} -->
Back to Top

Greatest Risks Posed by Social Media

(updated 2021) 



Companies of all types and sizes are adopting the use of social media for their marketing campaigns, but many are forgetting to consider the risks inherent in having a social media presence. There are platforms and widely known metrics that help management to measure the organizational value of social media marketing, but I rarely see a qualitative or quantitative framework that helps management to control their risk exposure. Although social media began as a personal tool for networking, it quickly lent itself as a marketing tool. As such, the potential effects of social media marketing efforts should not be underestimated; it should be fully vetted in the same manner that other organizational strategies are reviewed.

Strategic Risk
According to Pew Research, 93% of Americans use the internet. In just 20 years, the use of the internet has increased by 40% and the saturation is such that businesses are almost forced to engage in business online.1 Most organizations have embraced the shift to digital engagement with their customers. Ninety-two percent use some form of social media marketing, but only 44% of Chief Marketing Officers say they can quantify the impact of their efforts.2 Sixty-three percent of marketing professionals believe social media marketing is a valuable strategy; however, 67% struggle with strategy design and data analysis.3  Although the ability to value social media marketing is still a work in progress, businesses have at least acknowledged the potential strategic risk: the risk arising from the failure to implement appropriate business decisions in a manner that is consistent with the institution’s strategic goals.

”Acquiring new customers is certainly an important consideration, but maintaining current loyal customers is arguably even more important.”

- Lifetime Value of a Customer


To effectively address strategic risk, organizations should recognize that social media usage is about more than establishing a social media presence. There are both pros and cons to usage, and appropriate expectations, parameters, and targets should be established and adhered to. In addition, the strategy should be implemented in alignment with the organization's needs and goals including human capital, marketing, technology, and financial considerations. The results of social media marketing efforts should also be reviewed regularly, as an errant marketing effort can potentially alienate your core customers.

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. Many organizations underestimate this risk because social media is free. However, free does not mean without value, expectation, or risk:
  • Value: A disgruntled customer, using a free service as a means to communicate, may reduce their time expenditure by typing 280 characters instead of a 300 word email or letter. They may also have reduced the organization’s expense for staffing a 1-800 contact number.
  • Expectation: But this customer may also expect a faster response.
  • Risk: And their inquiry could result in widespread negative sentiment about the organization, especially if the communication is shared/retweeted/upvoted/etc.

In recent years, companies have gotten better at responding to customer complaints on social media.
According to a Harvard Business Review study, 48% of US consumers use social media to evaluate an organization's interactions with customers.4 Responding to complaints and inquiries should help to control negative word-of-mouth and potential loss of revenue.

”…the most successful companies in our sample generally responded to complaints with a public message inviting the customer to continue the conversation using a private channel.”

- Harvard Business Review



Social Media is about engaging the consumer, which implies active involvement from both the organization and the consumer. Many reputational risks can be overcome relatively painlessly:
  • Create and communicate the organization’s philosophy concerning social media to all employees.
  • Respond promptly and effectively to consumer complaints, no matter the form.
  • Give the social media marketing responsibility to someone who can recognize the importance of responding to consumer complaints as well as the importance of disseminating a message that is consistent with the organization’s intent.
  • Have your processes reviewed regularly by an independent third party who can provide objective insight into the effectiveness of your process.

Operational Risk
Operational risk refers to the risk of loss resulting from inadequate internal processes, people, and systems or from external events. Mistakes happen, and most are forgivable; but it only takes one major misstep to cause significant damage. Errors can never be eliminated; however, the risk exposure can be effectively reduced by the following:
  • Ensure that the person that delivers organization’s message understands the mission, branding strategy, and desired outcomes so that they can effectively manage the organization’s social media presence and mitigate potential risk exposure.
  • Check the social and political environments daily and ensure that planned communications remain appropriate, to avoid appearing offensive or tone deaf.
  • Ensure that planned communications are proofread prior to distribution.
  • Have your processes reviewed regularly by an independent third party who can provide objective insight into the effectiveness of your process.

A social media strategy should be implemented in alignment with the organizations needs and goals including human capital, marketing, technology, and financial considerations.
via @finandmrkt (http://bit.ly/3-Risks)


click to tweet

One of the largest disadvantages of communicating via social media is that the art of communication can be lost in translation. The receiver cannot see the sender’s face or body language for the emotional and behavioral cues that add meaning. This can leave the communication open to interpretation. Implementing controls that maintain your message in alignment with the organization’s mission and appropriate for the current environment should reduce the organization’s risk exposure.

Strategic, reputational, and organizational risks are the greatest risks of social media marketing. However, the risk analysis should not stop with these considerations. In addition, the solution set to address these risks should be expanded as necessary to remain commensurate with the level of risk. More complex marketing programs and issues may require retention of a lawyer, retention of a publicist, employment of a public relations representative, or employment of other specialists to handle the risk.
---
1 Pew Research Center: Internet/Broadband Factsheet



Privacy Policy
Facebook RSS Twitter
Finance & Marketing
© 2011 finandmrkt.com