A STUDY by British company Fasthosts Internet shows the use of social networks is growing among small businesses there, with 24 per cent of respondents saying they use these networks to promote sales or plan to look at doing so this year. 'The aim of social networking is to create interaction between people,' says Steve Hodgkinson, research director with Ovum Research. 'Commercially, the aim is to harness this energy to provide insights into customer needs or to promote a brand.'

Marketing and research

The Culture Group, which operates the Bali Culture, Beach Culture and Swiss Culture restaurants, is one local SME that uses social media to market itself.

Earlier this year it started using Facebook to create events and promote them to friends and customers. For example, its Jack Daniel's Black Jack Night, at Bali Culture on July 25, attracted some 300 people, about 60 per cent of whom were its Facebook members, says managing director Raymond Png.

Civil servant Marcus Lee, 28, was introduced to Bali Culture by a friend who got to know about the restaurant's Facebook group and decided to join it. 'It's a good way to get updated on events,' he says. 'There are no push messages, no spam mail. I simply go there weekly to check what's on.' According to Mr Png, Facebook allows the restaurant to gauge how many guests will attend an event and to send them a reminder closer to the date.

Social networking tools appeal more to the younger, go-ahead set, while newspaper and TV advertising is usually for the general crowd, he says. But this may change. As Mr Png has noticed, more and more older people are getting on to Facebook to look for long-lost friends and keep in touch with existing ones. 'I have people in their 50s adding me as their friend in Facebook,' he says. 'This technology has the potential to change people's behaviour.'

Besides marketing and promotions, social media tools can be used by businesses to conduct market research - for example, to get feedback on products and services - at a fraction of the time and cost associated with traditional methods such as surveys and focus group discussions.

As Patricia Law, digital strategist with Ogilvy 360? Digital Influence, points out: 'If you conduct a survey the traditional way you'd be lucky to see initial findings in two weeks. With the right social media tools you obtain your findings as soon as the first person utters a word online.'

Social media as a recruitment tool

Besides interacting with customers, some SMEs have been using social networks to recruit. In the US, a survey by recruitment firm Jobvite found about 80 per cent of companies use or plan to use social networking sites to attract candidates this year.

Significantly, 66 per cent of respondents said they have hired a candidate identified by or introduced through an online social network, showing this channel is not only being used but is producing results.

Social networking sites, which can range from generic ones such as LinkedIn, Facebook and Twitter to more niche communities, enable SMEs to cast their net wider and reach an audience they might not be able to engage through the traditional media - for example, the younger and more IT-savvy community.

When social media monitoring solution provider JamiQ was looking to hire a developer, it used the platform it knew best. Founder and chief executive Benjamin Koe went to IT developer communities in Singapore, Malaysia and China to look for the right person.

The company posted the job specs online. 'The thing that's really interesting is that unlike job sites, which are usually country-specific, we get to post to an international community,' Mr Koe says. 'And it worked for us because we did not need the person to be situated in Singapore.'

JamiQ received between 10 and 20 responses within a week of posting its job ad, and eventually hired an online candidate.

The social networking platform also allows potential candidates to find out more about would-be employers and engage in frank discussions that helps give them a good understanding of the company. For its part, a company can assess a candidate's capabilities through the quality of their contribution to online discussions.

Extracting value from social networks

Ovum's Dr Hodgkinson says a simple way SMEs can start harnessing the power of social networking is to participate in networks such as Facebook, MySpace and LinkedIn as members - observing the likes and dislikes of users, their language and behaviour.

It is important for the participation to be 'authentic'. For example, 'snooping' under an alias is frowned upon by online communities. The tone of contributions is also critical - people react very negatively to 'corporate speak' in social networks, says Dr Hodgkinson. And that's why overt marketing attempts or straight advertising may not work.

The trick is to tune into the flow of dialogue in a way that addresses the needs and priorities of the network community, rather than the advertising schedule of the company.

Employees, too, have to be educated on the code of conduct in social media to avoid misunderstandings. For example, they have to know whether they are allowed to share information about their company or its products on their blogs, and if so, to what extent.

Another key point for SMEs to note is that while many social media tools are free, significant effort has to be invested to use them effectively. SMEs have to understand what social media can and cannot do.

'In the same way you don't use a spoon to cut a steak, it's important to understand the advantages and disadvantages of social media,' says Ogilvy's Ms Law. 'From a broad perspective, social media is best used for relationship building and gathering insights - you're not about to generate the sale of 100 Boeing business jets on Facebook.

'SMEs need to look beyond the medium and concentrate on the objectives and the problems these objectives were derived from. A sound strategy can morph itself to fit any medium.'

This article was contributed by the Infocomm Development Authority of Singapore. Visit www.ida.gov.sg/sme to find out how the Infocomm@SME programme can help you adopt infocomm for your business

This article was first published in The Business Times.