Influence - knowing the value of your customers

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Picture1Guest blog post by Luke Brynley-Jones who is hosting Monitoring Social Media 2010 in London on 22nd November.

I’ve written about social media influence a few times in the past year – including a somewhat plaintive post asking whether flawed influence measurement is better than no influence measurement.

I’ve also hosted a Bootcamp where I questioned the “influence” calculations of certain leading free monitoring tools. Then earlier this month, I participated in a discussion in which the overwhelming mood was that influence could and should be measured – if only because it’s so  important to marketers that we simply have to try to calculate it.

While I’m not keen on bogus science or flawed assumptions- having read Peter Shankman’s “Road-to-Damascus” post that describes the moment that he realised how valuable it would be to know how influential your customers were the moment they walked in the door - I have to say, I’m getting there. However, the question of how influencer rating is calculated - whether it’s based on Twitter re-tweets, inbound links, number of comments on a blog or shoe-size – is simply going to run and run. But all that really matters is that it works for your business.

If your customers are online and into social media, an influence analysis service like Klout, which uses freely available data, might work fine. In his post, Peter describes how businesses can use Klout to get a short, snappy rating against which they can decide how much “engagement” time a customer really deserves – or whether they should simply be sent packing. 

Most of us haven’t yet knowingly suffered as a result of a company knowing our “influence” rating (in other words, our commercial value) – but imagine when every shop, garage, restaurant and bar knows exactly how influential (or not) you really are. I predict that’s a 2-3 years away yet…but can you imagine the situation:

“Do you know who I am?!”
“Well, Sir. Actually, yes - we do”.

Luke has kindly offered our readers 10% discount on the ticket price for Monitoring Social Media 2010, taking place in London on 22nd November - please use the discount code “fresh”. Charlie (Osmond) will  be speaking about How to Identify Influencers, including details from our up and coming report on using tools to identify social media influencers.

Social Media ROI and Obliquity

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image via FlickR courtesy of LucyFrench123

image via FlickR courtesy of LucyFrench123

“The problem with brands in social media is that they act like 19 year old dudes”.
Yelled Gary Veynerchuck at SXSW, excited as ever.

His point was that there is a tendency to approach every interaction with a single goal - sex for the dudes, sales for companies. And to rush towards that goal without pausing for breath.

I have been reminded of Gary’s comment a few times this week. Mostly by the economist, John Kay.

John has a new book out: Obliquity – why our goals are best pursued indirectly. And as a result he’s cropping up everywhere at the moment.

The premise of his book is that the greatest, most profitable companies achieve success as a result of focussing on higher ideals than cash generation. This is not an especially groundbreaking theory - I’ve rarely met a successful entrepreneur who was primarily money-motivated. However I do think he has coined a super phrase and one with a distinct social media relevance.

Obliquity - why social media goals are best pursued indirectly
Success in social media rarely comes from being the 19yr old dude. Sustained social media ROI relies on building realtionships, not converting one-night-stands. The tools of social media provide a new form of communication. As a result they can help you improve products, processes and customer relationships. An indirect, or oblique benefit, might be more sales.

However, obliquity is a tough message when you’re a nervous marketing manger who only likes to spend money on safe bets where ROI has been proven upfront or in advance.

The tragedy of social media is that “digital can be measured”. This drives a desire is to spend £1 and get £1 and 10 pence back before investing more. Whilst such an approach is fine for Google Adwords or other search marketing, social media plays by different rules.

Please don’t act like the 19yr old dude. Customers can spot it a mile off. You’re far more likely to achieve social media ROI if you focus on a different (oblique) business goal first. Use social media to engage customers. Use social media for deeper customer insight or to improve your customer service. The cash will follow.

Can the market decide influence in social media?

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Over the weekend I wrote about Ian Schafer, who sold advertising space on his Twitter feed for a month on eBay; the item closed at $1,082.01 (see post here). This experiment interests me for a couple of reasons:

  1. Ian’s Twitter feed is followed by 520 people and so this works out at about $2 per person the advertising will reach over the month
  2. The advertising space was sold by auction and there was considerable competition for it. The final price appears to be one that the bidders felt appropriate and as such represents the market value of this advertising space

On one hand I was surprised by the relatively low fee paid for the advertising - with Twitter, people with similar interests and background tend to follow each other. So I’d expect Ian’s followers to be a fairly discrete group and one that could suit really targeted advertising. But the auction on eBay was open and included a number of bidder, so it may be that this is a fair price.

So, an open auction sold off advertising space that would effectively reach an individual’s social network. If we believe that this is a fair indicator of value of this space then it could be that this value is in fact the current true market value of advertising to Ian’s social network on Twitter. In other words this value is a reflection of the influence Ian has.

I’d love to repeat this experiment with a range of other users, or indeed on other social networks. Flooding the market in this way would, of course, have an impact on the prices paid, but it would be the relative prices that interested me most. There is much talk about measuring influence in social networks, and to me allowing the market to decide a fair price for advertising on somebody’s page would be an interesting proxy for such measurement.

The more influential somebody is, the more people that will follow them, the more those that follow them will return and the more trust they will put in what they see there. The price that somebody is willing to pay to be associated with such a person, and with their social media presence, could be an interesting commentary on the influence people believe they have.  Letting the market decide the (relative?) value of somebody’s presence and contacts in social media could allow us to start to understand influence.

Social media metrics

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Next week I’m speaking at the SocialMediaInfluence conference in London on Measuring Influence and Audience online. It’s a tricky subject and looking around today I have been unable to find any examples of an approach which has been successfully and repeatedly applied.

The problem appears to be that whilst there are a whole range of metrics that we can measure in social media (see The Social Organisation blog for a fairly comprehensive list) but none of these truly gets to the crux of the problem. What we want to do is know is to measure the influence that a single blogger, commenter or video upload has. What is the value of a blog post praising Coca-Cola in terms that Coca-Cola could understand and measure. As many of our clients ask us, what’s the ROI of encouraging this kind of activity.

The answer is that it’s difficult to measure, not because we don’t have a range of metrics (we do) but because at the moment our understanding of what causes a particular post or a particular individual to be influential is limited. We can measure proxies, such as trackbacks, links to the site from other sites (and the number of links to the sites that link there). But these really only reflect an inherent influence that we still haven’t measured.

What we really want to know is how influential is everybody that is exposed to an piece of content, and how influential are all the people they influence. Of course calculating this number would be difficult if not impossible. And the information you need to gather would be huge. It really wouldn’t be worthwhile.

Which is why some more basic measure is needed. Take the sites like Dell’s Ideastorm and MyStarbucksIdea. These get peers to vote posts up or down depending how relevant they think they are. You can then migrate only the more popular posts to the front page or the top of the list. This kind of rough approach might be a crowd-sourced way of measuring influence. We know that the most popular posts are those that people in the community think the brand needs to listen to most. Perhaps this is the only measure of influence we need.

Forrester: The new lifetime value of customers

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Mark Beth Kemp from Forrester thinks that the lifetime value of a customer is no longer enough. Both this and the ROI model are deficient because they don’t take account of customer dynamics.

One interesting example she gave was about the launch of the Wii. They wanted to launch a games console that appealed to an expanded market and to sell the benefits of gaming. One critical barrier they saw was the difficulty of persuading parents of children (specifically mums) that this was a new games console that kids should enjoy using. They turned this barrier into an opportunity and launched the alpha mums programme. Finding the most active mums online and seeding them with the product. These mums were encouraged to host parties where other mums could try the Wii. The result was incredible and shows the power of harnessing customer dynamics. One alpha mum alone sold 200 consoles to her email contacts.

For Mary Beth, your new high value customers are not those who spend the most with you over their lifetime. It’s more complex. The highest value comes from your Ambassadors - those who spend a relatively large amount personally and also have a lot of social value - they have a lot of contacts and have influence over these people. Finding exactly who these people are can be complex although really it just relies on finding out where they socialise (online or offline) and how many people they are in contact with there. This gives you their reach. You can then calculate how valuable their recommendations are likely to be and that gives you a crude measure of social value. Perhaps a developing but more useful measure for marketeers.