Social Media Marketing (also called Social Media Management or SMM) refers to managing a business or organization's presence on the social networks on the internet. Social networks are online communication tools that allow users to communicate with family and friends and interact in many ways that were not possible before the internet. A business's presence on these popular social networks provides a new cost effective method of having customers find you, and more importantly interact with you and other potential customers about your business. Compared to other promotional methods, a social media presence is very affordable because there is no direct advertising (unless you would like to implement this in addition). Once your presence is established with accounts on some of the major social networks (MySpace, Facebook, Twitter, LinkedIn), it acts as a vehicle for word of mouth promotion that is very valuable.
For example, Sam just bought a car from your dealership and was told by an employee that your dealership is on FaceBook. He was happy with his experience so he went on your FaceBook page and became a fan. His becoming a fan of your dealership was very likely just broadcasted to every one of his friends and family that are on FaceBook. April, who is Sam's cousin, is looking for car. She has peeked at a few ads and flyers but still wasn't feeling ready to do any shopping not sure of a reputable dealer. When she signs on to FaceBook, she sees that Sam has become a fan of your dealership and knows that he must have had a good experience working with you. She is interested by this and clicks on to your page on FaceBook where she can find your address, photos of your dealership, what other FaceBook users are a fan, any comments they may have left on the page, store hours, current sales and deals, a link to your website, contact information, and have an opportunity to contact you with any inquiries.
In that brief example you can see how just by having a presence on one of the many social networks brought a potential customer. Also Sam, and possibly April if she becomes a fan of your business's page on FaceBook as well, is now able to receive any updates that you send out to fans. This can be extremely valuable when you are running a promotion and can really help towards bringing back your previous customers. This example uses an auto dealership, however this setup can happen with just about any type of business.