NEW YORK: Social conversations and word-of-mouth, both online and offline, have a measurable business impact and are a major driver of consumer sales, a new study has revealed.

According to Engagement Labs, a firm that analyses conversation data, online and offline conversations drive an estimated 19% of brand sales, which equates to between $7 trillion and $10 trillion of annual consumer spending in the USA.

The study, which examined 170 brands as well as more detailed analysis of a subset of 21 brands, found that online social media make up half of the social contribution to sales, while offline word-of-mouth contributes the other half.

That means 10% of consumer sales are attributed to word-of-mouth and 9% to social media, whereas previous studies have estimated a smaller impact on sales through these conversations, the report said.

The study also revealed that even a small improvement in online and offline social performance can have a big impact on a brand’s bottom line.

By improving social performance by just 10%, brands – or at least those measured in the research – could expect to see a 2% increase in sales and a big improvement in profit margins.

Elsewhere, the study found that traditional media – which it defines as TV, radio and digital – coupled with advertising play a significant role in stimulating consumer conversations.

For example, Engagement Labs said that, on average, a quarter (25%) of paid media’s contribution to sales comes indirectly through social influence.

“Underestimating or ignoring the impact of social influence will negatively impact a brand’s bottom line. Social media conversation has a measurable business impact,” said Ed Keller, CEO at Engagement Labs.

“Our analytics also demonstrate that social influences go well beyond the screen. Consumers are making purchasing decisions at the water cooler, on dates and at home with family, as well as chatting with friends on Twitter and other social networks.”

Sourced from Engagement Labs; additional content by WARC staff