measuring value of a social media customer
DESCRIPTION
How do we measure the total value brought in by a customer to a firm through social media? This presentation follows our research to create a metric called the total customer value and identify what drives customers to follow, influence and make purchases through TwitterTRANSCRIPT
Who talks, and Whom to talk to? Understanding the Total Value of a Social Media Customer
A Research Report on Social Media Marketing
By Vikram Bhaskaran,Director of Products,
GoJeeno
Why Measure Total Customer Value?
• Introduction– Marketing Today– Social Media and the Diffusion of Innovations– Information, Influencers and Profitability– The Need to Measure Profitability– Aligning Social Media to Business
Marketing Today
• All Customers are Firm-Acquired– ‘Push’ acquisition strategies
• Focus on maximizing firm-centric nature of– Permission Marketing– Social Media ‘Memberships’ such as Twitter
Followers and Facebook Fans• Based on Hub-and-spoke Philosophy with Firm
at focal point of information disbursement
Business focus continues to rely on Hub-and-Spoke information strategies, with the firm acting as the focal information source.
Firm’s Marketing Efforts
Consumers
Information Channel
Traditional Customer Acquisition Philosophy
Social Media and the Diffusion of Innovations
Source: http://en.wikipedia.org/wiki/Diffusion_of_innovations
Implications of the Relevance Paradox– Customers talk amongst themselves– Intra-consumer relationships are a key factor in
individual purchase decisions
Source: http://en.wikipedia.org/wiki/Diffusion_of_innovations
In Other Words…
How Marketers View Consumer Networks
What Consumer Networks Actually Are
Benchmarks in Social Media Marketing
• Number of Conversations– Shares, Likes, Comments, Replies and ReTweets
• Number of Unique Memberships– Fans, Followers
But how aligned are these metrics to Core Business Objectives?
Questioning the Neo-Conventional Wisdom
Unique Membership Conversations
High Tech. Hardware (2) 0.024 0.002
Apparels and Accessories (3) 0.076 0.107
Services (3) 0.006 -0.013
*Correlation of Lift in Social Media Indices against Lift in Reported Profitability across 8 organizations with marked social media presence, spanning 3 industry verticals.
• Clearly, existing metrics are not aligned to business objective• There is a need to tangibly measure the value of Word of
Mouth of the networked customer
What is Total Customer Value?
• Total Customer Value– Introduction to Value driven Marketing– Perils of Individual Focus– Influencability and Purchase Decisions– Introduction to Social Profitability– Measuring Social Profitability– The Three Stage Model of Influence
Value Driven Marketing• The Concept
• Allocate more resources to high value customers• Do not spend marketing investments on the loss
makers
But how do we measure Customer Value?
• Individual Profitability– Measures the monetary value attributable to an
individual’s own purchases– Usually calculated using the CLV (Customer
Lifetime Value) framework
Issues with Individual Profitability in a Social Media Setting
• Overlooks Customer Attitudes– Attitudinally Loyal customers are not specifically
accounted for• Fails to leverage on Word of Mouth– Low value customers might be acting as bridges
carrying information to their high value friends
Measuring Total Customer Value
• The Influence Component– Measures the degree to which the influencer plays a role in
an influencee’s purchase decision• The Individual Profitability Component– Measures the monetary value of the influencee’s purchase
Influence Effect of customer “θ”
Number of Children/ Influencees
Number of Parents/ Influencers of Child ‘i’
Getting to Total Customer Value
Individual Profitability
• Net Present Value of Future Profitability attributable to an individual’s own purchases
Social Profitability
• Net Present Value of Future Profitability attributable to an individual’s Word of Mouth
Measuring TCV
AttitudesCustomer Effect
ActionsPurchase Behavior
Total Customer Value
Influencability
Customer EquityBrand Equity
Brand Identity
Brand Awareness
• The ease with which information flows across users
• Calculated based on Distance-Weighted average information flow rate
The Three Stage Model of Influence
Tie Existence• Does a Tie Exist for Information to Flow between
a pair of users?
Influence Visibility• Does the receiving user ‘see’ the Information
from the sending user?
Information Impact• Does the receiving user ‘act’ on the information
by further Spreading it or making a Purchase?
Hypotheses and Preliminary FindingsParameter Measured Component Affected Shape of Relationship
Generosity Tie Existence
Network Compatibility Tie Existence
Existing Clout Tie Existence
Activeness Compatibility Influence Visibility
Message Stickiness Information Impact
Host Conversation Diversity
Information Impact
Receiver Conversation Diversity
Information Impact
Number of Influencers Information Impact
(Detailed Explanation in the appendix)
*Collected on a sample of 1780 users across Twitter, totaling over 230,000 conversations.
Some Interesting Results• More conversational
users were not necessarily more influential
• Users’ Share of Total Conversations had a inverted U relationship with TCV
Additional Analysis and Next Step
• Identifying High Value Customers• Seeding Information with Key Players• Empowering High Value Customers with
Information and Platforms• Harvesting increased TCV and Customer Equity
Thank You
Who are we? http://www.gojeeno.comMore Info? http://blog.gojeeno.comQuestions? [email protected]
Appendix
Hypotheses, Findings & Explanation
Generosity
• Is the measure of reciprocity in social connections
• “Does following someone increase the chance of them following you?”
• Yes. We measured a linear relationship, indicating that following somebody has a significant positive impact on them following you!
Network Compatibility
• Do two people talking similar topics have a greater chance of forming a social connection?
• Yes! We observed a strongly positive linear relationship, empirically validating this effect, known as homophily (or ‘birds of a feather’ effect) in our data samples.
Existing Clout
• Do celebrities have a greater chance of acquiring fans and followers than others?
• Unfortunately, yes. Celebrities and rockstars still seem to have their sway in acquiring followers. However, these celebrities do not seem to have any significant difference in the degree to which they influence an individual.
Activeness Compatibility
• Do two people who are active (online) at the same time have a greater chance of being influenced by each other?
• Yes. But not linearly. Just being online at the same time greatly boosts the chances of influencing someone, but the effect does not increase much with the number of hours.
Message Stickiness
• Does information in a topic discussed by an individual ‘stick’ with him/ her better?
• Yes. And we measured this effect to be strong and positive.
Conversational Diversity
• Conversation diversity- does the variety of topics spoken by a talker/ listener have an effect on how some information influences them?
• For the host (talker), talking a varied number of topics resulted in an initial boost in influence, but talking too many different topics ended up diluting the effect.
• To the listeners, the fewer topics they discussed, the more influenced they were when they received information on one that they did discuss.
Number of Influencers
• Do more influencers have a greater or lesser effect on information impact?
• Yes. As the number of influencers increase, the chances of being influenced increases aggressively till a point, and then becomes almost constant.