What You Can’t See: 78% of Your Business

eye-chartRecently, I’ve been a little obsessed with ROI as it relates to social marketing, as I seek to put in more tangible terms what I feel intuitively about this new toolset’s value.

To this end, Adam Cohen hit my Reader just right with a nice real-world post on measuring the marketing effectiveness of social media in general (not another post just on how important it is that it be measured, thank goodness). As Powered has done in our 2009 ROI Report he focused on purchase path as the main way to address the value created by social presence. Truly, resultant sales is the most logical way to measure marketing, and Adam rightly calls for social media tools to be linked along the clickstream more directly with end purchase. Powered’s self-reported data is a compelling indicator, as we typically find on the low end that 1 in 5 consumers report a purchase as a result of social engagement within one of Powered’s client communities.

But there is more here than just getting people to consider a purchase. In our ROI report and with our customers we do focus on a number of statistics that address things like loyalty, advocacy, brand affinity, and insight into consumers. All of these words are abstract; they all refer to things that are intangible. But nevertheless, a marketer’s intuition tells you that these things are the essence of what we seek to impact. Unfortunately, those outside of the marketing profession see those terms as arcane and would rather you just “show them the money.” You can’t really blame them.

It was while considering the intangible and social marketing’s impact on it that I found this article by Christopher Kenton (via David Churbuck) that I found fascinating. Christopher’s article isn’t about social media/marketing, but rather about why CMO’s are being pushed more toward true financial measurability of marketing in general. The premise of his article is built around this finding:

According to Jonathan Knowles of Brand Finance, a consultancy that specializes in the valuation of businesses, the tangible assets that used to account for 75 percent of a company’s stock market value in the 1980s now only accounts for 22 percent of market value.

Wow, I can imagine the CFO-head-scratching that this sea change likely causes. Seventy-eight percent of my company’s value is in assets that I can’t see? Granted, some of these intangibles will reside in the internals: the IP, the human capital, the processes and technological know-how of a company. But no doubt much of this intangible value exists outside: in the brand equity that a company has built with consumers/customers – the affinity, loyalty, advocacy, and market insight that is the department of the CMO.

Today, what the stock market knows has forced the CFO into that CMO’s office to ask for a firmer grasp of the unseen – and for less arcane ways to measure it. Popular but still nascent measures like NPS (Net Promoter Score) seek to fill the gap and make loyalty/advocacy tangible, but more research and development is needed to tie it to financial impact – and that impact likely differs structurally from company to company.

In the meantime, as we wait for more widely accepted measures, I would suggest this hypothesis: there is currently no more powerful tool in the marketer’s toolbelt to impact intangible marketing assets like loyalty, affinity, advocacy, and insight than social marketing. Proof points abound outside of Powered’s walls, but our statistics show an extremely powerful effect that I believe dwarfs other marketing mediums when you take into consideration relative cost. Aaron Strout blogged about them earlier.

And when you’re talking about assets that make up as much as 78% of your company’s stock value, you might as well be talking about your entire business.

In the world of the CFO and company valuation, the two main forces on the positive side are cash flow and assets. So it’s reasonable to predict that someday in the not-so-distant future, the ROI of social marketing (and marketing in general) might not only contain a short-term conversion-based model that looks like the ROI models of old, rolling into cash flows . . . but will also include a more powerful new-world long term model that analyzes the impact of social marketing on intangible assets.

Are you already there? If so, how are you measuring?


Sales Troubles? No Comment(s)

Influence of various sources of information on purchasing

Influence of various sources of information on purchasing - Rubicon Consulting 10/2008

It probably won’t surprise you that personal advice is the number one reason people buy products from one company vs. another. It’s only natural to ask a co-worker, friend or family member’s advice before purchasing a new product or service. What I’ll bet you didn’t know was that online comments were the second most influential source for driving purchase consideration*. And not just by a little bit.

As you can see from the chart below, 50% of the 3,036 people surveyed selected “influence me strongly” or “influence me very strongly” as their choice when it comes to online comments. That compares to 70% of people that cite “personal advice” as their top motivator and 40% who look to “articles posted by newspapers/magazines” for advice.

So what if you don’t have comments on your site? What if you don’t have any type of community or social presence? Unless you can get people telling their friends and family about you (something online communities/social media is also good at) you have to hope that a magazine or newspaper will write about you or the editor of a third party website favorably reviews you. Not surprisingly, “advice from salesperson” comes in at a whopping 20% in the top 2 box.

In a society where people are becoming less and less trusting of what big companies are telling them, don’t you think it makes sense to create a place where your customers can tell other customers what they think about you? Yes, they may something bad but guess what, if you don’t make good products or your customer service stinks, they are already saying this about you. Don’t believe me? Try doing a Google search on your company’s name plus the word “sucks” in your query.

Looking for an example of a company that is doing this well? Take a look at Sony’s Backstage 101 community. Their engagement, loyalty and willingness to recommend numbers are off the charts. Yes, Sony is a customer of ours but don’t take our word for it. Check out the case study that our friends at MarketingProfs put together.[the report requires premium membership – if you need a copy, e-mail me at stroutmeister AT gmail DOT com].

*Online Communities and Their Impact on Business: Ignore at Your Peril – Rubicon Consulting, October 2008 (thanks to our friends at SHIFT for forwarding this report over to us).

Zappos Delivers WOW Moment

My Zappos order was delivered overnight as a special WOW gift to make me feel good.

Here’s a quick follow up to my recent post about Tony Hsieh and Zappos. I’m pleased to report that the company delivers on its WOW promise. Shortly after placing my order at www.Zappos.com on Wednesday, I received an email stating:

“Although you originally ordered Standard (4 to 5 business days) shipping and handling, we have given your order special priority processing in our warehouse and are upgrading the shipping and delivery time frame for your order. Your order will ship out today and be given a special priority shipping status so that you can receive your order even faster than we originally promised!

Please note that this is being done at no additional cost to you. It is simply our way of saying thank you for being our customer.”

Sure enough on Thursday my shipment arrives, complete with the cool Paul Frank monkey shirt for my son Ayrton. He’s wearing it proudly at school today. It’s always good to know another company that truly values relationships with customers.

Outspend or Outteach?

Outspend or OutteachThis classic 2005 article on the Creating Passionate Users blog contains some great thoughts about how marketing has changed and how “education has become the killer app in a newer, more ethical approach to marketing.” It also contains a lot of good links, trackbacks, and comments to good educational marketing resources to explore. Worth a careful read.

Of course, despite the forward-thinking wisdom in this article and many of the others linked to it, traditional marketing (Out-spend instead of Out-teach) still has a very strong toehold. And even though it won’t make people “passionate” about your brand, outspending still works. My experience in marketing states that the “consumer education” message hasn’t been quite compelling enough to break that toehold.

Instead, the disruption necessary to really change marketers’ minds, and open them up to the importance of consumer learning and research, is coming with the advent of Social Networking and User-Generated Content. The content users weren’t getting from brands, they now seek from each other. Marketers who have been sitting on the sidelines watching this happen are suddenly getting this nagging feeling that if they don’t understand this new social world and figure out how to be a part of it . . . well, they might have to find something else to do for a living. When you say “social,” marketers are ready to listen.

At its root, Social Commerce is about education: brands teaching consumers and consumers teaching each other. Learning is key to the buying process, and even more broadly it is key to making consumers care (or become passionate) about your brand.