That lovely Instagram shoutout could save a small business from shuttering this year

By Zlati Meyer

November 17, 2020

Few things put more smiles on the faces of small-business owners than social media recommendations about their products or services, but now, new research proves that those online shoutouts also put cash in their bank accounts.

On average, social media endorsements of small businesses generate 23% of revenues—or approximately $197 billion—new data from American Express finds. And 78% of the owners say that positive shoutouts on social media are a “significant driver” of business.

This year, the bottom line is even more important for small businesses. Forty-six percent of small-business owners say they’re gunning for a better-than-average holiday season just to stay in business in 2021.

Teri Johnson, the founder of the Harlem Candle Co., has seen the value of social media recommendations firsthand. Though beauty and lifestyle influencers have cited her high-end scented candles, the biggest were nods from singer Alicia Keys and renowned ballerina Misty Copeland.

“They’re extremely valuable,” Johnson says. “Our biggest days come from social media endorsements. Instagram Stories is where people get to know about a brand they’ve not heard of before.”

Merchandise from the Manhattan-based business, which launched six years ago, is sold online and in 30 stores around the country, including at NiLu in New York City and Mountain Dandy in Wyoming. Social media mentions garner attention that the Harlem Candle Co. might not otherwise get.

“It definitely moves the needle. Every now and then when I see orders going crazy, I check Instagram, I check Twitter, I check the news and think, ‘What happened?,’ because we’re getting followed,” Johnson explains, adding that those new followers then go to the company website and place orders.

A signal in the noise

The importance of social media recommendations grows as consumers become more sophisticated. They turn up their noses at commercials and digital ads, because while those are great at keeping brands top of mind, consumers are more discerning, knowing the messaging is paid for and not always 100% true.

“There’s overwhelming decision in everything we buy,” says Luca Cian, an assistant professor of business administration at the University of Virginia’s Darden School of Business. “There are so many alternatives that people say, ‘Oh, gosh. How can I choose?’ . . . We need someone to help us. We cannot rely on advertisements or commercials, because we’re skeptical.”

With consumers increasingly suspicious of traditional ads, Cian says recommendations from family, peers, or even celebrities help fill the void for businesses hoping to drive sales. For instance, a consumer may read about a bakery or a barber shop or a handcrafted wallpaper company cited online and take note—whether it’s the next-door neighbor’s post or a viral tweet from a mega-star.

“Word-of-mouth from peers matters, because they’re felt as authentic and genuine. There’s less of a perception of authenticity from a celebrity. However, in general, what it lacks in authenticity, it compensates for in the desire to emulate. I wish I was like Brad Pitt. One step closer to being Brad Pitt is drinking the same coffee he does,” Cian says.

Instagram Stories is where people get to know about a brand they’ve not heard of before.”

Teri Johnson, Harlem Candle Co.

Though small businesses welcome social media compliments any day of the year, they have more poignancy as the holiday shopping season starts. One test will be on Small Business Saturday—the Saturday of Thanksgiving weekend, which starts just as Black Friday ends.

According to American Express, which created this shopping day in 2010, 88% of shoppers want to support local stores and eateries during the COVID-19 pandemic, which has hit these businesses especially hard. They’re doing it online, too; 42% report that they’ve supported a small business on social media.

Social media recommendations are “more important for small businesses, because I know what Coke and Pepsi are. I already have opinions on big brands, but I have no opinion about small businesses,” Cian points out.

“The big value is many times people lack awareness of what a small business is about,” Cian adds. “Social media provides a cheaper way to spread awareness and information.”