Archive for the ‘Profitability’ Category

Are We There Yet? Tuning Up Your Metrics

By Marian Burk Wood, Author of The Marketing Plan Handbook

Before you roll out a new social media marketing program, be ready to answer one key question about results: are we there yet? Here’s a roadmap for tuning up your metrics so you’ll know where you’re headed and how to track progress along the way.

Look Ahead, Look Behind

Just as your GPS needs a street address to plot a route, you need three types of specific objectives to serve as destinations for your social media activities:

  1. Marketing objectives for brand building and relationship building (such as targets for brand awareness or customer acquisition). Ford’s campaign for the new Fiesta—initially a social media event reinforced by traditional media—set (and achieved) objectives for brand impressions and awareness as well as pre-launch information requests. In the follow-up to P&G’s super-viral Old Spice Guy campaign, one marketing objective was to attract a million Facebook fans to the brand’s social media “sacred club,” part of the push to increase brand awareness and change consumer attitudes.
  2. Financial objectives for money-related results (such as sales and profitability—by channel, by customer, etc.). QVC can set sales objectives for sales driven from its Facebook page (which has 300,000-plus “likes”) and its Twitter presence (more than 30,000 followers), track repeat business, and calculate profit by product and channel.
  3. Societal objectives that give your social media marketing a larger purpose (such as raising money for a worthy cause). P&G’s Dawn relied on the brand’s Facebook and Twitter interactions to get customers involved in achieving its target of donating $500,000 to wildlife conservation organizations.

And to steer clear of potholes, don’t forget to check the rearview mirror—learn from how and why existing programs hit bumpy roads in the past.

Prepare to Shift into High Gear

With objectives in place, your next step is to set up standards and a timetable for checking these metrics:

  • Compass points. Are you going in the right direction? For marketing objectives related to brand awareness or preference, metrics such as the number of Facebook “likes” and the number of positive blog comments can give you a sense of whether you’re gaining ground, standing still, or going south. QVC, for instance, regularly monitors the number and sentiment of comments on each blog post, promotional tweet, and Facebook post. Bounce rates, referral rates, and engagement duration are other compass points; think of indicators that make sense for your objectives and business.
  • Mile markers. You should be able to estimate how far along you need to be at various points in the journey so you can make interim adjustments as needed. For example, are you attracting and converting enough visitors every day/week/month to reach your long-term targets? Check these metrics early and often to avoid nasty last-minute surprises. QVC drills down into its sales statistics—sometimes minute by minute—to determine whether each product or promotion is on the right track and make mid-course corrections as necessary.
  • Speed. How quickly are you moving toward your destination? Look at viral rates for your communications to analyze how quickly you’re gaining new friends, subscribers, or customers (depending on your objectives), and investigate unusual lags or patterns in response to social media initiatives. If something is working especially well, use it to accelerate your results.

Now you’re all set to hit the road and put the pedal to the metal!

Posted in Awareness, Blogs, Branding, Cause Marketing, Channels, Engagement, Facebook, Ford, Marian Burk Wood, Marketing, Measurement, Metrics, Profitability, Promotions, Relationships, Sales, Twitter | Comments Off on Are We There Yet? Tuning Up Your Metrics

Connecting Customer Lifetime Value with Social Media

By Bruce Weinberg and Paul Berger, Professors at Bentley University

Let us express upfront our sincerest apologies for using a somewhat academic voice in this blog post!

“Customer lifetime value” (CLV) is a very important relationship marketing concept. It is the present value of the net cash flows (from all purchases) that an organization expects to receive from a customer over his/her “lifetime.” While the definition is straightforward, the mathematics used in computing it can sometimes get messy and involved (don’t worry, we have PhDs from MIT). Marketers use it to think about customer acquisition and retention (i.e., long lasting relationships), rather than focusing solely on the initial transaction. Indeed, when used effectively, CLV can lead to improved marketing decision making and increased profitability.

We believe that CLV is a mathematical kindred spirit with social media, in that they both can be important mechanisms in relationship marketing. Further, we believe that CLV can work hand-in-hand with social media to satisfy senior management’s thirst for quantitative accountability from social media. With all due respect to Cuba Gooding, Jr., “show me the ROI” has always been the mantra for proof of performance. CLV can absolutely play an important role in not only identifying the value of social media but also in effectively leveraging the value of social media (i.e., helping organizations use it more effectively).

In order to do this, we extend the notion of CLV to incorporate/consider social media and propose the concept of “connected customer lifetime value” (CCLV). CCLV includes not only the present value of the net cash flows from a customer’s purchases over time, but also the present value of the net cash flows from others’ purchases who were influenced (to purchase) by that customer through social media. Just to be clear, we are saying that there are two important components: CCLV = purchases by a customer + purchases by others who were influenced (to purchase) by that customer through social media.

Using CCLV can change dramatically whom marketers value as customers! When using CLV, marketers would target customers based on their expected purchases. Customers who are expected to purchase relatively little over time have relatively little value. However, when using CCLV, these very same customers could have relatively high value to a marketer if—this is the cool part—their influence on others’ purchasing decisions was great (and positive), resulting in substantial volume of purchases (by others). It is conceivable that a customer who makes relatively few purchases could be the most valuable customer to an organization, courtesy of social media and the influence it enables!

We are not saying that this is necessarily typical; although, we know that consumers typically search online for consumer opinions/conversations before making a purchase. The important messages here are that a customer’s economic worth can be based on his/her purchases and on influence through social media, that CCLV can quantitatively show the value of social media, and that CCLV can be used by marketers to leverage social media in making decisions.

Posted in Bruce Weinberg, Customer Lifetime Value, Customers, Marketing, Profitability, Relationship Commerce, Relationship Marketing, ROI | Comments Off on Connecting Customer Lifetime Value with Social Media