TotalCIO

Dec 15 2010   8:08PM GMT

Can the use of social media skew sales forecasts?

Linda Tucci Linda Tucci Profile: Linda Tucci

Best Buy uses social media like a pro, or as professionally as a business can, given the newness of the communication mode. The company’s Twelpforce service enlists the passion of Best Buy’s entire workforce, not just customer service employees, to help online shoppers make their purchasing decisions. The company’s most recent use of social media was to “crowdsource” its job description for a new social networking position,┬ásoliciting advice from its online community to get the requirements right. Best Buy senior management is right there in the mix. CMO Barry Judge chronicles Best Buy’s use of social media in his lively blog. CEO Brian Dunn talks about how he learned to love using social media in a piece in this month’s Harvard Business Review. In fact, if you google Best Buy and social media, the results page is thick with headlines touting the retailer’s savvy use of social media tools to connect with customers.

That’s why my ears perked up when I noticed Tuesday’s blaring headlines that Best Buy had overestimated holiday sales — not just overestimated, but badly misread its customers’ appetite for high-end televisions and other fancy gadgets. The misjudgment resulted in a drop in quarterly sales and lower-than-estimated earnings. The flub sent Best Buy shares plummeting, and put pressure on the shares of competitors and consumer electronics manufacturers, according to news reports. The miss cast doubt on the holiday prospects of the consumer electronics business — and more: “The lackluster showing also cast a shadow over the strength of the recovery in the consumer-driven U.S. economy,” Reuters wrote. A pall on the whole recovery!

It seemed to me ironic that a company so in touch with its online customer base could be so out-of-touch with the mood at large. Does using social media give companies a distorted view of their customers? I don’t know. It sounds like one of those dopey correlations we hear daily: People who do crossword puzzles are less likely to get Alzheimer’s, so doing crossword puzzles will prevent Alzheimer’s. Or my favorite when I was raising my children: Kids who do well in science and math are also good in music, so crank up the Bach and Mozart, if you want your kids to excel in math and science. In Best Buy’s case, good sales probably correlate with online enthusiasm, but that doesn’t mean that online enthusiasm causes good sales.

The problem may be that online social communities often turn into echo chambers of the like-minded, where the occasional contrarian only serves to egg on the social group to act even more like-minded. They are happy to be among their own kind. One thing is true: Being able to read the minds of the self-selecting customers who browse online is no guarantee that you’ve got the holiday zeitgeist right.

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