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3 Greatest Risks Posed by Social Media

Although companies large and small are adopting the use of social media for their marketing campaigns, many are forgetting to consider the risks inherent in having a social media presence. It’s true, the benefits are always highlighted, the added value has been nailed down to a science and a monetary value can be readily assigned. Rarely, if ever, do we see the risks being quantified and discussed. Social Media is still new technology. Uses, risks, pros, and cons are still being sorted out. However, this is no excuse for failing to think about Social Media from a 360° perspective and to consider the potential risk impacts to an organization.

Strategic Risk
Approximately 79% US Adults use social media and 65% consult online information prior to making a purchase. Although many organizations are currently using social media, only 60% of large organizations use social media in their social outreach efforts and only 30% of all organizations that use social media currently measure the impact of their efforts. Organizations are struggling to find the right social media fit for their organization.

According to IBM’s CMO Study, approximately 50% of CMOs feel sufficiently prepared to measure the impact while over two-thirds acknowledge that ROI will be the primary performance measure by 2015. CMOs also realize that they must, “ inject new skills into the marketing function by expanding the digital, analytical, and financial capabilities of existing employees and by hiring staff or by partnering with specialists to fill the gaps.” Although still a work in progress, in general, small and large business have recognized the Strategic Risk of Social Media: the risk arising from the failure to implement appropriate business decisions in a manner that is consistent with the institution’s strategic goals. They are addressing this risk:

Acquiring new customers is certainly an important consideration, but maintaining current loyal customers is arguably even more important.
The Lifetime Value of a Customer

  • Recognize that social media use is more than just establishing a social media presence.
  • Thoroughly explore the pros and cons and then establish expectations and targets.
  • Operate within your ability to implement successfully. Hire human capital as required.
  • Review the social media strategy on a regular basis, along with the organization’s other strategic considerations.

Reputation Risk
Reputation Risk refers to risk arising from negative public opinion including dissatisfied customers, interactions inconsistent with policies, security breaches, and exposures caused by third-party relationships. Of all of these impacts, the dissatisfied customer touches the widest range of organizations. Many organizations underestimate this impact because the service (social media) is free. However, free does not mean without value or expectation. A disgruntled customer, using a free service as a means to communicate with an organization, may have reduced their time expenditure by typing140 characters instead of a 300 word email or letter. The user may also have reduced the company’s expense for supplying a 1-800 contact number, installing the infrastructure to properly route a call, and for supplying humans on the other end. The convenience and cost-reduction factors should be seen as creating a win-win situation for the company and the consumer. However, the consumer service expectation remains the same as pre-social media.

Approximately 70% of companies ignore consumer complaints on twitter and although no firm percentage is available, many retailers also ignore complaints on facebook. To connect the dots: if 78% of consumers trust the opinion of other consumers then a valid complaint without prompt response means negative word-of-mouth and potential loss of revenue. Bottom line.

Social Media is about engaging the consumer, which implies active involvement from both the company and the consumer. Many reputational risks can be overcome relatively painlessly:

The manner in which we maximize our bottom line may differ by the nature of the industry; but, there are some methods that just about every business type can benefit from. 3 Easy Ways to Maximize Your Bottom Line

  • Create and communicate the organization’s philosophy concerning social media to all employees.
  • Respond promptly to consumer complaints, no matter the form.
  • Give the responsibility to someone who can recognize the importance of responding to a consumer’s complaint as well as for disseminating the organization’s message.

Operational Risk

Operational Risk refers to the risk of loss resulting from inadequate internal processes, people, and systems or from external events. Many honest operator errors are forgivable. However it is certainly a best practice to maintain operator errors to a minimum. One of the largest disadvantages to communicating via social media is that the art of communication is often lost in translation. The receiver cannot see the sender’s face or body language for emotional or behavioral cues that add meaning to communication. This can leave the communication open to interpretation which depends on the viewer’s mood, comprehension, etc. Although it is the largest disadvantage it is also one of the easiest to overcome:
  • Proof read. Always have a second pair of eyes review all material prior to distribution.
  • Mistakes do and will happen. Be willing to correct the mistake and to apologize when necessary.
  • Have your processes reviewed by an independent individual or organization who can provide objective insight into the effectiveness of your process at regular intervals.
These are common errors and manners of correction. More complex matters can be successfully navigated by expanding the strategy to include retention of a lawyer, retention of a publicist, employment a PR representative, or employment of other specialists to handle the specific risk area.