Subscribe to Entrepreneur for $5

When Social Networking Does a Business More Harm Than Good

Opinions expressed by Entrepreneur contributors are their own.

pj-lamberson.jpg Businesses are tripping over themselves in a rush to expand their social networks, but having a high volume of connections does not always boost sales. In fact, in his article "Social Learning in Social Networks," Visiting Assistant Professor PJ Lamberson at MIT Sloan School of Management claims that in certain situations more connections may make people more hesitant to adopt something new.

"In some cases, even though on average people would be better off using the technology or product, adding more connections can decrease how much it spreads," says Lamberson. "It's kind of surprising. We would have thought that adding connections would always help something good spread."

Lamberson, a specialist in systems theory, has built a mathematical model that simulates the way people behave when considering adopting a new technology, idea, or behavior, such as installing an energy-efficient furnace or stepping up to HDTV. In his model, individuals make choices based on their pre-established notions along with information from friends, family and others in their social network. Based on this data, Lamberson is able to predict with some certainty the number of people who will adopt the new technology.

Lamberson's research has some important lessons forbusinesses:

  • Social networking alone is not a magic bullet.
  • Quality products and services are key in generating positive word of mouth advertising.
  • Managing customer expectations is key. People who have a better than expected experience are more likely to praise a business and its products.
  • An external stimulus, such as a discount or free sample, may help in stimulating adoption and spreading positive word of mouth, especially if sales never take off or stagnate.

In short, work toward combining your social networking efforts with efforts to improve customer satisfaction. Also keep in mind that you can use information you gather from your social networking efforts to improve the way you do business and the products and services you offer. The most effective approach is a holistic one.

Entrepreneur Editors' Picks