Let me start by annoying you a bit.

We all hate authors who do that. Some sort of smug statement about how clever they are, followed by some waffle about how they've spotted something clever that none of the other authors in their field has even come close to suspecting. It's deeply annoying. I understand that. I get it, really.

Only, I've got this Jaguar. And I've got it because I'm on Twitter.

Well, I say, 'I've got this Jaguar'. Actually, it's a loan for a weekend, but it's free of charge. And the reason it's arrived is because some idiot wrote off my car, I mentioned it on Twitter and Jaguar, bless them, got in touch.

(I'm going to pause this anecdote before people get excited: in this illustration, business owners should bear in mind they're Jaguar, not the lucky bloke who got to borrow a luxury car for nothing. OK, as you were.)

My car was written off at 4 o'clock one morning while it was parked because an uninsured gentleman went into it at speed. These things happen. So I logged onto Twitter, a social network you're bound to have heard of by now, and mention the incident. 'Anybody fancy giving me a free car?' I joked.

Then Jaguar's digital PR got in touch. They couldn't give me a car, they explained (and looking at the insurance costs I can only admit I'm relieved), but they would be pleased to lend me one in the short term once they've found out a bit more about me. Found out about me? Well, yes. This is social networking rather than an old-fashioned customer/supplier relationship. That's how you build up a relationship with a customer.

Jaguar has used social networking to establish not only its latest vehicles – the XF and XK – but its own identity as an informed, modern company that uses social networks. UK PR manager Nick O'Donnell explained that the aim is to cascade information and indeed emotion about the cars and the brand throughout the various websites and networks available. 'The first phase was to understand who we wanted to reach – and what messages we wanted to get to them. It is as important to communicate information and emotion about our new vehicles to existing and new/potential customers as it is to communicate the change in the brand to the widest possible audience. We aim to challenge some negative perceptions about the brand and influence buyer peer groups. If your peer group regards Jaguar as an older person's car, then this could be the difference between purchase and walking away; we need to get the decision-maker and their peers thinking differently about Jaguar and the cars we make,' he says. 'The next phase was how to reach them; so we looked at which websites, blogs and forums could reach these different audiences, and the creator/influencer individuals within these sites that we should communicate with. We looked at motoring, luxury, lifestyle, gadget and technology websites. The plan was to engage with the online individuals that are creating content and discussion on these websites and facilitate them hosting our content and/or help them create their own content about Jaguar (in much the same way as I would do for a print journalist).

'We also identified that the motoring websites and forums (obviously well known to us already as these are led by our off-line contacts, e.g. Top Gear, Auto Car etc.) were responsible for a huge amount of content and discussion about Jaguar across the web,' he continues. 'A focus has been on encouraging Jaguar content and discussion on these sites and maximizing SEO for this activity. For example, there are a huge number of searches for heritage Jaguars – we therefore offer these motoring sites the opportunity to video an old Jaguar alongside a current model.' This sort of engagement is a thousand miles from the traditional approach taken by established motoring brands.

So, why am I telling you this? Well, suppose you'd been a car dealer on Twitter. Suppose you'd seen my moan – or anyone else's – after an accident like that, and you'd stepped up to help. Let's pretend I'm not writing a book so you don't get mentioned in here: that's aiming a little high and only a tiny minority can hope to get into something like that. But I'm complaining about someone having demolished my car, so you drop me a note offering a deal on a replacement. And you follow up with good service, and I follow up with a message on Twitter – or Facebook, or MySpace, or wherever – saying what an excellent company you have. My 2,000 followers on Twitter have just had a free testimonial about your business delivered to their inbox.

A quick reality check, though. Not all of those 2,000 readers will actually see every message I put up on Twitter. Not every one of them will be wanting a replacement car, and you can't be certain that those who are aren't on the other side of the world. But it's another possible chance of getting some business.

Not sold on the idea yet? OK, how about a little market testing to pass the time? It's well known that there are a lot of celebrities on Twitter. Broadcaster Jonathan Ross is one of them. He used the system to set up a book club. He'd been on for about six months and picked up about 200,000 followers, and one day he just announced the club. Wouldn't it be good, he suggested, if we all agreed to read a book each week and discuss it with these little micro-blogs, or 'tweets', at an agreed time on Sundays?

People responded immediately – great idea, what shall we read – and in May 2009 the Wossy Book Club was born. A trite example? Well, maybe. Richard and Judy had just announced they were going to retire from television, so there was an obvious gap in the market. Did Ross have this in mind at the time? I don't know, I tweeted him about it and didn't get an answer. But that doesn't matter for the moment. He'd built up his followers and he was able to market test an idea in minutes. Think about how long it takes you to consider a new service or product, test it and get it to market.

The bad news is that you're (probably) not Jonathan Ross. Or Ashton Kutcher, or Stephen Fry, or any of the other famous people who have already mastered and become stars of the new medium. They were stars already and they're going to attract a lot of followers precisely because of that.

This ought to be good news for you, though. You don't want to be followed by that many people. Suppose you had 200,000 people reading your posts and the standard 3 percent (if you're doing a flier) decided to wanted to see you. That's 6,000 personal visits from you as a consultant – which is too many, you're unlikely to be able to make those targets. But you might be able to if you had interest from 2,000 people. Or you might be able to retain 200 people as a customer base much more effectively if you had an additional way of keeping in touch with them, something they enjoyed and was cheap to do. By now, the more commercially minded reader should be starting to notice a trend. This social media thing increases people's profits. It makes money, sometimes for everyone except the people behind the social networking website itself.

It can also be royally messed up. If someone misunderstands the medium or, worse, allows their prejudices rather than solid market research to govern who they target and who they don't with their social networking, then it can be a disaster. You want to target teenagers through Facebook? Fine, there are many teenagers on there: but bear in mind that the largest group of people on that network are aged 35–55 (in fact that's the largest constituency on any of these 'teenage fads', as someone once described them to me). We'll be looking in this book at avoiding that sort of mistake.

Probably the easiest way to demonstrate how to do it right, arrogant though this is going to sound, is to tell you a little about how I came to write this book. I joined Twitter in February 2008. I know because it says so on my Twitter Profile and they're very good at recording dates. The only thing is, I didn't really use it until about the following November. You might be the same: signed up, frowned at it, thought about how likely it is that someone else will be remotely interested in what you had for breakfast, signed out again. Frowned a bit more.

I don't know what it was that drove me back in November. I'd been using Facebook as a way of keeping in touch with people, FriendsReunited had been fun while it was attracting new members and putting me back in touch with old mates and LinkedIn had actually produced a tiny amount of work, although most of the people on it were more inclined to show off about how many 'friends' they had than to do anything constructive.

Twitter, however, was starting to make news. Granted, the news was mostly about celebrities using Twitter; the aforementioned Ross, Fry and Kutcher, Philip Schofield, Andy Murray, many of whom raised the system's profile beyond anything its founders could have imagined.

So I went on again and started following some people I knew. I started making little announcements, or tweets as they would be called, myself. And I noticed something. If I mentioned, for example, that I was off media training – training spokespeople to talk to journalists like me without getting tongue-tied or waffling too much, basically – then very often people would hire me again and offer more work because they'd seen me on Twitter talking about what I was doing.

This, I reasoned, was a good game. The Jaguar (sorry, did I mention that again?) helped with that general impression.

Other things started to happen. Editors I was following started to follow me back. For 'editors' you could read 'clients'; I'm a journalist but I could have been anyone trying to sell a service. They started to notice me and come to me when they needed things written. They'd put notes out when they were short of copy. There was, in fact, a very good reason for me to be on Twitter and to continue to be there.

Let me tell you how I secured the contract to write this book. As well as going through the usual channels – approaching agents, sending a synposis to publishers, that sort of thing – I put a note out on Twitter. 'Would anyone be interested in publishing a book on Twitter for business?' I asked. I'm still awaiting replies to the formal book pitches, but within two hours of my putting my initial tweet out, I had a letter from a man in Oregon who was publishing director of John Wiley & Sons, a major business publisher. He referred me to the UK branch of the same company, which passed the idea to its publishing arm for small business, Capstone. No, they weren't interested in doing anything that was so much about Twitter that it ignored the rest; however, they would be very interested if I could do something about social media overall.

You're holding the result in your hand. It's fitting somehow that a book on social media networking happened because the author was able to network with the most likely publisher outside the more traditional route. And of course, several of the interviewees whose input has been invaluable were found through Twitter, Facebook, Blellow, LinkedIn, that sort of thing. By the time you finish you'll know the names and will probably be able to guess which networks I used and which I didn't.

It would be wrong to overstate the role the networking played, though. Something I'll be keen to stress throughout the book is that the technology as a medium is part of the mix, not the whole thing. So yes, I made my initial contact for the book through Twitter and OK, I kept up some of my contacts with the sales team and publicists at the publishers through LinkedIn and other networks. But I also emailed in the proposal for the book as a Microsoft Word document. I met the publisher personally, we shook hands and drank some excellent coffee.

I had coffee with the digital people at Jaguar, come to think of it. Met an actual person. Had proper conversations. My point is that there are already people out there who think digital media and social networking in particular are substitutes for, not useful additions to, a business plan and traditional sales routes. This is plain wrong. It has to be part of, not the whole of, a strategy.

And 'strategy' is an important concept in this book. We'll be focusing loads on planning, on building ideas into something coherent, on justifying costs and ensuring a return on investment. We'll be looking into real costs rather than just the headline prices: Facebook doesn't cost anything to join, but you'll be paying yourself or someone else for the time they spend uploading things, typing facts into it, working out social media promotions. This is a business book, so you need the real costs, not the watered-down stuff that leaves you short of resources and time and nobody has told you why.

But this is getting negative again. Let's consider a few more people other than me and celebrities who have secured business through social media. Simon Apps, for example, is a professional photographer specializing in images for the PR community. He's picked up work by making himself known on Twitter. 'Not thousands of pounds worth, but it's work we wouldn't have otherwise had. And on the basis that once a client has used us, they carry on using us for the foreseeable future, it's definitely worth the investment in time. Besides, I enjoy being able to twitter on,' he says. Interestingly, he's taken the decision – we'll come on to this sort of stuff later – not to talk only about his business when he's online. 'I think it's very important to tweet about everything you do as a person and develop relationships with people. For example, I stalk deer. When I first started on Twitter I had to make the decision whether to even mention it, but it's a big part of what I do so I went for it, but keep my tweets fairly tame when I do mention it and avoid going into the gory bits!'

Vegetarians will no doubt be throwing this book across the room by now, but Apps' decision is a telling one. This is social networking not sales networking, not networking for marketing. Not every contact is going to contribute to sales and not every post or contribution should be made with selling in mind. People buy from people, not companies, and in social media they really need to feel that this is happening.

Ben LaMothe is another interesting case: he has a job, like many people, but he found his job through Twitter. He emailed just before this book was published – on deadline day, in fact: 'Tomorrow I'm starting as a part-time web/social media consultant at United Business Media. This is a job I would not have gotten were it not for Twitter. I'm not sure who followed whom first, but it started with John Welsh. I had been reading what he was tweeting about – mostly new media and publishing – and decided to throw caution to the wind and ask if he took on any interns. He ended up offering to let me shadow him for a day.

'During that day I met with some of his colleagues, sat in on a meeting he was conducting with the entire editorial staff about blogging, and then went into a meeting with the promotions people in another sector. They wanted to know how to best utilize Twitter to promote an event. John and I talked them through different methods. During that day I also sat briefly at the desks of The Publican and Travel Trade Gazette.

'This was in December. Back then (hard to believe that qualifies as 'back then', but Twitter is fast evolving) it was fairly simple to find the people you wanted to follow. What happened before the job shadow is John RTd some of my tweets. As a result I ended up being followed by some of his colleagues. So I walked into the meeting and was instantly recognized by people I'd never met before. It was all Twitter. One of the people I met was Phil Clarke, who heads a number of construction and sustainable development titles. We shook hands and did introductions.

'The day ended and I returned to my degree. But I sensed there was an additional opportunity. During my time at the TTG desk it was suggested that I should contact them about a week-long internship of sorts. So I did that. A few weeks later I was at the TTG desk as an intern, doing stories, filing online, etc. And on my lunch break I ran into Phil again. This time he had something on his mind. He said he might have a job for me, if I was interested. I definitely was. He didn't have all the details, because it was coming into form at the time. Then we dropped it and didn't speak about it again until I sent him a DM on Twitter asking about the opportunity. That led to more emails and a meeting. Then we had a final meeting where I was formally offered the position.

'I realize it sounds a bit convoluted, but without Twitter I never would have met any of these people, had any of those professional experiences or been offered this job.'

As I was typing that very paragraph, British Telecom announced that it had signed 100 companies to its BT Tradespace scheme, which offers an online shop front to companies and businesses, after Twittering about it just once. Journalist and broadcaster Kelly Rose Bradford uses both Twitter and Facebook: 'As a journalist I've used Facebook and Twitter extensively for putting calls out for case studies, alerting PR people to my needs for stories etc., and for flagging up my work once it goes to print. The advantage of Twitter over Facebook for securing case studies or quotes is the re-tweeting – you have a potentially limitless audience for your original message if your contacts re-tweet it for you.

'I've also had unsolicited work via Twitter – my local community radio station followed me on there because they knew me as a newspaper columnist, but had no idea I also did broadcasting – they found my personal website via Twitter, listened to some sound clips I had on there, and subsequently offered me a weekly slot at their station.

'I've recently set up a second Twitter account which I am going to use as a marketing tool for my forthcoming book and tweet extracts ahead of its release. It's hard to imagine promoting oneself without using social media sites these days, so much so I'm having my business cards reprinted with my Twitter and Facebook user names on – I would truly be lost without them, and think for anyone in business, Twitter in particular is an essential tool.'

Gardening products company Wiggly Wigglers uses a lot of social media, including Facebook and podcasting. It does well out of the podcasts, its staff tell me, because of their shelf life. 'Podcasting has enabled us to develop a 'one-to-many' conversation, which the listener experiences as a one-to-one conversation (usually through their headphones),' said the company in its entry to a business competition (which it won). 'The blog and Facebook group have supported this activity and developed to be a vital part of our feedback loop, enabling us to react to positive and negative concerns quickly and easily. We were the first UK gardening company to podcast and have gained a considerable competitive advantage of having instant searchable entertaining and informative answers to our customer's questions.' The best thing is that they are still finding that people download two-year-old podcasts: how much of your company's advertising still pays its way after such a long time?

This kind of benefit starts with word getting around. It starts with people being allowed the chance to feed back.

This is social media.