Measuring Value of a Social Media Customer


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How do we measure the total value brought in by a customer to a firm through social media? This presentation follows our research to create a metric called the total customer value and identify what drives customers to follow, influence and make purchases through Twitter

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  • In most cases customers have been, and continue to be, directly acquired and managed by the firm. This mindset has continued into social media marketing as well. This is evident from the explosive adoption of Facebook Fan Pages and marketing efforts to maximize the number of followers on Twitter.
  • This current marketing philosophy is, therefore, based on the assumption that firm-consumer relationships continue to present a predominantly hub-and-spoke model, with the firm as the focal point of information disbursement to each end consumer.
  • The diffusion of innovations is a widely accepted model explaining the adoption lifecycle of a product. If all information were purely firm initiated, product adoptions would have been linear. The reason for the lack of uniform consumer adoption in a firm initiated setting is attributed to what is known as the Relevance Paradox-Consumers only seek information that is relevant to them. However, without knowledge of this information, consumers perceive it as irrelevant to them. For example, consider the case of ‘Zoozoos’, a highly successful viral social media campaign undertaken by Vodafone India. With the traditional hub-and-spoke model, consumers would not have found the videos interesting till they actually took the effort to watch the video at the company fan pagesThe adopters of a product therefore play an important role of breaking this paradox. A majority of viewers saw the videos because it was shared by their friends, thereby making the campaign viral. Over 97% of the total spread of Zoozoo videos in Facebook was caused by users who were not a member of the Fan page at the time of sharing the video.
  • Therefore, is the hub-and-spoke assumption valid in the current scenario of highly networked consumers? Is it justifiable to overlook the interdependencies and connections between consumers?In reality, fans across most social media are already heavily connected amongst themselves, and others outside the fan club. Therefore, the underlying strategy, when it comes to social media marketing, needs a paradigm shift.
  • The current benchmarks used to measure and guide social media marketing can be divided into two major categories- conversations and memberships.
  • The concept of value driven marketing is simple- allocate more resources to the high value customers and stop investing on the loss makers. Lets take the example of a hypothetical company called AcemTech with five customers. Since charlie brings in the most value, it makes sense for acemtech to invest more resources on retaining charlie, than on, say Alex. Showing the door to some customers may seem evil to a lot of us here, but from the long term perspective, it is necessary. IBM and P&G have realigned their customer management strategies based on this information. Best Buy, a famous electronics retailer in the US, actually barred loss making customers from entering their stores, while Sprint- the telecom carrier, terminated the contract with over five thousand loss making customers.
  • But how do we account for customer attitudes?
  • By tying influence information to sales we can start measuring the social profitability of an individual. But how can we tie these two?
  • Analysis of Key Players and Seed Users:Optimized Investments: Simulated Annealing methodology to identify key playersCalculation of Influencability of Each UserCalculation of TCV and Social Profitability
  • Managing Customers based on TCV-Optimization Strategies-MILEH
  • Measuring Value of a Social Media Customer

    1. 1. Who talks, and Whom to talk to? Understanding the Total Value of a Social Media Customer<br />A Research Report on Social Media Marketing<br />By Vikram Bhaskaran,<br />Director of Products,<br />GoJeeno<br />
    2. 2. Why Measure Total Customer Value?<br />Introduction<br />Marketing Today<br />Social Media and the Diffusion of Innovations<br />Information, Influencers and Profitability<br />The Need to Measure Profitability<br />Aligning Social Media to Business<br />
    3. 3. Marketing Today<br />All Customers are Firm-Acquired<br />‘Push’ acquisition strategies<br />Focus on maximizing firm-centric nature of<br />Permission Marketing<br />Social Media ‘Memberships’ such as Twitter Followers and Facebook Fans<br />Based on Hub-and-spoke Philosophy with Firm at focal point of information disbursement<br />
    4. 4. Business focus continues to rely on Hub-and-Spoke information strategies, with the firm acting as the focal information source.<br />Firm’s Marketing Efforts<br />Consumers<br />Traditional Customer Acquisition Philosophy<br />Information Channel<br />
    5. 5. Social Media and the Diffusion of Innovations<br />Implications of the Relevance Paradox<br />Customers talk amongst themselves<br />Intra-consumer relationships are a key factor in individual purchase decisions<br />Source:<br />Source:<br />
    6. 6. In Other Words…<br />How Marketers View Consumer Networks<br />What Consumer Networks Actually Are<br />
    7. 7. Benchmarks in Social Media Marketing<br />Number of Conversations<br />Shares, Likes, Comments, Replies and ReTweets<br />Number of Unique Memberships<br />Fans, Followers<br />But how aligned are these metrics to Core Business Objectives?<br />
    8. 8. Questioning the Neo-Conventional Wisdom<br />*Correlation of Lift in Social Media Indices against Lift in Reported Profitability across 8 organizations with marked social media presence, spanning 3 industry verticals.<br /><ul><li>Clearly, existing metrics are not aligned to business objective
    9. 9. There is a need to tangibly measure the value of Word of Mouth of the networked customer</li></li></ul><li>What is Total Customer Value?<br />Total Customer Value<br />Introduction to Value driven Marketing<br />Perils of Individual Focus<br />Influencability and Purchase Decisions<br />Introduction to Social Profitability<br />Measuring Social Profitability<br />The Three Stage Model of Influence<br />
    10. 10. Value Driven Marketing<br /><ul><li>The Concept
    11. 11. Allocate more resources to high value customers
    12. 12. Do not spend marketing investments on the loss makers</li></li></ul><li>But how do we measure Customer Value?<br />Individual Profitability<br />Measures the monetary value attributable to an individual’s own purchases<br />Usually calculated using the CLV (Customer Lifetime Value) framework<br />
    13. 13. Issues with Individual Profitability in a Social Media Setting<br />Overlooks Customer Attitudes<br />Attitudinally Loyal customers are not specifically accounted for<br /> Fails to leverage on Word of Mouth<br />Low value customers might be acting as bridges carrying information to their high value friends<br />
    14. 14. Measuring Total Customer Value<br />The Influence Component<br />Measures the degree to which the influencer plays a role in an influencee’s purchase decision<br />The Individual Profitability Component<br />Measures the monetary value of the influencee’s purchase<br />Influence Effect of customer “θ”<br />Number of Children/ Influencees<br />𝐶𝐼𝐸𝜃= 𝑖𝜂01+𝐶𝐼𝐸𝑖𝜌𝑖<br /> <br />Number of Parents/ Influencers of Child ‘i’<br />
    15. 15. Getting to Total Customer Value<br />
    16. 16. Measuring TCV<br />Attitudes<br />Customer Effect<br />Actions<br />Purchase Behavior<br />Influencability<br />Brand Awareness<br /><ul><li>The ease with which information flows across users
    17. 17. Calculated based on Distance-Weighted average information flow rate</li></ul>Brand Identity<br />Total Customer Value<br />Customer Equity<br />Brand Equity<br />
    18. 18. The Three Stage Model of Influence<br />
    19. 19. Hypotheses and Preliminary Findings<br />(Detailed Explanation in the appendix)<br />*Collected on a sample of 1780 users across Twitter, totaling over 230,000 conversations.<br />
    20. 20. Some Interesting Results<br />More conversational users were not necessarily more influential<br />Users’ Share of Total Conversations had a inverted U relationship with TCV<br />
    21. 21. Additional Analysis and Next Step<br />Identifying High Value Customers<br />Seeding Information with Key Players<br />Empowering High Value Customers with Information and Platforms<br />Harvesting increased TCV and Customer Equity<br />
    22. 22. Thank You<br />Who are we?<br />More Info?<br />Questions?<br />
    23. 23. Appendix<br />Hypotheses, Findings & Explanation<br />
    24. 24. Generosity<br />Is the measure of reciprocity in social connections<br />“Does following someone increase the chance of them following you?”<br />Yes. We measured a linear relationship, indicating that following somebody has a significant positive impact on them following you!<br />
    25. 25. Network Compatibility<br />Do two people talking similar topics have a greater chance of forming a social connection?<br />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.<br />
    26. 26. Existing Clout<br />Do celebrities have a greater chance of acquiring fans and followers than others?<br />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.<br />
    27. 27. Activeness Compatibility<br />Do two people who are active (online) at the same time have a greater chance of being influenced by each other?<br />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.<br />
    28. 28. Message Stickiness<br />Does information in a topic discussed by an individual ‘stick’ with him/ her better?<br />Yes. And we measured this effect to be strong and positive.<br />
    29. 29. Conversational Diversity<br />Conversation diversity- does the variety of topics spoken by a talker/ listener have an effect on how some information influences them?<br />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.<br />To the listeners, the fewer topics they discussed, the more influenced they were when they received information on one that they did discuss.<br />
    30. 30. Number of Influencers<br />Do more influencers have a greater or lesser effect on information impact?<br />Yes. As the number of influencers increase, the chances of being influenced increases aggressively till a point, and then becomes almost constant.<br />