What is your social value formula?
What is your social value formula?
Executives understand that social media has value for their business and a far greater potential then how they are using it today. Most of the multinational brands we work with are in their third year of committed effort introducing social to marketing, communications and customer service efforts. What were once unconnected experiments in Facebook, Twitter, YouTube or blogs, are now efforts to enforce some interpretation of ‘best practice’ customer engagement across Facebook fans in 40 countries, for example.
According to the new McKinsey paper, Making Sense of Social Media, from partners David Court, Roxane Divol, and David Edelman,
“Despite offering numerous opportunities to influence consumers, social media still accounts for less than 1 percent of an average marketing budget, in our experience. Many chief marketing officers say that they want to increase that share to 5 percent.”
And I would stick to the, now, three year goal of 18% of total marcom spend put forth in the Fuqua School of Business research from 2010. Either way, we need to expand our use of social media – especially in marketing, communications and customer service.
Finding your value
A few years ago, a global financial services company was exploring how social media could further their goals or at the very least , how they might anticipate new threats from social media. Internal evangelists butted heads with “traditionals” who needed proof before endorsing any real investment in social media. One of those evangelists came up with a simple value formula.
Since they were a service brand, they had already established a simple value for a public customer complaint. When someone declared a serious service complaint, it cost them “$X” in terms of referral or direct business. They then mined Twitter and a specific travel forum which featured a concentration of brand experience comments from customers. By tallying up the negatives and ranking them in severity, they were able to demonstrate that a month’s worth of unchecked negativity had put almost half a billion dollars of business at risk. That became a motivating ‘social value formula’ for decision-making executives.
The McKinsey paper cites another example:
“…to ensure that the company was doing a quality job designing and executing its social presence, it benchmarked its efforts against approaches used by other companies known to be successful in social media. It then advanced the following hypotheses:
- If all of these social-media activities improve general service perceptions about the brand, that improvement should be reflected in a higher volume of positive online posts.
- If social sharing is effective, added clicks and traffic should result in higher search placements.
- If both of these assumptions hold true, social-media activity should help drive sales—ideally, at a rate even higher than the company could achieve with its average gross rating point (GRP) of advertising expenditures.
The company then tested its options. At various times, it spent less money on conventional advertising, especially as social-media activity ramped up, and it modeled the rising positive sentiment and higher search positions just as it would using traditional metrics.
The company concluded that social-media activity not only boosted sales but also had higher ROIs than traditional marketing did. Thus, while the company took a risk by shifting emphasis toward social-media efforts before it had data confirming that this was the correct course, the bet paid off. What’s more, the analytic baseline now in place has given the company confidence to continue exploring a growing role for social media.”
Find your value
In the McKinsey example, I am struck by the simplicity of the brand shifting budget to prove their hypothesis valid. Too many brands are cautiously going at half-steam in social media hoping that the killer data point, the mythical social “GRP” or value of a fan, will reveal itself from some third party. The social value formula should be bespoke to your business. And, it’s available today if you are simply willing to prove it valid. What is your social value formula?