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The Art And Science Of Social Media Program Measurement
 

The Art And Science Of Social Media Program Measurement

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This e-book by Vanessa DiMauro and Lily Cua from Leader Networks provide an excellent discussion of how to approach social media metrics. The Art and Science of Social Media Program Measurement makes ...

This e-book by Vanessa DiMauro and Lily Cua from Leader Networks provide an excellent discussion of how to approach social media metrics. The Art and Science of Social Media Program Measurement makes a clear case for why an effective strategy is crucial to achieving business goals.

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    The Art And Science Of Social Media Program Measurement The Art And Science Of Social Media Program Measurement Document Transcript

    • The Art and Science of Social Media Program MeasurementWritten ByVanessa DiMauro and Lily CuaLeader Networks
    • Table of ContentsFOREWORD .................................................................................................................................................................4INTRODUCTION.........................................................................................................................................................5 WHAT IS SOCIAL MEDIA? ...........................................................................................................................................5 Figure 1: Twitter Growth Curve ..................................................................................................................5 WEB 2.0 WANTS YOU! ..............................................................................................................................................6 Table 1: Web 2.0 Usage Between IT and Non-IT Employees:............................................................9 BUSINESS PLANNING AND STRATEGY ....................................................................................................................... 10FINANCIAL METRICS .............................................................................................................................................. 11LEARNING AND GROWTH METRICS ................................................................................................................... 12 THERE IS NO SUCH THING AS A STABLE COMPETITIVE ADVANTAGE ....................................................................... 12 PEOPLE CAN LEARN, MACHINES CANNOT ............................................................................................................... 13 BE PRO-ACTIVE, NOT RE-ACTIVE ........................................................................................................................... 13 IT’S ALL RELATIVE ................................................................................................................................................... 16 PRACTICE MAKES PERFECT ...................................................................................................................................... 17 Table 2: First Movers versus Market Leaders ....................................................................................... 17 NOT ALL GROWTH CAN BE MEASURED................................................................................................................... 18MARKETING METRICS ............................................................................................................................................ 21 THE SOCIAL MEDIA UPRISING .................................................................................................................................. 22 Table 3: Allocating Online Marketing Budgets .................................................................................... 22 Figure 2: Social Media Marketing Spend ................................................................................................ 23 SOCIAL MEDIA MARKETING IS STILL MARKETING .................................................................................................... 24 IS ONLINE MARKETING A RECESSION-PROOF REMEDY? .......................................................................................... 25 HOW TO HARNESS SOCIAL MEDIA CYBERSPACE AND QUANTIFY MARKETING SUCCESS .......................................... 26ENGAGEMENT METRICS ........................................................................................................................................ 28 FIND OUT WHAT CUSTOMERS WANT AND THEN GIVE IT TO THEM........................................................................ 29 Figure 3: Customer Engagement as a Benefit from Using Social Media Marketing. ................ 32CUSTOMER METRICS .............................................................................................................................................. 33 PEOPLE TALK, CUSTOMERS TALK ............................................................................................................................ 33 ARE YOUR CUSTOMERS HAPPY? .............................................................................................................................. 35 ALL CUSTOMERS SHOULD NOT RECEIVE EQUAL TREATMENT ................................................................................. 36 IT’S NOT ALL BLACK AND WHITE ............................................................................................................................ 37OPERATIONS METRICS........................................................................................................................................... 39 FOCUS ON THE DAY-TO-DAY ................................................................................................................................ 39 IT’S WHAT YOU DO WITH WHAT YOU HAVE .......................................................................................................... 40 2
    • SOCIAL MEDIA STRATEGY REQUIRES NEW BUSINESS PROCESSES ............................................................. 42 THE SUM OF THE PARTS .......................................................................................................................................... 43 3
    • ForewordSocial media has changed the way we communicate in both the personal and the business arena.Every individual now has the ability to create community powerful interactions about a product or asocial or political cause. We are all now potential reporters and publishers, critics and reviewers. Ouropinion matters and influences how people worldwide invest their time and money.This revolution has also changed the way we market. Marketing budgets are shifting away from printand television ads that reach the masses to programs that listen to customer sentiment, engage themin social communities, and share value by way of corporate and personal blogs, microblogging, andvlogs, just to name a few.While there is no question that corporations are making the shift to these new channels, they willnot put their marketing dollars into these new areas blindly. Costs of such programs can besignificantly lower than traditional media buys, but companies need to know that social mediaprograms are not only less expensive but effective. The two immediate questions are: How does a company effectively listen to their customer? What actions, if any, do they take?The key factor is that they do listen, and use what they learn to improve the customer experiences.If designed with measurement in mind, social media programs are significantly more measurablethan traditional print ads of the past. In addition, social media has the potential to provide morethan brand recognition. Companies can gain insights that no previous marketing vehicle could haveprovided. Specifically, the ability to create an open forum for customers to be heard, and companiesto better serve them.In the next 40 pages, Vanessa DiMauro and Lilly Cua provide an excellent discussion of how toapproach social media metrics. The Art and Science of Social Media Program Measurement makes aclear case for why an effective strategy is crucial to achieving business goals. Then, as they say, thedevil is in the details.Written byCatherine WeberPresident, Weber Media Partnerswww.impressionsthroughmedia.com 4
    • Introduction “Web 2.0 evangelists…argue that social software can be used to boost productivity. Theysay it can facilitate an open-ended corporate culture that values transparency, collaboration and innovation. Most important, it can be an effective way to build a customer-centric organization that not only communicates authentically but also listens to customers and learns from that interaction” (Dutta and Fraser, 2009).www.forbes.com/2009/03/11/social-networking-executives-leadership-managing-facebook.htmlWhat is Social Media?We hear about it and talk about it daily, throwing around terms such as ―blogosphere‖ and ―mini-feeds‖ and talking about sites like Digg and Twitter. However, what exactly is social media? Thisterm is difficult to define for two reasons. First, the scope of this term is very broad and, therefore,hard to define succinctly. Second, social media is constantly changing as technology continues toevolve. For example, just one year ago, almost no one had heard of Twitter and now millions ofpeople are tweeting worldwide. Figure 1: Twitter Growth CurveSource: http://mashable.com/2009/01/09/twitter-growth-2008/ 5
    • Social media is a broad term that collectively refers to the various activities that use onlinetechnologies to publish any form of information and then broadcast it to the entire World WideWeb where anyone with an internet connection can view it and respond. Because of its nature, thiscontent is easily accessible and highly scalable and any online user can generate it, which is whysocial media is also known as user-generated content (UGC) or consumer-generated media (CGM).While current emphasis is on the tools that support the behaviors of connecting, social media isreally about a business process redesign. Businesses use the internet as a facilitation platform toconnect and enable collaboration between different people using a set of tools or triggers. It islargely responsible for the monumental shift in how people search for and find information as wellas how people communicate in their personal and professional lives.Web 2.0 Wants You!Web 2.0 is no longer just for teenagers. CEOs and top executives cannot ignore this fact. Researchhas shown that executives make strategic business decisions based upon peer information, much liketheir teenage counterparts who make choices with input from peers. However, there are relativelyfew opportunities for executives to connect with each other online, other than via email. They oftenneed to wait for a conference or in-person event to learn who is doing what with whom in business.Conversely, throughout the web, teenagers, the 20 something cohort, and a growing number ofpeople in other age groups have a myriad of forums where they are talking about themselves andtheir experiences. They are sharing information and collaborating with each other in powerful ways.Armed with their peers‘ perspectives, they are using new tools to make decisions about what theybuy, where they go, and what they do. In essence, they are changing the global economy throughtheir online collaborative behaviors.The potential for this opportunity exists for executives as well, as this constituent is very driven byleveraging peer referral and experiences to shape future decisions. Therefore, youthful users discusswhich music to download or party to attend, while executives need a means to discuss industrychanges and trends, management issues. They need to know which product or service their companyshould buy and how to best leverage their organization.Accordingly, social media programs are becoming the new strategic business mandate – for bothB2B and B2C organizations. Effective customer relationships are the core to any successfulcompany and the strength of any organization is largely dependent upon the company‘s ability todeliver the right products and services to its customers in a timely way. Knowing what the customerwants and understanding their current and future needs is paramount to increasing revenue and 6
    • exceeding customer expectations. Social media programs provide a prime opportunity forcompanies to get to know their customers more intimately and keep the finger on the pulse of theirneeds and behaviors.The time is now for companies to embrace communities to help them serve their clients better,faster, and in more cost-efficient ways. Using social media, companies now have an opportunity toforge a dialogue with their customers actively, not just at the point of sale, but also throughout thelifecycle to learn what they like and don‘t like about a product or service.There is nothing more dangerous to an organization‘s lifeblood than a group of dissatisfiedcustomers. Yet, an organization may often not be aware of clients‘ issues until they have incurredreputation damage or a trending loss in revenue. By cultivating meaningful relationships online,product development leaders can work with clients to share roadmaps and plans. This helps to getearly input from the people who could be buyers at a later stage. Marketing can learn what messagesare most effective with their constituents and have greater opportunities to educate and inform thecustomer, not just with shiny whitepapers and marketing newsletters, but also by bringing them intothe discussion and process of product and content co-creation. Social media engagement programsalso offer opportunities to make heroes out of users, enabling them to share best practice stories andto connect with other clients.Social media sites have also become huge players in the political, sports, music, and entertainmentrealms. Big name proponents of this web platform include President Barack Obama, ShaquilleO‘Neal, Arnold Schwartzenegger, and Sarah Palin.1 What is surprising is the indifference of manyhigh profile business leaders. However, an increasing number of executives at smaller firms see thevalue they can generate through social media outlets and are adopting various channels into theirbusiness strategies. In a recent study conducted by ENGAGEMENTdb of the world‘s 100 mostvaluable brands2, figures showed a direct correlation between strong financial performance and deepsocial media engagement. More specifically, the research shows that, on average, in the past year, thecompanies most involved with social media enjoyed an 18% growth in revenues whereas the leastengaged companies suffered a 6% decline. The values for gross margin and net profit paralleledthese values (Altimeter, 2009).31 Reference list of business leaders and executives on twitter: www.twexec.com/executives-on-twitter/2 As measured by BusinessWeek/Interbrand “Best Global Brands 2008”3 Reference: www.engagementdb.com/downloads/ENGAGEMENTdb_Report_2009.pdf 7
    • With such a clear relationship established between financial indicators and social media involvement,it is perplexing to observe companies that continue to resistance to this new genre ofcommunication and technology. The following are some surprising statistics released in a reportcompiled by UberCEO.com this June regarding the CEOs of Fortune magazine‘s top 100 companies: Only two have Twitter accounts Only 13 have LinkedIn profiles, and four of them only have one connection 81% do not have personal Facebook pages Only two have more than ten friends on Facebook None have a blog4Some attribute these figures to the fact that it is difficult to know the investment‘s potential value orrelated risks and restrictions imposed by regulations such as Sarbanes-Oxley and Reg-FD. OtherCEOs dismiss social media ―as a time-wasting distraction or regard it as a risk managementproblem…focus[ing] on potential risks like security breaches and data privacy‖ (Dutta and Fraser,2009). Whatever the reasons, CEOs that do not engage in social media are ―giving the impressionthat they‘re disconnected, disengaged, and disinterested.‖ They are ―missing a fabulous opportunityto connect with their target audience and positively affect their company‘s perception‖ (SharonBarclay, an UberCEO.com editor.See: www.computerworld.com/action/article.do?command=viewArticleBasic&articleId=9134860)Moreover, these business leaders need to see the urgency of managing their online reputation beforesomeone else does. This assertion is supported by findings from a study conducted by ForbesInsights, which indicates that the Internet has become the chief source of business information(2009).However, the term ―Internet‖ now includes much more than Google searches. Its scope spans fromglobal news sites to personal blogs. The executives that use all forms of Internet input as businessinformation, whether it be from a competitor‘s website or a consumer‘s Facebook page, willultimately be the most knowledgeable and therefore, most successful. Currently, most of theseexecutives are younger than 40 years old. The Forbes study found that 56% of executives under 40maintain a work-related blog daily (35%) or several times a week (21%). This figure drops to 35%and 1% for those that are 40-49 and 50-plus years old, respectively (2009)5. We find a similar pattern4 Source: www.slideshare.net/shazza/fortune-100-ceos-and-social-media?type=presentation5 Source: Forbes 2009 Study: The Rise of the Digital C-Suite: How Executives Locate and Filter BusinessInformation 8
    • for Twitter usage, with members in the oldest category claiming that they ―don‘t see the businessvalue in it‖ (Forbes, 2009).This same study also discovered a similar divide between IT and non-IT professionals. Forbes foundthat ―CIOs and other IT leaders are the most likely executives to conduct Web searches, use onlinecommunities to gather information and recommendations, seek out blogs and other Web 2.0 tools,or use online video over text‖ (2009). The table below illustrates the stark differences in Web 2.0usage between IT and non-IT employees: Table 1: Web 2.0 Usage Between IT and Non-IT Employees IT Employees Non-IT Employees Daily Several Total Daily Several Total Times/Wk Times/Wk Contribute or read micro-feeds via 29% 33% 62% 9% 5% 14% Twitter or similar application View work-related video content via 33% 29% 62% 9% 9% 18% YouTube Network professionally in an online 36% 36% 72% 12% 19% 21% community (LinkedIn, Facebook, online industry forum) Source: Forbes 2009 Study: The Rise of the Digital C-Suite: How Executives Locate and Filter Business InformationWhether or not a company‘s executives have implemented social media action plans, they cannotdeny social media‘s obvious presence. As the personal computer generation rises into leadershippositions, social media will become more entrenched in daily business operations. We stronglysuggest that social media is not a passing fad. Although more and more companies are setting upblogs, Facebook profiles, and Twitter accounts, it appears that in many cases companies are takingthese actions only because everyone else is doing it. As a result, these companies are not able toreap the full benefits of such tools. In this eBook, we hope to give organizations a clear picture ofwhat this success entails and discuss metrics that you can track to help achieve success. We havecategorized the research into sections that provide an analysis of key areas of social media metrics,detailing what they are, how they are measured, and what value and insight they can provide. 9
    • Business Planning and Strategy Does your company have a real social strategy?We are talking about a real social enterprise strategy - one that you drive and measure by businessperformance. We are not referring to the garden-variety social media marketing campaign thatfocuses on tools such as creating a twitter account to "get" followers or a Facebook corporateaccount to put up marketing information.We are referring to a social strategy that is well grounded in the business goals and objectives yourcompany needs to achieve, one that permeates the organizations operations from customer care tocompetitive intelligence, to driving new products and features and, is integrated in the sales cycle.Have you prepared for the cultural impact and change management process that a social strategy canhave on an organization? Have you created a social framework for the enterprise to do businessdifferently?In order to move from the fanciful experimentation with social media tools to putting a socialstrategy at the forefront of the business operations one must focus on the following key areas: 1) Develop an integrated approach to a social enterprise strategy: Social strategy does not just impact marketing nor should marketing be the only influencer on social strategy within the enterprise. Instead, a balance of voices and vision should drive the process and include key operational areas within the business. Everyone should strive to meet social strategy objectives and help achieve goals across the organization. 2) Seek external metrics: Do not spend too much time navel-gazing, looking only at your social returns but look to competitors for best practice, success indicators and outcomes. Outside research and benchmarking is often rich with data to inform your organization about what is possible with social strategy and showing you where you may be lagging. 3) Define frameworks and measures: Social strategy is no different from any other kind of business strategy. You need to establish milestones, measures, and metrics to assess critically the efficiencies and outcomes gained with the same rigor you would apply to any other line of business activity. Yes, social business is a new order. Nevertheless, hold it to the same performance standards and measures as any other business strategy. Social strategy needs to return stakeholder value. 10
    • Financial Metrics “Financial metrics…are necessary to measure if any investment is worth keeping or it any process change will significantly impact the company’s finances negatively orpositively…The very goal of measuring finances is to cut on costs or improve how money is spent all throughout the organization.” http://ezinearticles.com/?The-Key-Components-of-Financial-Metrics&id=1240926All established businesses have some set of financial metrics that they measure. CEOs, CFOs, andstakeholders often look to these numbers first and prioritize them above other metrics that do notappear to directly impact the business‘ bottom line. This is because a business‘ main purpose is togenerate value. As a result, all components of a business—marketing, operations, growth anddevelopment, human resources, strategy, and management—incorporate some form of financialmeasures. It is difficult to sift out financial metrics into an exclusive category because they underpinall other figures that businesses track.Moreover, many departments translate the values they monitor into financial data because ultimatelythey want to see the direct connection between their operations and the returns. For example, themarketing department may track its monthly customer churn rate and from this data calculate howthe company‘s sales levels dropped as a result. Because of this common practice, this paper will takean integrated approach to financial metrics in which each of the following sections will include theassociated financial values and resist the temptation to create a specialized category for financialmetrics as they cannot (nor should they) be taken out of context of the larger business objectives. 11
    • Learning and Growth Metrics “The dogmas of the quiet past are inadequate to the stormy present. The occasion is piled high with difficulty, and we must rise with the occasion. As our case is new, so we must think anew and act anew.” (Lincoln)Most traditional metrics capture values from the past in order to forecast the future. While thesemeasurements can give a firm a general idea of its upcoming performance, often the past is nolonger relevant, the data has become obsolete, or it just does not directly correspond to current andfuture operations. Learning and growth metrics are unique in that they quantify how a business planson evolving. Unlike most metrics, learning and growth metrics directly appraise potential changesrather than manipulate old numbers to churn out ballpark forecasts. These metrics are thereforevaluable because they help to gauge a firm‘s future performance.There is No Such Thing as a Stable Competitive AdvantageFor companies to grow and succeed, they need to have a unique competitive advantage thatdifferentiates them from their counterparts. Unfortunately, the pace of today‘s business world forcescompanies to continuously enhance their competitive advantage because the odds are that yourcompetitors will quickly imitate and improve upon the profit-generating formula you created.However, there is one thing they cannot easily replicate or standardize - employee experience.Organizations now have the technology to reproduce easily, operating systems, computer software,and other equipment business operations depend on.However, what employees know and have learned during their experience working at a companycannot be perfectly transcribed and reproduced. As Russell Coff, an associate professor at Emory ofOrganization and Management, argues, ―human assets are a key source of sustainable advantagebecause…casual ambiguity and systematic information mak[e] them inimitable‖ (1994). In thisregard, a company‘s true competitive advantage should come from its human capital. If the companywants to remain competitive its employees must constantly be learning and adapting to changingindustry standards. 12
    • To leverage social media successfully long-term companies must offer a unique point of view and beable to contribute to the growing body of shared thought leadership in the social sphere. Too often,companies launch empty social media campaigns - campaigns void of a purpose or that fail to makea salient contribution to the world‘s information exchange. While at times these campaigns aresuccessful in the short-term due to their sex appeal of well-crafted messages, if there is no meatbehind the effort to engage, or complete processes to support the spoils of the engagement, theyoften fail long-term. Therefore, defining and sustaining success with social media frequently beginswithin the organization.People Can Learn, Machines CannotMost executives will agree that their employees are their most valuable assets. Although advancedtechnology has some human-like capacities, one of the most important features that distinguishhumankind from computers is our ability to learn, catalog, integrate our experiences into ourknowledge base, and innovate. Computer systems can have frequent updates to incorporate neworganizational developments, but people have to design these new systems. All technology isdependent on some form of human involvement, whether it is designing the structure, inputting ormanipulating the data, further analyzing the output, or updating the system.David Carr of the New York Times reaffirms this position, stating that ―In the digital age, the criticaldifference between success and failure is human capital - those heartbeats and fast hands that canmake a good business great‖ (2008). Because employees are the component of the organization thatenable it to evolve, the following section on learning and growth metrics largely deals with acompany‘s human assets.Be Pro-active, Not Re-activeGrowth and learning metrics are ―not just behavioral and statistical but ‗developmental‘ in the senseof development of adult mental growth over the life span.‖(See: www.balancedscorecard.org/Portals/0/PDF/Laske4.pdf page 1).In other words, growth and learning metrics do not solely measure and analyze old behaviors.Rather, they aim to capture those values that most directly correspond to future organizationalgrowth. Traditional metrics provide information about a firm‘s past performance, but are not alwaysthe best figures for predicting future performance or implementing and controlling a firm‘s strategicplan. This method may have been effective when businesses were not forced to evolve at a 13
    • whirlwind speed. Now, businesses cannot depend on old data to make accurate predictions. Theyneed to be pro-active and anticipate what values will be most relevant to their organization in thefuture and modify them as dictated by market forces. By integrating this forward-lookingperspective, businesses will be able to ―better translate the[ir] organization‘s strategy into actionableobjectives and better measure how well the strategic plan is executing‖ (Kaplan and Norton, 1992).Robert Kaplan and David Norton, authors of The Balanced Scorecard, also recognize the importance oftracking a company‘s learning and growth. They designed a management system in which one of thefour perspectives they integrate is learning and growth. In their words, ―learning and growth metricsaddress the question of how much the firm must learn, improve, and innovate in order to meet itsobjectives‖ (Kaplan and Norton, 1992). From the perspective of their management system, most ofthese metrics relate directly to or are driven by employees.As the pace of today‘s technological era continues to accelerate, continuous learning and growthbecomes increasingly imperative for a company‘s success. Therefore, these metrics need to becollected and analyzed frequently and modified as needed. When numbers are gathered slowly,information will become outdated and useless. As a result, these metrics will drain money and timerather than guide managers on how to capitalize on their investments to realize the most growthpossible.The following is a list of learning and growth metrics: 1. New ideas generated to improve the company (e.g., new product ideas and suggestions, operational adjustments, etc.) a. New ideas can be put forth by customers via posts and blogs, or by employees (company newsletter, company blog, etc.) 2. Savings on market and consumer research spending (faster and more knowledgeable employees will result in more efficient practices and lower costs) a. Time to market is accelerated through using social channels to vet new product ideas and reality test new concepts before they reach full-scale product development lifecycle. 3. Average length employees work at company (the longer they stay, the greater the potential for learning and increased efficiency, which will help the company grow quickly, even in tight economic times. In a recession, companies are reluctant to fire experienced employees because they are the firm‘s most valuable repository of knowledge) a. Experienced, knowledgeable employees can make excellent social media representatives for the organization. 14
    • 4. The strategic technology advances the firm plans on implementing and how this will improve operations and/or reduce the number of employees (labor costs, OH costs etc). 15
    • It’s All RelativeNone of these values is incredibly useful in isolation. In order for these types of metrics to behelpful, companies need to gather data regarding their competitors‘ firms in addition to their ownorganization. It does not really matter how fast your company is learning and growing unless you aredoing it faster and better than your industry counterparts are doing it. Of course, you want to be asoperationally efficient as possible to minimize costs and widen profit margins, but as long as youhave an edge up on your competition, you will generate business.The 2008 Summer Olympics are a good example. In the track and field competition, Usain Boltblew by his competition in the 100-meter dash with a time of 9.69 seconds with the second placerunner coming in a full two tenths of a second later. Breaking the world record he had already set,Bolt‘s feat generated a lot of buzz and brought in a great deal of revenue from his sponsors, namelyPuma, Gatorade, and Digicel. Michael Phelps was also at the center of most discussions at thesesame Olympic Games, coming away with eight gold medals and millions of dollars in sponsorships(granted, this was before some compromising pictures were released).Although all of his eight performances were incredible, the one that produced the most hype wasthe 100-meter butterfly in which he won by a mere one-hundredth of a second. My point, however,is that while Bolt made his race look like a stroll in the park and Phelps‘ race was a nail-biter to theend, both athletes ended up with the same prizes, gold medals, fame, and money.The position above (i.e., what is most important is that you can outperform your competition) canalso be applied to business situations. For example, consider time to market (TTM), which measuresthe amount of time between when a company conceives the product idea and when the physicalproduct is available for sale. This metric is particularly important in industries where productsquickly become outmoded, which is becoming more commonplace as the attention spans ofconsumers shortens and expectations rise.If two businesses come up with similar product ideas, the company that can create a prototype andsend it to its manufacturers first will immediately get a huge boost in market share, which willconsequently erect a barrier to entry for competitors. It does not matter if the company released theproduct one year or one month before its competitors. The fact that it came out with the productfirst (given that quality and price levels are comparable to those of competitors‘) guarantees asubstantial amount of business. 16
    • Practice Makes PerfectOn the flip side, many companies have made their millions by waiting for industry innovators to―test the waters‖. They adopt previously tested ideas, learn from failed attempts, and makerefinements where necessary. In other words, these companies are waiting for others to educate themarket. This approach allows them to use the additional time and experience to perfect the productor service and enter the market with a superior product. Michael Shrivathsan, an expert in productmanagement and marketing, explored the misconception that having the first-mover advantage isthe be all and end all. In Table 2 below he highlights how market leaders are not always the firstmovers ( 2006): Table 2: First Movers versus Market Leaders First Mover Market LeaderPersonal Computer Altair (1975) DellWord Processing Software WordStar (1979) Microsoft WordWeb Browser Mosaic (1992) Microsoft Internet ExplorerInternet Search Engine Excite (1993) GoogleIn many instances, most people have not heard of first mover companies. This substantiates thecounterpoint to the previous argument. Companies with a ―head start‖ do not necessarily reap thelong-lasting benefits. As Shrivathsan states, ―to gain the advantage, first movers must capitalize onthe opportunities that come with being a pioneer while at the same time manage the threats thatarise. The bottom line: Being first in a market is only an advantage when you do something with it‖(2006).This applies directly to businesses using social media tools and online communities. Companiesshould not just focus on creating and using them first, because they run the risk of focusing onimmediacy rather than quality. Twitter is a good example. The average Twitter user has 549followers, although this number is skewed by large corporate sites that have 15,000 followers onaverage.What proportion of these followers actually cares about your personal life or your company‘sproducts? If you look at your own Twitter page, it‘s likely you will see a post made by someone youdo not know or at least by someone who you don‘t really care to know about. If you examine yourfollowers, it‘s likely you will be surprised how many of them you have never heard of. Even the 17
    • people you follow religiously tweet insignificant details about their lives that you could more thanlive without.The Twittersphere inundates us with thousands of tweets that are 140 characters of nothingness. Sohow do companies find a balance between tweeting noise and effective marketing and customerrelations? As is the case with most social media instruments, being the first and loudest does notnecessarily make you the most successful. Strategic metrics are therefore paramount. Measuringquantity will not guarantee returns. The trick is measuring quality and efficiency. Engaged companiesare often the most successful companies, and that requires a business strategy with clear goals andobjectives by which to measure the outcomes of social efforts. If companies can develop socialmedia strategies that effectively satisfy their customers‘ needs and before their competitors, then theywill have built an insurmountable barrier to market entry, making them the only game in town.Companies that do not have an integrated social media strategy should look at what othercompanies are doing to see which strategies are succeeding and which are just budget drainers. Theyshould first and foremost ―focus on customers, understand their needs deeply, and create productsand services that meet those needs much better (in ways that matter to customers) than any of [their]competitors‖ (Shrivathsan, 2009). This is a best practice approach to how a company can use a lateadopter status to its advantage. Otherwise, they will not only have a slow start, but they will be stuckat the starting line while competitors continue to push forward.Not All Growth Can Be QuantifiedAs with most categories of business metrics, there are values that you need to track, but cannot befully quantified. Specific aspects of learning and growth include corporate cultural attitude,mentorship opportunities, and recruited talent all of which have a qualitative aspect. While somequantitative metrics may apply, the qualitative measures must be included to gain a fullunderstanding.Corporate culture refers to a firm‘s core values, beliefs, and behaviors. One can define corporatecultural attitudes as a function of how employees interpret and act upon these shared values, beliefs,and behaviors. Are employees encouraged to experiment with and suggest new ideas? Are theycomfortable enough to voice their opinions and complaints? Are they empowered to make decisionsand take on responsibility? It is difficult to assign numeric values to the answers of these questions,but that does not discount the value that you can distill from the answers to these questions.The ―mentorship opportunities‖ category is relatively self-explanatory but is similarly difficult tomonitor and quantify. Mentor-mentee relationships are some of the most valuable bonds in a 18
    • company, not to mention, cost-efficient. Mentors are often the most experienced employees and cantherefore teach recently hired employees about the ins and outs of a company from firsthandexperiences. New employees will likely respond more to advice given to them by coworkers ratherthan by bosses who have control of their employment status. Mentor-mentee relationships build onand sustain themselves through a sense of camaraderie, which translates into a happier and moreself-sufficient work force. This ultimately results in lower costs and greater profit margins for thecompany.Reverse MentoringA particularly valuable mentor-mentee relationship would be pairing up a ―Millennial‖ employeeswho is technologically savvy with a group of executives that are not as well-versed in the emergingWeb 2.0 culture, or as David Weinberger calls them, ―digital immigrants‖. A company shouldmaximize the value it can get out of its human resources and these reverse mentoring programs helpestablished businesses break into the changing business scheme at essentially no additional cost.One of the most common findings we encounter is that a lack of digital leadership sends the wrongsignals to staff - when executives do not use social media strategically or simply do not use it at all,the organization learns by example that social leadership is not a priority. This is an unintentionaloutcome. While leaders are saying social leadership is important, when they do not act accordingly,the message is diffused and therefore rarely embraced.The most common reason for lack of social leadership is unfamiliarity with the tools and bestpractice of social media. This is a problem (somewhat) easily solved. On a number of occasions, wehave put in place "reverse Mentoring" programs to pair leaders with Millennial to help educate andor support change. Once senior leaders become familiar, skilled, and "acculturated" into social mediausage, they are then able to speak the language of social media - and lead - by example.Recruiting TalentPutting the unique role a Millennial employee can play within an organization aside; recruited talentis probably the most important learning and growth value in which a company can invest. The talentbrought into a company determines the growth potential for the organization. Human resourcesdepartments and any other individuals involved in the recruiting process need to be incrediblyparticular as to the employees they are hiring. They need to look at personality traits, compatibilitywith the firm, intellectual depth, acquired skills, and willingness to learn and work hard. Because new 19
    • employees will likely replace older employees in the future, recruiters need to think in terms of thecompany‘s vision for future growth and development.Bill Gates and Steve Jobs, two of the most distinguished technology founders in history, practicethis kind of rigorous hiring process believing that ‗A players hire A players, and B players hire Cplayers,‘ this can translate functionally into a negative slope. Lowering the hiring standards a smallamount will eventually lead to a very significant drop in the quality of employees. Companies shouldhire only those individuals that have the skills and knowledge to realize the firm‘s growth potentialand should closely monitor the learning curves of recently hired employees. This will ensure that therecruited talent can handle the tasks as well as be able to contribute to future companydevelopments. Recruiters need to realize that the people they hire will ultimately become the newand (hopefully) improved backbone of the company. 20
    • Marketing Metrics “Good marketing is any effort by a company…to DIRECTLY satisfy the wants and needs of its customer” (Collier 2007). (http://moblogsmoproblems.blogspot.com/2007/01/what-is-good-marketing.html)Marketing metrics aim to quantify the performance of a business‘ marketing efforts. Given theunprecedented and rapidly growing impact technology has had on the business world, the followingdiscussion will focus on online marketing. It is important for a business to track the effectiveness ofeach of its marketing campaigns to minimize gratuitous costs and optimize the value added directlyand indirectly to its bottom line. To use marketing metrics effectively, one must first understandwhat a company is striving to accomplish with its marketing campaigns.Effective marketing will accomplish four things: 1. Spread consumer awareness, thereby expanding the pool of prospective customers 2. Increase word of mouth (WOM) and other forms of consumer-generated advertising, also augmenting the number of potential customers 3. Pique interest so consumers become customers and begin to explore and purchase the business‘ products or services 4. Affirm the quality of the business‘ products or services to existing customers, resulting in greater customer loyalty and retention ratesHow does a business quantify whether or not its marketing efforts do these four things? This task isdifficult for any marketing campaign and more difficult to accomplish for those campaigns servedon online communities because of their novelty. Popular online communities such as Twitter,Facebook, and Digg have only been around for a few years, created in 2006, 2004, and 2004,respectively. However, companies that are not integrating these social networking sites into theirgrand marketing plan are already falling behind those that are in better synchronization with thisnew wave of technology. Unfortunately, many of the businesses trying to incorporate socialnetworking into their strategy planning are completely oblivious to whether their efforts andresources are generating optimal results; a state of affairs that could hurt them in the future. 21
    • The Social Media UprisingAs tweets, posts, and blogs permeate the daily headlines and news reports, it is obvious that thenumber of ―social media ‗spectators‘‖ is escalating at a rapid pace. Not only are there more eyes onsocial media sites, there is a growing level of attention and capturing audience attention is the newcurrency in the online marketing environment.. People are beginning to realize that these sites canbe used for more than trivial communication and connections. For example, Twitter in its earlieststages was perceived as a detached method of broadcasting petty details about one‘s personal life.Now, it has become one of the most important tools of the Iranian Revolution, American politicalcampaigns, and in wide use in many companies‘ marketing and CRM strategies. Table 3: Allocating Online Marketing BudgetsSource: http://mashable.com/2009/01/12/social-networking-online-marketing/Twitter is one of the fastest growing social media sites, boasting 1,382% growth in February(McGiboney, 2009). In March, the number of global visitors to Twitter‘s website alone skyrocketed 22
    • to over nineteen million (Schonfeld, 2009). Consistent with these statistics, social networking hasand continues to be the top growth area in online marketing. The table above shows how companiesplan to allocate their online marketing budgets. As you can see from this table, a quarter of thecompanies surveyed plan to increase their spending on social networking and a third plan tomaintain their level of social networking funds. Forrester Research reports similar findings fromthe results of their research study. Figure 2: Social Media Marketing SpendSource: www.web-strategist.com/blog/2009/03/16/report-social-media-marketing-up-during-recession/These figures may not seem impressive, but given that the current recession typically demandsreduced budgets, especially marketing budgets, a 95% bullish market for social media is remarkable.These increases in social networking spending, however, are not unfounded. Social media marketingis relatively inexpensive and provides a great opportunity to generate cost-efficient word of mouthpromotions. Most importantly, it engages customers. 23
    • Social Media Marketing Is Still MarketingLet us not get ahead of ourselves. Online marketing is still a subset of overall marketing. Accordingto CPA, Michael Gray, there are three components required for a successful marketing campaign: amarket, a message, and timing (2002). When designing a marketing plan, the first three questions andunderlying issues you need to address about the market are: 1. To whom, are you trying to target? 2. How many people are in your target population? 3. Is your market large enough to support your operations?Marketing departments must always consider their target market when designing and adjusting theirstrategies because ultimately, marketing is only successful if it appeals to the target market.An engaging message is the second key element of a thriving marketing campaign. The messagemust catch the attention of and resonate with the target market. In order to create such a message;marketers need to understand their customers. They need to know the wants, needs, fears, andproblems of their customers and emphasize how their value proposition will satisfy them. Thisrequires frequent and open dialogue between the company and the public.However, releasing your message and directing it at selected consumers will not guarantee aprosperous marketing campaign. The final factor marketers need to consider is timing. Thedifference between a failed attempt and a successful campaign could be determined by severalfactors including: o Consumer trends o Economic conditions o The competitive environmentAlthough these are uncontrollable factors, marketers can still use them to their advantage if theyanticipate them and respond aptly. A glaring example is the current recession. Andrew Kohut,president of the Pew Research Center, reports that consumer satisfaction with the economy hasreached a 15-year low, which explains the drastic reduction in consumer spending.High-end businesses such as Tiffany‘s and Coach are feeling this squeeze most acutely and havebeen forced to alter their marketing strategies to maintain reasonable sales levels. While stores on theopposite end of the price spectrum, such as Target and Wal-Mart, are also suffering from the 24
    • economic downturn, they have been using the market conditions to their advantage. They havealtered their marketing campaigns to highlight their low-price offerings and attract the growing poolof cost-conscious customers.Is Online Marketing a Recession-Proof Remedy?According to a study conducted by Forrester Research (2009), ―merchants believe online business isbetter suited to withstand an economic downturn than physical stores or catalogs.‖ This assumptionmay explain the retail industry‘s shift in marketing tactics from billboards and televisionadvertisements to Facebook and Twitter banners and buttons. Given that the number of peoplewho read or watch social media has increased from 48% last year to 69% this year, this strategyshould continue to spread (Forrester, 2009). Many companies such as General Mills and Blue Crossrecognize the benefits of blogs, podcasts, and other forms of social media and have alreadyintegrated them heavily into their marketing strategies. Bloggers such as Seth Godin also realize how―traditional ways of interrupting consumers (TV ads, trade show booths, junk mail) are losing theircost-effectiveness. At the same time, new ways of spreading ideas (e.g., blogs, permission-based RSSinformation, and consumer fan clubs) are quickly proving how well they work.‖(http://sethgodin.typepad.com/seths_blog/2005/05/what_every_good.html).Not only are the costs associated with social media marketing significantly lower than those ofconventional advertising many studies suggest that WOM is more effective than any other kind ofmarketing, and social media is essentially online WOM. Jim Tobin further explores this idea in hisbook, ―Social Media Is a Cocktail Party.‖ He likens social media practices to the expected code ofconduct at a cocktail party. For example: when you arrive at a cocktail party, ―the first order ofbusiness is to observe the room, listen for conversations of interest and find an appropriateopportunity to enter the conversation‖ (Tobin, 2008). Similarly, ―observing and tracking theconversation is a vital first step in developing an effective social media program. By first listening tothe conversation, you will find what‘s being said, who is saying it and who is listening‖ (Tobin,2008). If businesses can understand and apply the aforementioned concepts and tactics, they shouldbe able to launch a social media marketing campaign successfully. 25
    • How to Harness Social Media Cyberspace and Quantify MarketingSuccess―People are talking about you and your brand and your issues (whether you like it or not). The onlyquestion is whether you want to have an influence on it‖ (Ranii, 2008). This statement is even moregermane now with the introduction and widespread success of social media websites. Onlinecommunities provide a forum for open dialogue in which consumers and businesses alike canexpress their opinions, share their experiences, and spread information. Given the Internet‘s massiveaudience, consumers and businesses now include essentially everyone. As a result, the scope of amarketer‘s job has expanded immensely. A company‘s target market not only includes thosecustomers directly exposed to its advertisements, but it includes everyone connected to thosecustomers regardless of how distant the connection is.In summary, marketing efforts have the potential to impact any and all consumers. Therefore,metrics that intend to quantify the success of a marketing campaign become increasingly essential toa company‘s success. The following is a list of marketing metrics that businesses should considerwhen launching a social media marketing campaign: 1. Number of inquires on search engines (to measure spreading awareness) a. Average number of impressions 2. Number of new customers 3. Customer acquisition cost 4. Ratio of cost to website exposure a. Measured as cost per thousand page impressions (CPM) b. Cost per lead (CPL or cost per acquisition) 5. Growth in market shareHowever, as the scope of social media marketing expands (which it inevitably will given the growthof online networking tools) it becomes more difficult to quantify the success rate of particularmarketing efforts. There are many aspects of marketing that marketing departments should monitoreven if numbers cannot be assigned to these values. This includes the amount and quality ofcustomer-generated marketing initiated by a company‘s original marketing operations. Ask yourselfthese questions: 1. What are people are saying about your advertisements? 2. What are they saying about your competitors‘ advertisements? 3. What degree of hype are you able to build up? 26
    • Specifically, a company needs to understand what is said about their product, who is talking aboutthe products, and how frequently are the discussions taking place.In today‘s technological era, this encompasses tracking blogs, podcasts, tweets, and other forms ofWOM both online and offline. Additionally, Web 2.0 connoisseur, Joshua-Michéle Ross, suggestsstories should also be a success metric because ―great stories are inherently viral and can have aprofound impact on decision making in an organization‖ (2008). The fact that we cannot translateeverything people are saying about a company‘s products and services into numerical values doesnot take away from the importance of listening what people are saying. What people are saying isextremely important and directly correlated to a business‘ success. 27
    • Engagement Metrics“An organization’s best customers…are not just “satisfied” or “loyal,” they are emotionally attached to the organization’s brands or services. They are engaged” (Gallup, Inc., 2009). www.gallup.com/consulting/49/customer-engagement.aspxA disengaged customer is not really a customer, or at least not a good customer. Unfortunately, fewcompanies have implemented effective systems to gauge the level of their customers‘ engagement.Understanding engagement metrics is important because they can give a company a more accurateand complete picture of their customers.For example, there are millions of daily web surfers. Most surfers breeze through websites andarticles, maybe spending a few seconds on any given page. These brief visits will increase acompany‘s number of visitors and impressions, but it does not give the company an accurateaccounting of how many of visitors are interested in their ideas, products, or services. This is whyengagement metrics are an important part of the mix. Engagement metrics aim to quantify howinterested and committed customers are to a business. Although it is good for businesses to get asmuch exposure to their sites as possible, it is better yet to focus on getting the attention ofcustomers whose visits will most likely translate into business.Engaged customers generate the most business because they are more likely to generate higherconversion rates, be more loyal, and have higher retention rates. Another benefit of having engagedcustomers is increased customer satisfaction.Some key metrics for focusing on engagement include 1. Increased revenue 2. Increased customer loyalty 3. Improved customer experience 4. Increased customer referrals 5. Increased customer life-time value 6. Improved sales processes 28
    • If consumers are indifferent to a company‘s offerings, they are unlikely to become paying customers,especially not loyal, repeat customers. Therefore, knowing the level of engagement of your targetmarket is important. The following is a list of engagement metrics: 1. Ratio of the number of visitors to number of repeat visitors (to measure how successfully the site captures viewers) 2. Ratio of the number of registered users to the number of active users 3. Click-through rate (CTR = Number of users who clicked on an ad, i.e., number of impressions) 4. Frequency of posting 5. Average duration of visit (to measure the interest level in the site) 6. Average number of posts over a period of time per visitorFind Out What Customers Want and Then Give It to ThemRecently a study of 1300 American and multinational companies conducted by e-Consultancy foundthat less than half of the respondents had implemented a clearly developed customer engagementstrategy. However, the study showed a high level of awareness of the need for such a strategy(http://live2support.com/newsletter/2009-01/customer_engagement.php).Executives are beginning to appreciate the importance of engaging customers online and to investheavily in methods to capture the customers‘ attention and retain consumers‘ interest. However, onecommon misstep in the process is that companies often (too often) believe they know what thecustomer wants from them. They then often skip a critical step in the planning process – namely toask the customers or clients what their needs and expectations are from the company. A formalinquiry process should start with understanding where the prospective user base‘s current process orexperience gaps are – what keeps them up at night or causes issues, problems or inconvenience.A driving goal of any social media program should be to use the digital channel to accelerate abusiness (or consumer) process and make it easier or more streamlined for the customers to interactwith your company. Therefore, the key is to explore, through semi-structured interviews or througha quantitative study, the points of customer discomfort and/or need, and not focus initially on thesocial media tools you might use to mitigate the pain. 29
    • Too often, we have all been the recipient of a satisfaction questionnaire that asks a question such aswhether we prefer to read a blog or get a RSS feed! Where this fails is that it doesn‘t answer thequestions ―to do what?‖ or ―to achieve what?‖ Your answer is likely to vary widely depending on thecontext of the engagement. Too much tool talk, while it might be entertaining, can significantlyderail the process of learning about customer needs. The goal is to identify issues and use theinformation, when appropriate, to a social-media-driven intervention. Case Study Amazon.com is widely acclaimed for its customer-tailored approach to its online services. Recently, I purchased a book from Amazon online after receiving an email promoting a sale they were having. A hyperlink was in the email allowing me to go straight to the website. A personalized web page opened and had information and featured titles that matched my interests. I had no plan to make a purchase, but one of the books suggested was one I had heard good things about and it was conveniently on sale. Because I am a registered customer with Amazon.com, I did not have to re-enter my shipping and billing information. That information simply appeared to further facilitate and expedite my transaction. I bought the book!Sharon Mertz, a research director at Gartner Research, explains that during a recession businesseshave to put in the extra effort in the Amazon example to get consumers‘ business. She states,―When the economy slows down and consumers don‘t spend as much, businesses need to fightharder for every dollar of consumer spending. Customer experience will only help with that‖ (ascited in Beal, 2008). Companies have responded to this anticipated pattern of behavior by investingheavily in two areas, CRM software and social media marketing.Despite overall budget cuts, many businesses are spending more to enhance their CRM systems.Gartner Research projected that in 2008, the revenue generated by CRM sales would increase 14.2%from the previous year and that this level of growth would continue through 2012 (Beal, 2008).Although implementing a CRM system entails time and resources, the benefits typically more thanoffset the costs. 30
    • CRM software enhances a company‘s relationships with its existing customers, which has thepotential to result in: 1. Increased sales through better timing from anticipating needs based on historic trends 2. Identifying needs more effectively by understanding specific customer requirements 3. Cross-selling of other products by highlighting and suggesting alternatives or enhancements 4. Identifying which of your customers are profitable and which are not 5. More effective targeted marketing communications aimed at particular customers based on their needs and preferences6The use of CRM software provides a firm with the opportunity to develop a more personalapproach to its interactions with customers. This can lead to enhanced customer satisfaction andretention. If a firm keeps its customers happy, they reward the company with return business andpossibly referrals to the firm. This will generate more value from existing customers and reducecosts associated with supporting and servicing them and the cost of finding new customers. CRMsoftware also identifies those customers that will be most profitable. In sum, CRM software enablesbusinesses to be more cost-efficient by engaging the most beneficial customers, which will maximizeprofit margins.The recent spending pattern for social media marketing parallels that of CRM systems. According toa report published by PQ Media in 2006, ―the total marketing spending on social media is forecastto grow at a compound annual rate of 106.1% from 2005 to 2010, reaching $757.0 million in 2010‖(Rubel, 2006). These figures cover blog, podcast, and RSS advertising. This level of spending is notsurprising given the latest updates on minutes spent on social networking sites. Nielsen Online, acompany that measures web traffic, reported that in the past year the number of minutes on socialnetworks rose 83% in the United States (2009).Top ranking social media sites like Facebook and Twitter increasingly permeate the public‘s lifestyle.Overtime they become more valuable as advertising real estate on which businesses can broadcastand endorse their products and opinions. These sites also are valuable forums in which businessescan build up their reputation in the community by listening and addressing complaints publicly andin a timely manner. When companies tap into these online communities effectively, they expandtheir market potential significantly and cultivate open relationships with customers, which may resultin enhanced customer engagement.6 [Online] Available: www.businesslink.gov.uk/bdotg/action/detail?type=RESOURCES&itemId=1075422939. Dateof Accession: July 5, 2009. 31
    • As you can see in the graph below, 85.4% of the executives polled cited customer engagement as abenefit of using social media marketing. Figure 3: Customer Engagement as a Benefit from Using Social Media Marketing.Surprisingly, this same study conducted by Marketing Executives Networking Group (MENG)found that only 21.2% of those surveyed thought that ‗lead generation source‘ was a benefit of socialmedia marketing. This suggests that although executives see social media as a valuable tool to engagecustomers, they may not see the direct correlation between social media and their firm‘s bottom line(as cited in Forrester, 2008). Regardless, no one is likely to argue against the position that socialmedia is going to play a huge role in the upcoming future, both in our personal and professionallives. Thus, businesses will increasingly need to understand social media in order to understand andengage their customers. 32
    • Customer Metrics “Customers are the lifeblood of any organization. Without customers, a firm has norevenues, no profits, and therefore no market value” (Gupta & Zeithaml, 2005, p. 3).As markets continue to shrink, businesses are shifting their focus to the individual customer, as theyshould be, and are scrambling to keep their customers satisfied. If businesses want to succeed, theyhave to exceed their customers‘ expectations because without customers, there is no business. Thisdevelopment is reflected in a worldwide survey conducted by The Economist in 2002 which reportedthat of the 681 senior executives interviewed, 65% claimed customers to be their main focus overthe following three years (as cited in Gupta & Zeithaml, 2005, p. 3). Many other studies, involvingboth American and global firms reveal the trend of businesses becoming more customer-driven.This finding is not surprising. After all, the customer ultimately drives a company‘s bottom line.Therefore, there is likely to be a direct correlation between customer satisfaction ratings andcompany equity.People Talk, Customers TalkSome studies suggest there is a slightly exponential positive relationship between a firm‘s marketvalue and its customer satisfaction level. To explore this idea, put yourself in the shoes of a newcustomer at a new restaurant. You go to the grand opening and have an all-around great experience: o Hostess was pleasant o Bartender was friendly while you waited for your table o Your waiter got all of your orders correct o Food came out quickly, was hot, and deliciousWhat are some of the likely outcomes from your experience? o Talking about this restaurant with your colleagues at work the next day o Recommending the restaurant to your friends or anyone looking for a place to eat in that area o Going back to this restaurant 33
    • Now think about the opposite scenario. You go to the grand opening and have the followingexperience: o Hostess is flustered with requests o Bar is crowded with loud fans and the bartender is watching the game o Your waiter was inattentive o The food arrives cold and is of questionable freshnessWould you complain to your coworkers and friends the next morning about how awful your diningexperience was? The answer to this question is reasonably obvious.As you can easily see, companies need to satisfy each customer because each one is a walking andtalking advertisement that has the potential to spread great reviews or harsh criticisms.Kevin Cacioppo, examined this issue in his article ―Measuring and Monitoring CustomerSatisfaction‖ he found that a ―very satisfied customer is nearly six times more likely to be loyal andto repurchase and/or recommend your product than a customer who is just satisfied.‖ In addition,customers with a problem will eventually tell on average nine other people about their negativeexperience (2000). This kind of WOM advertising can only be control through your directinteractions with customers. All businesses can do is strive to please their customers in hopes ofmaximizing good publicity and minimizing bad publicity. Furthermore, having satisfied customerswill not only guarantee repeat customers and continued business, it will also generate more business,which gives a company potential for securing additional loyal customers.The points above are part of loyalty expert, Fred Reichheld‘s, Net Promoter Score (NPS) concept. Acompany‘s NPS is calculated by subtracting the percentage of customers who are ―detractors‖ fromthe percentage who are ―promoters‖. P – D = NPSReichheld defines detractors as ―unhappy customers trapped in a bad relationship‖ and promotersas ―loyal enthusiasts who keep buying from a company and urge their friends to do the same‖(2006). Customers who neither endorse nor denounce the company fall into a third category referredto as ―passives‖. Research shows that NPS leaders outperform their competitors by an average of2.5 times in most industries (Reichheld, 2006). In another of Reichheld‘s noted texts, The Loyalty 34
    • Effect: The Hidden Force Behind Growth, Profits and Lasting Value, he reiterates theimportance of customer loyalty, finding that it results in as much as 95% higher profitability byreducing customer defections by as little as 5% (as cited in Customer Engagement Strategies, 2009).Surprisingly only 4% of dissatisfied customers will submit a formal complaint to the company(Cacioppo, 2000). This disconnect in the customer feedback loop reinforces the importance ofhaving clear-cut metrics. All companies have unhappy customers, but because so few complaintssurface, companies do not know where their problems exist. Worse yet, companies may think theydo not have problems, or at least no problems significant enough for people to complain. Becausecompanies cannot force disgruntled customers to file complaints, companies need to have customermetrics they measure and analyze regularly. Although numbers cannot paint a complete picture a offirm‘s problems, they will at least raise red flags altering the appropriate personnel to furtherinvestigate these areas if necessary.Are Your Customers Happy?Given the importance of achieving customer satisfaction it is no shock that customer metrics spanover a wide range of topics. Customer metrics include product and service satisfaction, loyalty, andretention metrics. Although businesspeople casually throw around these terms, they should not usethem interchangeably. Granted, there is some overlap in the concepts related to these terms, but it isthe nuances of each that give a company insight into their customers‘ opinions and thoughts. o Satisfaction is a customer‘s appraisal of their entire experience with a company. o Loyalty, as defined by Richard Oliver, author of Satisfaction: A Behavioral Perspective on the Consumer, is ―a deeply held commitment to re-buy or re-patronize a preferred product or service consistently in the future, thereby causing repetitive same-brand or same brand-set purchasing, despite situational influences and marketing efforts having the potential to cause switching behavior‖ (1997, p. 392). o Retention refers to a company‘s ability to keep its current customers and maintain a steady inflow of cash from these customers.In other words, customer metrics collectively aim to answer the question: are customers happyenough to continue purchasing your product? For businesses, having connected customers translatesinto steady demand and growth potential. It is for this reason that tracking customer metrics is notonly smart, it is essential for business‘ survival. 35
    • The following is a partial list of measurable customer metrics: 1. Net Promoter Score (NPS) 2. Retention rate 3. Quality perception 4. Customer churn rate which can be devised by taking the total number of customers who discontinue a service divided by Average total customers for that period 5. ASCI score (http://customermetrics411.com/customer-satisfaction.html)The above list is far from comprehensive; and continued research needs to be conducted in thisfield. However, it is important for businesses to have benchmarks that they can measure and use todetermine their degree of effectiveness in servicing their customers.All Customers Should Not Receive Equal TreatmentBusinesses are well advised to consider another aspect of customer metrics. While businesses wantto attract as many consumers as possible, they want to focus their efforts on those customers thatgenerate the most value for the company and drop those that cost more than they contribute.Therefore, businesses should calculate each customer‘s lifetime value (CLV) and customer equity(CE). These values represent ―the present value of all future profits obtained from a customer overhis/her life of a relationship with a firm‖ (Gutpa & Zeithaml, 2005, p. 13). From these calculations,companies can make educated decisions about who they should direct their marketing campaigns toand who they should not waste their money on.It is particularly important to satisfy valuable customers because attracting new customers, onaverage, costs five to eight times more than retaining old ones (Cacioppo, 2000). Many executivesare familiar with this, which was revealed by a survey conducted by Forrester Research Inc. thatshowed the number of companies focusing on customer retention has nearly doubled in the pastyear. Furthermore, studies have found that greater customer satisfaction leads to significant increasesin a firm‘s market value. For example, Anderson, Fornell, and Mazvancheryl (2004) conductedresearch with N=200 of the Fortune 500 companies across 40 industries and discovered that a 1%improvement in satisfaction resulted in a $275 million increase in the firm‘s value (as cited in Gutpa& Zeithaml, 2005, p. 16). Anderson and Mittal (2000) conducted a similar study with an N=125Swedish firms and the Swedish Customer Satisfaction Barometer (SCSB), which is comparable to 36
    • the American Customer Satisfaction Index (ACSI). They found that a 1% increase in customersatisfaction resulted in a 2.37% increase in ROI (as cited in Gutpa & Zeithaml, 2005, p. 16). Clearly,there is a direct correlation between customer satisfaction and financial outcomes. For this reason, itis important understand customer metrics and integrate them into strategy planning.It’s Not All Black and WhiteThere are some customer ―watch points‖ that cannot be easily quantified, but should be monitoredby companies to get a broad understanding of their customer base. As defined by the Word ofMouth Marketing Association (WOMMA), WOM marketing is ―giving people a reason to talk aboutyour products and services, and making it easier for that conversation to take place. It is the art andscience of building active, mutually-beneficial consumer-to-consumer, and consumer-to-marketercommunications.‖ (2007).One example is WOM marketing, which includes other phenomena such as: going viral, productbuzz, community building, and cause marketing. The nature of this kind of marketing makes itdifficult to monitor. Yes, there are tools available for social media monitoring such as Techridgy,Tweetbeep and a host of free and for pay social media monitoring services, however, none arecomprehensive. Therefore, many organizations use a variety of tools and manual processes fortracking social media buzz. Although WOM marketing dates back to the birth of business, marketers are now beginning to seethe benefits of harnessing and exploiting it within the social media arena. As popular social mediaoutlets continue to spread, the scope of this job is broadening. WOM now not only includes audibleconversation, but emails, blogs, tweets, SMS messages, podcasts and other venues. However,companies can use advanced technology to track what people are saying. The bigger problem ismanaging the outcomes of the WOM and developing systems to use the information strategicallywithin the organization to inform innovation, increase customer satisfaction, identify brandevangelists, and manage sales.Organizations can take a variety of steps to use the information they receive via social mediamonitoring for the benefit of the bottom line. This entails four basic tasks7: 1. Educating consumers about the firm‘s products and services 2. Identifying like-minded consumers and providing an accessible medium for them to openly communicate and share information7 [Online] Available: http://womma.org/. Date of Accession: June 30, 2009. 37
    • 3. Observing and analyzing how, where, and when information and opinions are being shared 4. Listening to supporters, detractors, and neutrals and responding promptly and appropriatelyIn summation, businesses need to monitor their brand. They should track upswings and downturnsin customer behavior and explore how consumers perceive their brand both before and after thelaunch of marketing campaigns. Companies need to identify the most powerful influences on theirmarket. This all relates to the concept of satisfying your customers. Before you can please yourcustomers, you have to know who your customers are and what they are saying. With more peopleplugging into the 21st century and more online communities emerging, the input into companies‘customer base is exponentially increasing. If monitored effectively, this input can become acompany‘s most valuable source of customer feedback. In addition, if used appropriately, a companycan satisfy more customers and prosper from the increased business. 38
    • Operations Metrics “Operational Efficiency is what occurs when the right combination of people, processes, and technology come together to enhance the productivity and value of any business operation, while driving down the cost of routine operations to a desired level. The end result is that resources previously needed to manage operational tasks can be redirected to new, high value initiatives that bring additional capabilities to the organization.” www.ensynch.com/sp_operational_efficiency.aspxOperations metrics are measures of the effectiveness and efficiency of a business‘ processes. Inother words, how fast does a business accomplish its objectives, how much human and equitycapital was required to accomplish these tasks, and how successful was the business in producing theintended results?Focus on the Day-to-DayA business‘ operations are the daily activities it must accomplish to achieve broader tactical andstrategic plans. It is important to track operations because it is through operations that firmsgenerate value. Monitoring operations is a three-step process. It involves tracking the resourcesneeded for each operation, the output of each operation, and the operation itself. As a result, thereshould be three distinct categories of operations metrics: Input, Output, and Processing.Businesses should strive to minimize input, maximize output, and expedite processing. In order toaccomplish this, firms first need data that show them how they are currently operating. Then theyshould create reasonable benchmarks. When operational adjustments are made in the hope ofreaching these target values, firms should track the appropriate metrics on a continuous basis.These practices apply to all businesses, regardless of whether their operations are conducted in abrick-and-mortar setting or online as an ecommerce firm. 39
    • The following is a partial list of operational metrics:Input 1. Cost of resources (includes human capital) 2. Resource availability 3. Resource optimization 4. Market and consumer research spendingProcessing 1. Time duration of process 2. Number of people required for the process 3. Operating margin (operating income/total revenue)Output 1. What kind of attention is your product generating (#tweets, posts, blogs, digs, etc?) 2. (for physical products) sales volume produced in set periodIt’s What You Do With What You HaveOperations have always been and will continue to be an organization‘s focus in its business strategiesand benchmarking. This is because the purpose of any business is to generate value for consumers,and value is not produced by people or machines alone, but by the actions of employees and theoperations of machines.Significant advances in the field of operations over several decades have been made regarding speedand efficiency. Firms still need people and machines to operate, but fewer people are taking less timeand fewer resources to accomplish the same tasks.The introduction of social media communities has enabled consumers to become a businesses‘ mostvaluable marketing tools. Many companies have integrated some form of ―generation-c‖ marketinginto their grand strategy because it requires minimal funding and it gets potential customers involvedwith their company. In terms of operational efficiency, customers are helping marketingdepartments accomplish their goals of: increased exposure, generating awareness, piquing interest,and affirming the company‘s reputation; all with smaller budgets and fewer employees. Onlinemarketing spreads like wildfires with the potential for unlimited growth of the marketing message‘sexposure and influence. 40
    • All a marketing department needs to do is light the match and let the rest spread naturally (maybeadding some lighter fluid to rekindle the flame). This ―match‖ could be creating a blog or socialcommunity site, blasting a tweet, or posting a creative podcast or video.A popular example of the aforementioned viral marketing technique is Blendtec‘s ―Will It Blend?‖campaign. In the show, Tom Dickson, the founder of Blendtec, attempts to blend an assortment ofitems to accentuate the power of his blenders. His first attempt included a box of matches, and sincethen he has worked with golf balls, cell phones, hockey pucks, Barbie dolls, iPods, and many otheritems. Before the series of infomercials was launched in 2006, Blendtec was an unknown companyin an oversaturated industry. For most people, all blenders are the same. The trick for Blentec wasgetting consumers to distinguish its blenders so that consumers would care enough to buy itsblenders as opposed to the hundreds of other available blenders in stores.What is remarkable about Blendtec‘s success story is that its marketing budget was about fiftydollars. Interestingly, the most expensive part of each episode was often the product to be blended.Given these limited resources, George Wright, the marketing manager of Blendtec, epitomizesoperational efficiency. Rather than spend money the company did not have on commercials thatwould get lost in television‘s advertising clutter, he bought WillItBlend.com and producedinnovative movies he thought (and hoped) people would want to talk about.Not only has the online marketing campaign increased sales 700%, it inspired the creation of ―Will ItBlend?‖ merchandising approach. The additional merchandise (e.g., shirts and gadgets) producerevenue, but more importantly, they further promote the company and its products. Moreover, with65 million views on YouTube and 120 million views on WillItBlend.com, Blendtec has gotten a lotof media coverage and buzz both nationally and internationally.Examining the three lists above Blendtec would excel in all operational metric categories. Cost of resources: $50 and staff time Resource availability: can blend whatever is easily attainable Market and consumer research spending: follow the market trend and let people talk about your product Attention generated: international buzz, 65 million views on YouTube, media coverage (Today Show, Food Network, History Channel, Discovery Channel, Tonight Show), print magazine (Wired), mentioned in Congress, Blogs posted (Forbes, NYTimes, BusinessWeek) 41
    • What is most impressive, as stated by Wright in his keynote address in 2008, is that all of theoperational advantages were generated ―on a shoe string budget.‖ Using the most basic operationalefficiency metric, output divided by input (all of the above metrics can be summarized into thesetwo categories), we see that the numerator is significantly larger than the denominator. In otherwords, Blendtec has found a winning formula for accomplishing its marketing objectives quickly,with minimal resources, and with a high rate of success.Social Media Strategy Requires New BusinessProcessesStrapping new tools onto old processes is a common problem when enterprises start using andmeasuring social media. Enterprise Social Media often requires a process integration effort toharvest online community and collaboration because the introduction of social media is likely tochange the way a company does business.Take for example a client-focused online community, a private area for say 10,000 of your keyclients and prospects. You create a community and launch content, user generated contentopportunities, forums, polls, etc. all the usual suspects. You spend 6 months focused on thisbeautiful thing, it launches, clients and prospects love it everyone is thrilled. This is a good thing.Now, the typical enterprise is not stupid. They rose to be a sizable organization for a good reason!Yet, somehow, because new media is, well new, companies often dont know what to do with theassets created by the social media. Of course, they are celebrated, touted as valuable, and maybe afew good case studies are written about how social media was able to help support a conferencebusiness by bringing in additional enterprise attendees. Maybe it saved a critical client relationship,but often the integration-point between social media initiatives and business process are not wellcrafted in support of each other. They should be since it is likely the reason the social media projectwas launched in the first place was to support operational outcomes, correct?Examine where the business process gaps are within sales, marketing, and product development.Also examine your social media efforts with a critical eye. Link the two processes, and createrepeated and repeatable measures so they can support each other. Find ways to make maximum useof the data from and outcomes of social media throughout your organization. Its just a matter oftime before "new media" loses it "new" luster and you will be ahead of the curve if you build inbusiness process alignment now. 42
    • The Sum of the PartsThere is an art and a science to measuring social media programs efficacy, and in the end, youbecome what you measure. While virtually anything is measurable, the art is really in creating aneffective strategy to accomplish the business goals you endeavor to achieve.Without an effective plan that clearly outlines key goals, the operations for achievement, staffingneeds, and a clear risk and mitigation strategy, it doesn‘t really matter what you measure because theprocess to get their will likely be random and based on serendipity. Thus, we encourage you to thinkcarefully about what you hope to achieve through social media programs, choose judiciously fromthe buffet of goals laid out from the various stakeholders within the organization, and focus clearlyon the tactical operations to get there.The devil, as with most programs, is in the details and too often social media efforts become likepeewee soccer games where all players run at the ball without any mind to their strategic role on theteam. With clear goals and efficient execution, the measurement of social media campaigns isexciting and the fruits of a well thought out social media program are your labors coming to life! 43