Social Media, Loyalty, and Organizational Performance

Abstract

We explore the relationship between expressions of loyalty on social media and organizational performance outcomes. Using Twitter and television show ratings, we find that the number of individuals following an organization’s Twitter account prior to the realization of a repeated performance outcome is positively associated with that outcome. We present evidence of the heterogeneity in the effect, showing that the relationship is stronger for organizations that match the demographics of the social network and for niche product categories. We also show that higher levels of a show’s initial following mitigates the relationship between loyalty and performance for shows in niche product categories, and strengthens it for shows in non-niche categories. Our results indicate that social media effectively diminishes the distance between the organization’s boundaries and outside stakeholders. This reduction in distance underlines the importance for firms to manage to their non-transaction interactions on social media.

Keywords: loyalty, performance, television industry, social media, twitter

JEL Classification: L1, L86