Strategy
How to measure social media
Sep 7th
There is much talk in marketing circles about how to measure the impact of social media. Some measurements are hard, such as actual campaign response and conversion rate measures. Others are a bit softer, such as measuring campaign reaction frequency and tone (e.g., positive, neutral, negative). While both are valid measures, I do think we have been missing a broader, yet critical component of our measures—the overall financial impact of word-of-mouth (WOM) spread.
It occurred to me today that I may already have a way to measure WOM influence and the impact of social media.
Years ago, I came up with a simple equation to measure what I called, the “Residual Value of a Customer.” In other words, this is a calculation to determine value of an average customers’ impact on your business relative to their individual influence on other customers. Keep in mind that this was before the internet and social media tools, so the sphere of influence of an individual customer was generally much less—maybe 7-10 people total. However, I think the logic still applies today.
The Residual Value of a Customer takes into account the annual sales to a customer, the expected tenure as a customer, and the estimated number of people influenced. For example, if “Customer A” spends $150 a year with a company and the average tenure is three years, then “Customer A’s” value to the organization is $450. However, if “Customer A” recommends the product/service to just one other customer who follows the same spending/tenure patterns (as the average), “Customer A” now has a residual value of $1,350.
Let’s take this thinking a step further. Recent research has suggested that the average Facebook user, for example, has 120 friends. The average user may interact meaningfully with between 10 and 20 Facebook Friends within a 30-day period. Using the calculations above, let’s say “Customer A” influences 20 friends within a 30-day period. “Customer A” now has a residual value of $27,000, as do each of those 20 friends who adhere to the average customer measures. In this first circle or ripple of influence the residual value of these 21 customers is now more than one-half million dollars over the next three years, assuming the averages spending and purchasing life remains consistent.
These are significant numbers, and all brought about by one customer sharing experiences with a circle of friends.
I have used this model a number of times to demonstrate the power of WOM marketing programs to senior management. It is simple to understand, and proven using average customer sales and tenure numbers. In the majority of the cases, I’ve been successful in gaining support from senior management for at least testing WOM or now, social media, programs. I have also used the Residual Value of a Customer to demonstrate the opportunity cost for not engaging in WOM.
In the spirit of sharing, I’ve created an online version of the model for you to use here: Residual Value of a Customer Calculator. Feel free to use this model and share with others.
I’d appreciate your feedback.
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Are your customers loyal or lazy?
May 27th
“I don’t know whether I’m loyal, or lazy,” tweeted a friend of mine last week as his eye doctor ran more than 30 minutes behind. He seemed as frustrated with himself for not finding another provider, as he was with his doctor for wasting his time. Granted, there may have been a patient emergency or an unforeseen situation with that caused the delay; yet, others with appointments were expected to endure without being alerted to the problem and given the option to reschedule. While this particular situation is most prevalent with professional appointments, we all know of similar situations that occur in our own businesses and organizations.
Customer loyalty, like friendship, is built on a mutual understanding and acceptance of one another. At minimum, the relationship between the customer and the organization requires:
> Honesty
> Integrity
> Consideration
> Empathy
> Respect
> Humor (maybe not required, but certainly helpful)
While the customer easily gives these qualities, organizations with which they purport to have a relationship often do not reciprocate. From an organization’s perspective, a customer relationship is all too often built only on revenue generated. Specifically, the value of that relationship is measured on the number of purchases made and the size of those purchases. When a customer recognizes that their loyalty is measured only by these factors, such as with supermarket loyalty programs, they become fickle about the relationship. Laziness creeps in and whoever has the best sale prices or is closest to home gains the customer’s favor. When this happens, the relationship becomes a commodity for the customer, as it is already for the organization.
To prevent customer laziness, organizations need to think of customers more as friends, than as dollar signs. Put yourself in your customers’ shoes and ask yourself the same questions you might ask about your friendships, for example:
Do my customers…
1. Feel like they’re “my only customer” whenever we get together?
2. Talk about our relationship in a positive light with their other friends?
3. Tell me when I’ve done something wrong and give me an opportunity to make it right?
4. Share their lives and stories with me because they know I care about them and the relationship?
5. Count on me to deliver whenever they’re in need?
6. Desire to spend more time with me and take every opportunity to do so—wherever I may be?
7. Show passion about our relationship (brand)?
8. Believe that every action I take is in their best interests?
9. Feel that they’re desired?
10. See tangible and long-term value our relationship?
If you can truthfully answer yes to most of these questions, your customer relationships—and long-term customer loyalty—are in good shape. If not, you have some work to do.
Do keep in mind social media tools make it very easy to build and cultivate customer loyalty today. You can connect anywhere at any time and have a meaningful conversation with customers. There’s really no excuse for not putting time and effort into building these relationships. Not doing so will make it easy for the customer to decide if he’s really loyal, or just lazy.
Can you afford lazy customers? No, I didn’t think so.
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Finding the edges
Jan 27th
Posted by 
Dave in Cultural Change
There’s a lot of disruption in the world.
I read today that more than 200,000 job cuts have been announced this month. Most announcements have been by big companies; we never hear about the smaller firms. In fact, many businesses have likely closed all together. We will not hear about those for a while.
These stories remind me of economic climate around the time of the dot-com bust. There was a lot of disruption then, too, but it led to great thinking and innovation in technology and in other sectors.
For those of us in the technology sector then, it was difficult time. Yet, those experiences changed technology. That disruption forced us out of our comfort zone and to the edges of our businesses where we discovered new opportunities to serve untapped markets. In some cases, we created markets where none had previously existed. We found things we never dreamt about or thought possible before someone “dropped the bomb,” forced us out, and made us look back on what had happened.
Without the dot-com disruption, we likely would not know about MP3 players, iPhones, social networks, blogs, or Twitter. Thanks to that disruption, technology makes it easier for us to keep in-touch, check our bank accounts from our mobile phones, and carry thousands of songs in our pocket.
I believe we need disruption in our lives, our businesses, and our worlds. We need to be forced outside of our comfort zone. We need to get to the edges, pull out the binoculars, and look at things a little differently. Like it or not, we need disruption to facilitate change and force us to the next level–whatever that may hold for us.
The good news is, we don’t have to wait for disruption from an external source. Scary as it may be we can create it ourselves; and, we probably should in this economy. Finding and getting to the edges may well be the only way our businesses will survive.
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2.9 (2 people) |
Change begins with you
Jan 20th
Posted by Dave in Change Management
“Be the change
you wish to see in the world.”
- Mahatma Gandhi
America didn’t change today.
There is a new person in The White House, but most everything else is the same. The economy still struggles. The stock market continues to decline. Most people out of work today will still be out of work tomorrow. Some people lost their homes today while others struggled to put food on their tables.
Today’s problems will still be here tomorrow. The hard reality for each of us is that change doesn’t begin in Washington. Change begins with us.
Sometimes in our businesses and our lives we’re afraid to make important decisions that are necessary to take us to the next level of success. We say we’re “risk adverse,” when in reality we’re probably just afraid we’ll make the wrong decision and fail.
So what. Failure is nothing more than change–not good or bad in most cases, just a different outcome than we might have wanted.
It is our fear of change, not failure, which stands in the way of our successes.
Accept change. Gather your courage and embrace it in your life and in your business. Because when you are ready to embrace change, you will be ready to make change. And that will make all the difference in your business and your life.
No, America didn’t change today. The expectations of many Americans changed.
Did yours?
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The “Great” Facebook Blackout
Dec 31st
December 15, 2008, over a million members of Facebook.com planned to stop using the website for a day. It seemed many users were unhappy with the new layout, account deletions, and interaction limitations of the network. They believed that by staging a blackout, Facebook management would listen. It didn’t work.
There are more than 40 million users in the United States alone. The Blackout folks didn’t even register a hiccup. In fact, Alexa.com did not show a sudden drop in pages views on December 15, or a sudden increase in page views on December 16.
The core generation using Facebook understands that the masses can move the direction of a company. They understand that the customer (in this case a Facebook user) can control and guide the brand. The problem here seems to be that the users think they “own” the brand that Facebook has developed. It’s a subtle, but important difference for both Facebook management and its users to consider.
We understand that Facebook management wants to build a website that attracts the masses, build user stickiness, and tastefully monetize the website through advertising. Management’s goal is likely to make money for investors (0r at least cover the cost of operating the service.) We also understand that users just want to interact with each others using the website and tolerate the advertising in exchange for free user of the tools.
Facebook management does seem to listen to requests and input from users, but I doubt the Blackout garnered much of their attention. Although, if the Blackout participants had numbered 10 or 20 million it might have raised an eyebrow or two. Facebook, like many Web 2.0 services, is designed for “the many” and not “the few.” It’s a very small number who are complaining about the changes Facebook management is making.
I suspect “the few” just don’t like any change in their lives.
Yet, in our online and offline worlds, change in our lives is the only thing on which we can depend. So, you (Facebook user or not) really have just three choices:
1. Drive change
2. Accept change
3. Freeze from fear of change
What will you chose in 2009? I hope you don’t choose the third option.
Happy New Year!
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The last thing you hear
Dec 6th
The automated phone system in the office has six option prompts. That’s not a big number, really. Yet, when we made a small change to the last prompt recently, we noticed a 100% increase in the number of misdirected callers who hit the last prompt–the one before, “If you need to hear these options again, press the number or pound sign.”
Most told us they just punched the last prompt they heard, but 99% of those misdirected callers should have chosen the first prompt they heard. I suppose one way of looking at this is that they customer was interested enough to listen to all the prompts before deciding. I think what truly happens is customers are waiting for a better “fit” with their needs and are responding to the last thing that they hear because they can’t remember what came before.
You do this, don’t you? I certainly do. We are always looking for something that better meets our needs, so we filter information that we don’t believe is relevant at this moment. We say to ourselves, “I don’t need that now. I’ll look for it again, when I do need it.” Things you don’t need never make your radar; the last thing you hear always does–even if it’s not what you need at the time.
For marketers, this is a huge problem. What it means is that we cannot just strive to be first name that comes to mind, we must also be the last name heard.
This is a task more difficult that it sounds.
Accomplishing both means your brand has to be everywhere, or at least seem like you are everywhere your customer. To be sure, it means you have to look for alternative ways of reaching customers. It definitely means you have to go to the customer and stop waiting on them to come to you. You also have to engage in the conversation and make sure your voice is heard. You have to understand your customer better and anticipate their needs to the best of our ability. However, more than anything, this means you have to be where you’re not expected, as well as where you are expected.
Be everywhere. Be relevant. Be unexpected. Any one is good, but achieving all three will help keep your brand both first and last in your customer’s mind. That’s where you want your brand to rest. Nothing between really matters.
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It’s all in the tone of your voice
Nov 5th
Posted by Dave in Change Management
Growing up, I learned quickly how to determine when my dad wanted my attention. He could add a certain tonal quality, let’s say, to the delivery of a sentence that let me know I needed to focus on what he was saying. He never raised his voice, but I often heard him “yelling” when he used “the tone.” On the other hand, my mom’s voice often had a constant level of exasperation that allowed me to lose every word she shared to the white noise that surrounded us.
I thought about “the tone” as I watched President-elect Barack Obama’s acceptance speech last evening. His entire campaign was delivered with a different tone. It was a tone crafted for and deftly delivered to a generation–the Millennial Generation. CNN’s exit polls last evening noted that 68% of voters 18-24 and 69% of those 25-29 voted for Mr. Obama–a solid victory for the Millennial Generation. Conversely, the same exit polls placed the majority of McCain’s supporters over age 45 and a great number over the age of 65.
If you have been unable to see these change markers in your every-day life and work, it should be clear from this election that the Millennial Generation, more than other generations, responds as much to the tone of your voice, as they do to your message. This realization presents an interesting dilemma for marketers, I think. Most of us understand “the tone” concept in our gut, but do not put it into practice in our marketing or advertising campaigns. A good many of us are using a tone in our voice that is heard well by Baby Boomers, but is generating white noise to pretty much everyone else.
The November 4, 2008 election should be a wake-up call for marketers. It is time to adjust the tone of our voice if we hope to be heard by a new generation.
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