Measuring Value of a Social Media Customer

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? ask@gojeeno.com

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.