Conference

of the EuroMed Academy of Business

21.10.2011

Aarne Töllinen, Heikki Karjaluoto / Jyväskylä University School of Business and Economics

• Social media has gained significant interest both in science and business

• Marketing Science Institute – Customer engagement as a top research priority for marketing

academics (MSI, 2010)

– New frameworks and methods that link existing marketing metrics and marketing performance measures with new media (MSI, 2010)

– Marketing measurement and metrics (MSI, 2000; 2002; 2004; 2008)

• Business

We ask…

... Is there a need for new marketing communications performance metrics for social media?

So, we try to develop a framework for measuring the effectiveness of

social media marketing communications.

TO DO THAT

We review and collate the literature on social media marketing, social media metrics, and marketing performance measurement. The

Literature is collected from

The most recent social media books and article The studies related to marketing performance measurement

Social media

• Social media is collaboratively produced and shared content published through the internet. The term refers to networked digital platforms, which are used in communication between human beings.

• Social media is new, but a permanent environment for marketing – Business invests $6 billion in social media in 2011

• The shift toward engagement and interactive communications

– From many to many

– Customer participation & customer interaction

– UGC / UGC

(van Zyl, 2009; Riegner, 2007; Hearn et al., 2009; Aho Williamson, 2011; Weinberg and Pehlivan, 2011; Dennis et al., 2009; Liu et al., 2011)

• With social media one could equally be a content creator and a content consumer.

• In social media, neither the customer nor the company is a king. The king is the content.

Platform for information Platform for influence

(Hanna et al. 2011; Parent et al. 2011; Kietzmann et al. 2011)

Web 1.0 INTERNET Web 2.0

Perspective to Social Media Author(s)

viral marketing Kaplan and Haenlain, 2010; Ho and Dempsey, 2009;

word of mouth Steffes and Burgee, 2009; Cheung and Rabjohn, 2008; Brown et al., 2007

ecosystem Hanna et al., 2011

customer engagement and participation

Parent et al., 2011; Muñiz and Schau, 2011; Kaplan and Haenlain, 2011

marketing budgeting Weinberg and Pehlivan, 2011

corporate internal communications Hearn et al., 2009

organizational knowledge management van Zyl, 2008

history and development Boyd and Ellison, 2008; Kambil, 2008; Schibrowsky et al., 2007

conceptual studies Karakas, 2009; Constantidines and Fountain, 2008

relationship marketing and customer interaction

Quinton and Harridge-March, 2010; Ozuem et al., 2008

direct marketing Palmer and Koenig-Lewis, 2009

• Why social media? (according to marketing literature ) – FIRST, marketing communication created by customers has been

proved to be more credible in customers’ eyes than the messages promoted by an organization, and so to have a more powerful impact on decision making (Riegner, 2007).

– SECOND, UGC may increase customers’ value experience, because of interactive and fluent customer service and better opportunities to participate in product and service creation process (Muñiz and Schau, 2011).

– THIRD, active interaction and customer based content creation helps companies to build long-term competitive advantages (Parent et al., 2011).

• Marketing performance measurement = gaining calculable and provable results from marketing activities

Financial (e.g. sales, savings) Non-financial (e.g. brand awareness,

customer satisfaction)

Quantitative (e.g. visitors, leads) Qualitative (e.g. sentiments,

reviews)

• The research have advanced only sporadically – Marketing productivity (the

efficiency approach)

– The marketing audit concept

(the effectiveness approach)

• The ability to measure

marketing performance positively affects firm performance and reporting frequency mediates the relationship

(Morgan et al., 2002; O’Sullivan et al. 2007 and O’Sullivan et al. 2009

• The digitalization has radically altered the ways in which firms can monitor their customers and collect data from their marketing communications

Companies do not understand what KPI`s they should measure?

How to measure the new kind of interactive marketing communications?

(Phillips and Halliday, 2008)

• The simplest measurement model includes actions (inputs) and profits (outputs)

• Ambler et al. (2001) propose that “metrics” should be limited to performance measures which are high level, necessary, sufficient, unambiguous, and ideally, predictive.

– Marketing metrics should be calculable, in quantitative form, and auditable –

in other words, reliable and professionally sourced (Ambler, 2002).

Business

strategy

Marketing strategy

Marketing objectives

Marketing tactics

Marketing measurement

strategy

METRICS

Phillips and Halliday, 2008; Ambler and Roberts 2008; Seth and Sisodia, 2002

• Challenges: – Short-term and Long-term effects

• the answer: brand equity?

– The continuous change in business environments

• the answer: multiple metrics?

– The lack of shared marketing-accounting language:

different objectives, different tools, different metrics • the answer: deeper co-operation between marketing &

accounting?

Ambler et al. 2004; Seth and Sisodia 2002; Sidhu and Roberts 2008

KPI discussion

• ROC (return on a customer)

• NPC (net promoter score)

• NPV (net present value)

• CLV (customer lifetime value)

• CE (customer equity)

• Shareholder value

ROI discussion

• According to AMA ROI measures are: – incremental sales revenue – ratio of cost to revenue – cost per sale generated – changes of financial value of sales

generated, – cost of new customer, cost of old

customer retention.

• According to Ambler and Roberts

(2008) none of those is really an ROI metric.

Peppers and Rogers 2005; Reichheld 2003; Ambler and Roberts, 2008)

“CP can be considered, with some adjustments, equivalent to the CLV over a period of one accounting year, it is possible to see the inter-relation of these two terms. Since CE is defined as the sum of all current and future customers’ lifetime values, we can clearly link CE with CLV by adding the NPV of future customers to the sum of the individual CLVs of all existing customers.”

Sidhu and Robers 2008

• Social media analytics is a fresh concept, but it is based on the old principles of business analytics

• ROI discussion

– Financial measurement and non-financial measurement

Barlow and Thomas 2011; Blanchard 2011; Turner and Shah 2001; Arikan 2008; Delahaye Paine 2011; Hanna et al. 2011

Qualitative Metrics Quantitative Metrics Financial Metrics

Negative mentions Number of shares Average buy

Positive mentions Number of retweets generated Average yield per transaction

Recommendations Number of outbound replies ROI

Product reviews Number of click-throughs EPL = earnings per lead

Geographic distribution of

mentions

Number of customer service

requests

Customer lifetime value

Consumers thoughts Number of comments Cost per acquisition

Consumers feelings Frequency of transaction Value of online transactions

Number of bookmarks Value of sales

Number of inbound visits Value of conversions

Number of subscribers CPM

Number of event attendees Value of leads generated

Bounce rate Value of prospects converted

Conversions Value of customer retained

Costs

Findings

• The digitalization has enlivened the discussion around marketing performance measurement during the last ten years

• New technologies enable more precise qualitative and quantitative marketing communications measurement

• When companies engage with their customers, the focus of their marketing measurement should be on the customer reaction to the tactics employed by their marketers.

– Marketing measurement metrics should also be customer oriented

– The digitized environment facilitates reaction tracking and marketing communications

measurement.

– Marketing measurement models developed in the past 40 years are still usable, and even more important than ever (customer satisfaction, CP, CLV etc.)

– The shift towards a digitized interactive marketing environment does not necessarily mean that a whole array of new measurement metrics is needed.

• The marketing communications measurement must be company specific

• That the marketing communications measurement must base on company strategy

• Especially in the social media context, but also in a broader sense, marketing performance should be measured with several metrics

• There is no broadly accepted opinion of a single KPI

• Social media marketing metrics can be categorized in three groups: qualitative, quantitative and financial

SOCIAL MEDIA MARKETING MEASUREMENT

ROO

Return On Objectives

Financial measurement

Quantitative measurement

Qualitative measurement

COMPANY STRATEGY

MARKETING STRATEGY

SOCIAL MEDIA MARKETING OBJECTIVES (short- & long-term)

Sentiments, Thoughts,

Emotions, Feelings, Tones, Mentions

Reviews

Number of… Followers, Clicks, Mentions, Shares, Replies, Requests,

Comments, Bookmarks, Bounce rate

ROI, Profits, Sales, Savings, Costs, CLV, EPL, CPA, Value of leads generated

EVALUATION

Goal A Goal F Goal E Goal D Goal C Goal B

SOCIAL MEDIA MARKETING TACTICS

• A large share of the literature concerning social media marketing measurement is managerial

• We combine traditional marketing performance literature and social media marketing literature

– Not conclusive, but indicative results

• How companies have combined the increased interest both in social media and in marketing performance measurement in practice.

• How has the movement towards social media changed measurement practices?

• An interesting question is whether the popularity of marketing accounting will continue to increase or perhaps we are moving towards more qualitative type of measures, or a mix of the two forms?