Many business leaders remain unconvinced about the power of social media to influence corporate reputation

Word of mouth has always been the most trusted source of information, whether complimentary or derogatory, about companies or products. And thanks to social media, word of mouth today is a more compelling communication channel than ever before.

While brands are waking up to the commercial opportunities offered by Facebook, Twitter and the like, new research suggests many business leaders are yet to react to the reputational threat they pose. According to a survey by YouGovStone, 59% of business leaders believe social media “will have either a marginal or no impact on business reputation over the next five years”.

However, Who Cares Wins: The Rise of the Caring Corporation, a report by Havas Worldwide, contends that corporate social responsibility and social media are “totally interlinked”.

“If you are not socially responsible as a business then the digitally empowered consumer will punish you,” says David Jones, chief executive of Havas Worldwide. But through social media, consumers, employees and shareholders can all become “powerful advocates” for a company, he says.

In the dark

As for the high proportion of business leaders who remain unconvinced, Jones says that will change rapidly. “We’re at the very start of this so it is absolutely understandable that a number of people will not yet have seen the threat or the opportunity,” he says. “If you ask the same question in 12 months, in two years, three years, you will see a dramatic progression.”

This is borne out by survey data in the Havas report. While 22% of business leaders said social media today has no influence on reputation, when asked whether social media will have no impact in five years that figure falls to 12%.

Recent events in the Gulf of Mexico will have done much to alert the doubters. The parody Twitter site, BP Global PR, has more than 175,000 followers, ten times as many as the official BP Twitter stream. And BP is only the latest of many companies that have seen bad news spread via social media. Other notable examples include Goldman Sachs and Toyota.

All three have suffered a “massive backlash” through social media, Jones says. However, he cites PepsiCo and electronics retailer Bestbuy as companies that have enthusiastically and successfully embraced social media to improve their public reputations.

Many firms have found out the hard way how adeptly campaigners are using social media. Chris Young, coordinator of the Real Bread Campaign in the UK, believes companies have been “caught unawares” by the expansion of social media. He says the powerful bread manufacturers he is campaigning about are not on Twitter. “That means there may be people effectively talking behind their back,” he says.

Jones suggests that some business leaders are less convinced by social media because they mistakenly feel it is not relevant to their sector, and Young says some companies wrongly think it is only for young people. “If you’re thinking it is just kids, I think that is a misconception,” Young says. The people who follow the Real Bread Campaign on Twitter range from those in their 20s up to pensioners.

“What the social media have done is dramatically grown the size, scale and velocity of word of mouth,” Jones concludes. “A century ago I could probably tell 10 people about a bad or good experience with something, whereas today I can tell hundreds, thousands or even millions.”