at this question. The study is featured in the March issue of the Harvard Business Review.

According to this study, companies that use Facebook and its fan page module to market themselves to customers can increase sales, word-of-mouth marketing, and customer loyalty.

Dholakia and Durham surveyed customers of Dessert Gallery (DG), a popular Houston-based café chain. Prior to the study, DG did not have a Facebook presence.

The study, based on surveys of more than 1,700 respondents over a three-month period, found that compared with typical Dessert Gallery customers, the company's Facebook fans:

• Made 36 percent more visits to DG's stores each month.
• Spent 45 percent more of their eating-out dollars at DG.
• Spent 33 percent more at DG's stores.
• Had 14 percent higher emotional attachment to the DG brand.
• Had 41 percent greater psychological loyalty toward DG.

According to Dholakia, the results indicate that Facebook fan pages offer an effective and low-cost way of social-media marketing.

"We must be cautious in interpreting the study's results," Dholakia said. "The fact that only about 5 percent of the firm's 13,000 customers became Facebook fans within three months indicates that Facebook fan pages may work best as niche marketing programs targeted to customers who regularly use Facebook. Social-media marketing must be employed judiciously with other types of marketing programs."

Dholakia said Facebook marketing programs may be especially effective for iconic brands, which appear to attract a higher percentage of their customer base as Facebook fans.

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