Web 2.0
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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0.0 |
People are talking. Are you listening?
Apr 28th
Hearing is a funny thing.
One can hear, but not be listening. One can listen, but not really hear what’s being said. Either way, the conversation goes on just the same. People are talking to you and about you, but you may not be making the connection that its “you” who is the topic of the conversation. Take it from a guy who has had the benefit of hearing impairment most of his adult life.
Those same conversations go on about organizations and brands every day. Everyone talks, but few organizations really listen. It seems to me that most organizations are “hearing or listening impaired,” and the older the organization the worse the problem. Granted, most organizations try to hear what is being said, but some are still using an old-fashioned hearing aid (ear trumpet). There are others who let their hearing aid batteries weaken, or worst of all, still others have removed their hearing aids because they don’t like what their hearing.
Don’t believe me? Do you work for any of these organizations?
The Ear Trumpets
Organizations listening to customers with the ear trumpet funnel many voices down a long tube where only the loudest are heard. In an organization, this is like sending all the calls to “customer service” or the “help desk.” The ear trumpet solution works poorly for the hearing impaired and even worse for organizations. Think about it: just because the organization is not hearing the softer voices doesn’t mean friends, neighbors, and competitors aren’t.
The Weak Batteries
Those organizations that operate on weak batter power for their hearing device miss critical elements of the conversation with their customers. The conversations continue, but the organization picks up only bits and pieces—like a conversation with your mom on a bad mobile phone connection. She keeps talking; unfortunately, you’ve dropped enough of what she is saying that don’t realize you’ve been offered a free trip to the Bahamas… and declined to go. The same thing happens with customers when an organization only hears parts of the conversation—good opportunities are lost.
The Not Listenings
The organization that removes its hearing device, or has decided not to buy one in the first place, does not want to participate in the conversation with its customers. It would rather yell at a customer and hope a few want what it’s selling, than open up a conversation with the customer about needs, values, and expectations. Who likes to be yelled at all the time? Not me, and I’ll bet not you. Aside from great products and exceptional service, all customers really want is to be heard.
Social media tools help level the playing field for organizations that are “hearing impaired.” It’s like having a pair of super-charged, digital hearing aids that help you amplify just those frequencies you need to hear. This ability to listen, hear and actively engage in conversations 24/7 allow your organization unbelievable opportunities to learn from your customers, correct your mistakes, and build a loyal following.
Now, turn on those hearing aids and engage in conversation. You’ll be surprised what you will learn when you start listening again.
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0.0 |
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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2.5 |
Trust is still the currency
Oct 28th
As Web 2.0 and social networking technologies gain a greater foothold on our culture, I often hear LinkedIn.com founder Reid Hoffman’s quote, “Privacy is an old man’s concern,” tossed about. There is some truth to that, I suppose. Although I suspect the real issue is “trust” and not “privacy.” Trust is certainly not an “old man’s concern.”
Baby Boomers and Generation X’ers view the increasing requirements of Web 2.0 for personal and private information with a wary eye. We are the children who came of age in a time that knew Vietnam, the concept of the Cold War, and Watergate firsthand. We are largely skeptical and don’t easily trust the “establishment,” whether it be the government, the corporations or unseen faces behind the wall of the Internet. To us, relationships are built one-on-one and face-to-face, and privacy is something protected until the deepest stages of the relationship.
The Millennial Generation, the generation fueling the development of Web 2.0, are children of technology. They have grown up with computers and technology, and their distrusting and skeptical parents (see above) were increasingly protective of them in their formative years. This generation’s social life was controlled by their parent’s ability (or inability) to take them where they could engage others (play dates, dance classes, baseball games, etc.) They saw little unstructured playtime in the neighborhood with their friends and their primary means of social interaction was (and is) online. Their online relationships are real and intimate because they are an extension of their daily interaction with their friends. To this generation, privacy is not something to be concerned about; it is simply the price paid for building trust.
Although the perceptions, behaviors, interactions are somewhat different between the generations, the act of sharing information and building relationships (face-to-face or online) is tied to one single factor: Trust. Trust is what makes the relationships work. Trust is the only thing that can make or break that relationship. It does not matter if it’s a personal, friendly relationship, or one build on expectations of your company or your brand.
Yet, companies violate our trust daily; and, we keep going back for more. Well, at least those of us who were skeptical and distrustful in the first place are returning. Our expectations were low at the outset, so we largely tolerate the violations of our trust. That’s about to change though. The Millennial Generation has higher expectations of our companies and our brands. Violate their trust, and we are history. We will not get a second chance.
Trust is still the currency for business success. It does not really matter how much private information is shared and kept by the company; it is what is done with the information to build trust that is important. As our culture continues to evolve, keeping the trust is going to be a lot harder than earning it in the first place.
Are you prepared for that?
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2.8 (1 person) |
E-BOOK: 19 Indispensable Websites
Feb 7th
Posted by 
Dave in Technology
Cool Tools for Small Business: Vol 1 – 19 Indispensable Websites
Please note that this e-book is Dave Harkins’ work created in other partnerships or organizations and the design templates have not been changed. Additionally, this content may now be dated but can still be used as an idea starter for your specific needs.
Cool Tools for Small Business: Vol 1 – 19 Indispensable Websites
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2.5 |
