Social Business is not Dead: New charts and data reveal the real evolution of social businesses

post

In recent times, I’ve noticed a rise in discussions around the “death of social business” and also an increase in alternative “fill in the blank but don’t use the word social” businesses. Some of those discussions have been hosted here recently. There’s strong merit to the discussions of course, especially those I’ve hosted (be sure to read the comments). But as an analyst tracking the evolution of social businesses and equally the cause and effect of digital transformation overall, I’m learning that the most advanced organizations see social not as a technology movement but instead one of culture and philosophy. Openness, collaboration, transparency, communication…these aren’t buzz words. Among those leading change, these words represent a way of business and it all starts with vision and the ability to see how relationships and experiences with customers and employees can improve or accomplish new and greater goals.

Along the way, I’ve also learned that pushing for social adoption because of technology misses the point of change. The true catalyst isn’t whatever the latest trend in social media is this week. That’s reactive and almost impossible to leapfrog. The truth is that change is fueled by the affect that social media, mobile, and other forms of disruptive technologies have on customer behavior. Whether it’s B2B, B2C, B2B2C, or whatever model you prefer, as long as we’re talking about connected human beings, you can bet that social and digital in general are influencing discovery, decision-making, and impressions in every moment of truth.

The evolution of social business as we know it today traces back to The Cluetrain Manifesto in the late 1990s, where its authors predicted that markets would become conversations. Here we are at the cusp of 2014, and businesses, and the strategists who lead social efforts, continue to struggle with sparking executive understanding, adoption, and leadership. The real story is about what’s happening beneath all that we see or think we see.

So what’s obstructing the evolution of social business?

Part of the problem is that social media and how it differs from traditional channels remains largely misconstrued. As a result, new opportunities, and the strategies, systems, and processes that support them, are either nascent or overlooked.

A social business is more than an organization that invests in a positive global footprint to overcome the world’s biggest problems, such as inequality and poverty. The term has developed to now also represent companies that are more open, transparent, and participatory in conversations and activity that defines markets. But the challenge is that social media strategists may actually be hampering its potential by not helping executives see the bigger picture beyond the technology.

Last month, Charlene Li and I published our latest Altimeter Group report, “The State of Social Business 2013.” In our research, we were surprised that businesses were still unsure of the role social media played enterprise-wide, beyond marketing and communications. Many, we found, were limited in scope and not universal in engagement with customers, employees, suppliers, partners, community, et al. Specifically, we learned that…

- Only half (52%) of companies say that their executives are informed, engaged, and aligned with the enterprise social strategy

- A mere 26% of organizations self-describe as being “holistic” in their social media approach, where business functions operate against an enterprise-level vision and strategy

- Just 17% of organizations self-described as being truly “strategic” in the execution of their social strategies

This month, Charlene and I are releasing the data charts from our latest report, plus additional material, to help strategists learn how to amplify or accelerate their social business strategy. The charts are available as stand-alone images on Flickr or as a complete deck via Slideshare. As always, this information is made available freely as part of Altimeter’s open research program. Please feel free to use the images or slides at work, in posts, on stage, or whichever way that helps you make a point or case.

Along with highlighting major issues (and opportunities) through this survey data, the presentation includes perspectives and inspirational quotes from executives and strategists at Sephora, Adobe, ARAMARK, Ford, Fidelity, Royal Dutch Shell, Wells Fargo among others.

We hope that you’ll find the slides in this presentation useful as resource and background material, as you continue to make your business case for social business.

[Source: Brian Solis]

The Ultimate Moment of Truth and The Art of Digital Engagement

In 2012, Google along with Jim Lecinski published a fantastic book that explored how digital customers made decisions in what Google refers to as “The Zero Moment of Truth.” The ZMOT as it’s abbreviated, helps strategists discover relevant strategies and tactics on how to show up at the right place, at the right time and with the right content in a digital ecosystem.

In a world where consumers “Google it” to begin their digital journey, ZMOT revealed that brands need to re-think the connected experience and the resulting click path. But what happens when the web sites that appear in traditional Google search results no longer suffice for someone so connected that impatience becomes a virtue? This is after all someone who begins the journey on a smart phone or tablet tapping review sites and social networks to make information come to them before conducting formal research. Some call it the lazy web. Others refer to it as the social web. In the end, it’s just how people make information come to them. Once they do, it becomes the norm.

Even though web sites technically work on smaller screens thanks to adaptive and responsive design, they’re still web sites. In the very least, they go against the very nature of how someone interacts with the screen and what it’s designed to make possible. Here, it’s less about clicks and scrolls and more about pinching and swipes. That’s not all of course. The intention of a web page is called into question, or should be, in a time of connected consumerism. Step back and think about it for a moment. The information included on web sites isn’t written for you and me, it’s written for the person approving it. When you consider context in addition to the screen in the Zero Moment of Truth, you learn that people aren’t seeking marketing copy, they’re seeking the experiences of others to help humanize information and apply it to their state of mind, needs, and aspirations. Let that sink in because I’ll wager it’s not where a majority of your investments are allocated right now.

So, the truth unfolds…

In my latest book, “What’s the Future of Business”, I introduced the Ultimate Moment of Truth, that moment where people who convert an experience into discoverable content in any one of the countless social platforms people use to stay connected these days. And in this connected economy, the Ultimate Moment of Truth, or UMOT, becomes the next person’s Zero Moment of Truth, over and over again.

In addition to web sites, landing pages and corresponding SEO and SEM strategies, businesses now must consider how to create experiences in every moment of truth that aren’t just meaningful or remarkable, but also shareable. The future of brands now lies in how UMOT meets ZMOT throughout the customer life cycle. See, without design, these experiences are left to chance. Instead, marketers must begin to architect, foster and optimize positive experiences in each moment that’s native to each screen, efficient in steps, and tied to desirable outcomes.

When Google learned of my work around UMOT, the team reached out to consider how me might work together to help marketers better connect the dots to enhance the ZMOT. Our first collaboration resulted in a whitepaper that’s free to download, “Give Them Something to Talk About: Brian Solis on the Art of Engagement.” I’ve included parts of our discussion below.

Give Them Something to Talk About

What does engagement mean for you?

Engagement is really about Actions, Reactions and Transactions; something that I refer to as A.R.T. Engagement, for me, is something that locks in an interaction or exchange. Thinking about engagement in that way inspires a different approach for content creation; you want somebody to feel something, not just see it.

If you think about engagement in this way, is it measurable?

Absolutely. You define your desired outcome and that outcome becomes what you measure. It’s the relationship between cause and effect. Unfortunately, most marketers don’t consider the outcome to be more than some low-level engagement measure — a ‘Like’, a ‘Share,’ a comment — when in fact you could introduce an emotion. If you love something, you share it. This isn’t just about impressions; this is about expressions. You want people to share it and do something and that should be designed into your engagement strategy.

Give_Them_Something_to_Talk_About__Brian_Solis_on_the_Art_of_Engagement_–_Think_Insights_–_Google

How can you enlist ‘shares’ to support a campaign objective?

No content should be designed today that isn’t inherently shareable. Take the Jeff Gordon Pepsi MAX commercial on YouTube. It comes from that same thinking that goes into Super Bowl commercials, where you stop and go, ‘Oh my god, that is the best commercial I’ve ever seen!’ For some reason marketers only get that creative once a year, but YouTube and the social web are unlocking that type of thinking. Everything you introduce to the social web should have the same caliber of creativity that goes into a Super Bowl commercial.

Is there a tendency for marketers to feel so overwhelmed by technology that they lose sight of their basic instinct for how consumers behave?

Look, I’m a consumer, you’re a consumer. When we talk about the brands we love, it’s very human and natural. But when we try to talk to people like us, we blank out and turn into ‘Marketing Man.’ We lose that human nature, that empathy. If you take a technology perspective, you are forever reacting. The minute you take a step back and say, “What’s the bigger mission?” you start to realize what you are trying to do is change behavior. This relationship between cause and effect is very human. Once you articulate that vision, technology becomes an enabler. It starts to work for you.

Consumers share brand experiences, whether the brand is listening or not. Do brands listen enough to those conversations?

Author Maya Angelou said: “People will forget what you said, people will forget what you did, but people will never forget how you made them feel.” Take Twitter, Facebook, YouTube — what is shared is experiences. Somebody is eating a delicious dinner; that picture is published and shared. Somebody spots a product that makes them feel fantastic; it too becomes a shared experience. There are shared experiences that represent every step of the customer journey. These conversations existed before technology, but now they are searchable, retrievable and building on each other. Shared experiences, in aggregate, become the brand.

What happens when a brand’s marketing doesn’t reflect its image among consumers?

You may say: “This is our brand, this is what it represents, this is what we want you to feel, say, share.” But always ask yourself: “What is the collective experience that is published across the social web?” If you compare the two, many times there’s a disconnect between promise and real world experiences. I refer to this as the ‘experience divide.’ In many experiments I’ve found the brand promise and the experiences that are felt and shared are not even close to being aligned. That’s a problem.

How can brands close that gap?

If we spent less time ‘talking’ about our brand and brand promise and more time designing how we bring it to life, the experience divide would naturally narrow.

What can brands do when online consumers’ first impressions are being shaped by other consumers’ experiences?

These conversations — these shared experiences — they don’t self destruct. They build upon each other, creating a collective index. Search engines plug into this cloud of shared experiences and that Ultimate Moment of Truth, or UMOT for short, of shared experiences becomes the next person’s ZMOT. Experiences form impressions. Impressions become expressions as they’re shared. Expressions form new impressions. The link between UMOT and ZMOT is the future of branding and relationships.

This is a new way of thinking. As a brand you have to create the experiences you want people to have and share, and reinforce that through positive conditioning, so those are the things people find — over and over again. To get people to share more positive things, you have to first make sure they have a positive experience. This is a renaissance opportunity for brands to look back: ‘Why did we start this company? What are we trying to do?’ Because in the social web, it is those experiences that become your brand.

[Source: The Ultimate Moment of Truth and The Art of Digital Engagement - Brian Solis]

The Conversation Prism v4.0

What’s different from 3.0?

Well, version 4.0 brings about some of the most significant changes since the beginning. In this round, we moved away from the flower-like motif to simplify and focus the landscape. With all of the changes in social media, it would have been easier to expand the lens. Instead, we narrowed the view to focus on those that are on a path to mainstream understanding or acceptance.

The result was the removal of 122 services while only adding 111.

This introduces an opportunity for a series of industry or vertical-specific Prisms to be introduced so stay tuned.

ConversationPrism_2880x1800

[Source: The Conversation Prism]

Influence vs Advocacy: Which Rules The Digital Kingdom

In the world of social marketing, digital influence is akin to saying holy water. It is sacred, mysterious, and purportedly carries with it healing properties. Influencers speak and the world stops to listen. Almost as prestigious in the new world of conversational marketing is the word advocacy. Advocates are the disciples of brands. They are customers or fans and they live to join branded communities and also go out of their way to tell everyone they know why the brand is so special.

I am exaggerating, of course. What is not an exaggeration, however, is the importance marketers place on influencers and advocates without understanding the role each can play in word of mouth or engagement programs. If you were to spend any time in a conference room full of brands, agencies or social software vendors, you would quickly realize that the words influence and advocacy would be used interchangeably.

What’s the difference between influence and advocacy? The differences are quite notable but the answers aren’t often sought.

Influencers are individuals who’ve earned authority on any given topic and have built a community or series of communities around their body of ideas or work. They have the capacity to cause an effect on the character, actions or behavior of someone or something.

Advocates are champions (and/or enthusiastic customers) who align with or embody the tenets or the mission of a thing (in this case a brand) or a cause. Advocates may or may not carry influence individually. When advocates unite, the concerted group can wield influence.

On the subject of influence, Technorati recently released its 2013 Digital Influence Report. In it, I discovered some interesting stats about the various ways that brands are approaching influence.

Influencers become part of the mix

For years, I’ve studied the art and science of digital influence, especially what it is, what it isn’t, and how it works (and can work for you.) As a long time blogger, I found it fascinating that “influencers” are most active on blogs with the likes of Facebook and Twitter supporting their efforts according to Technorati.

Their efforts don’t go unnoticed. Not only are they building audiences and communities, brands are actively seeking to work with them. Technorati learned that 65% of brands participate in influencer targeting as part of its digital marketing mix.

I was equally fascinated by how brands measured the elements of “influence.” In an interesting twist of cyber fate, brands appeared to calculate influence, or at least the semblance of it, using a myriad of popularity-based metrics rather than studying impact or the capacity to cause effect or change behavior. Ironically however, Likes, followers, friends, audience size, and views ranked higher in terms of weight than those very platforms designed to measure “influence,” i.e. Klout, Peer Index, Kred and even Technorati Authority.

Is it quantity or quality? In this case, when it comes to influence, less can be more. Similar to an influence studyI conducted a few years ago with Vocus, Technorati Media found that most brands, in this case 54%, believe that individuals or groups that boast concentrated communities carry greater influence. Please repeat, influence is not popularity and popularity is not influence.

Influence is relative, however, if it can’t be attributed to cause and effect.  Technorati learned something quite profound. When it comes to decision-making, consumers turned to blogs in droves when making a purchase. Blogs were found to be the third most influential digital resource at 31% behind retail sites (56%) and brand sites (34%).

When it comes to services most used, blogs ranked in the top 5, ahead of noteworthy destinations and networks such as Twitter, news sites, Pinterest and even brand sites. YouTube and Facebook respectively ranked as the first and second most used online services.

Which online services are most trusted by consumers? Technorati’s study revealed that news sites are by far the most trusted followed by Facebook. YouTube and blogs also made the top 5.

The report overall makes it clear that brands will miss important consumer touch points if they do not employ either new media influencer and/or advocacy programs as part of the greater marketing mix.  As consumers research products to make informed decisions, published experiences and impressions in social networks and blogs become the peer-driven digital equivalent to Consumer Reports.

3 strategies for cultivating advocacy programs

To succeed here requires distinct strategies aimed at cultivating influence and advocacy programs over time.

1) Identify, learn, brief, and support influencers based on what’s important to them, not what’s just important to you. It’s important to build relationships before you need them.

2) Recognize advocates and what it is they love about the brand. Develop online and social programs that allow them to connect with other consumers where touch points and decision-making intersect.

3) Reward advocates for asking and answering questions and for sharing experiences and passions.

Genuine influence and advocacy initiatives will only help your customers discover your value in key moments of truth. How are you using advocates and influencers in your overall strategy?

[Source: AT&T Networking Exchange Blog]

What Your Business Needs to Know About Facebook’s EdgeRank

Facebook recently introduced the ability for brands to increase reach for important posts and updates, but that reach comes at a cost. The prices varies depending on how many fans you have in your community. This new feature coincided with changes to the company’s Edgerank algorithm, which is how Facebook automagically filters posts in and out of your stream. Similar to how Google’s PageRank sorts results to better match your search intention, Facebook uses Edgerank to ensure that engagement is optimized and spam is minimized.

Following these events, many marketers and business executives have claimed a sharp decrease in unpaid post reach. Naturally, accusations of greed and corruption were hurled at Facebook as marketers believed that Facebook’s sole motive for this update was to force brands into a paid position to guarantee reach.

The controversy hit new heights when billionaire Dallas Mavericks owner Mark Cuban launched an offensive charging Facebook with a shakedown and thus threatening to move all of his community efforts to other social networks.

“FB is blowing it!” Cuban howled in a Tweet. He continued with a warning Facebook, one that he’s pursuing, “This is the first step. The Mavs are considering moving to Tumblr or the new Myspace as [sic] primary site.” He shared a telling screenshot in his Tweet of the Mavericks’s Facebook page showing a cost of $3,000 to reach one million of the team’s 2.3 million fans. If you do the math however, you’ll see the potential PPM of that equation is more than reasonable at $0.003 per person. Unfortunately, many experts missed this point.

The pile on continued though. We Are Social, a social media agency, and Socialbakers, developing of social network monitoring and tracking tools for analysis published findings that showed the average, organic post reach had dropped by 40% following the update to EdgeRank.

So, is overall organic post reach down?

Yes.

Is overall spam down as a result?

Yes.

Did Facebook purposefully change its EdgeRank algorithm to reduce reach and sell more ads?

Hardly.
If everyone reacted in similar fashion to Mark Cuban, not only would the business lose, fans lose as well. This is something I examined at length following GM’s famous pullout of its Facebook advertising budget earlier in 2012.

EdgeRank Explained

It’s important to understand how EdgeRank works before passing judgment or sparking fruitless debates. Whether you’re leading a paid, earned, or owned strategy, making informed decisions about goals and proper metrics starts with knowing the real challenges and opportunities.

In all honesty, Facebook should do a better job helping businesses understand not only EdgeRank, but how to better leverage the network as a whole in ways that are more meaningful for businesses and the community at large. But, we have to start somewhere.

In a post entitled, “News Feed, Engagement, and Promoted Posts: How They Work,” Facebook Ad Engineer Philip Zigoris aimed to bust myths while educating marketers. It tells the story of engagement and optimization:

Monitoring what types of posts are getting good responses is key, and always has been. UsePage Insights to determine what types of content – videos, posts, questions, etc. – are getting good engagement versus what types aren’t. Take a look at our Page Publishing Guide for posting best practices, and make sure to use our Page post targeting features so that you reach the audiences most likely to respond to your messages. And for posts that you see are getting a lot of responses, you can promote them to extend your reach to more news feeds.

What are the underlying EdgeRank factors that define whether or not someone sees a post in the news feed?

1) Facebook looks at whether or not you’ve previously interacted with an author’s posts or whether or not your friends are engaging around those posts.

2) If content is or isn’t engaged by your social graph and the network at large affects what you see and what you don’t see.

3) EdgeRank also examines whether or not your have interacted with similar types of posts in the past, i.e. photos, videos, polls, etc.

4) If content or page hosts have received complaints by other users, chances are that you will not see it.

Social Media Optimization is the New SEO

Engagement is the key to amplifying reach.

The debate unfortunately masks a much more important and productive discussion. Businesses confuse Facebook as a utility or service that’s there to help broadcast messages much in the same way businesses pay wire services to distribute press releases or brands buy advertisements on TV or radio to reach as many people as possible. Facebook is a social network to help people communicate, share, and discover. With over one billion people calling Facebook one of their digital homes, a social economy is a natural byproduct. Therefore, businesses must learn that relationships are earned and earned again and communities are built upon a foundation of mutual value, entertainment, and empowerment.

A like isn’t an opt in or subscription for marketing spam. It is an expression not a representation of a captive audience. Regardless of your community size, people are not idly waiting for your marketing messages. The reality is that only a small fraction of your overall community will see your posts. People may have Like’d you, but they’re also following friends, family, other brands and important organizations and events. With everyone publishing content, you’re competing for attention in real-time. Instead, consider competing for attention with the right content at the right-time.

Approach EdgeRank with a philosophy of contributing relevance to merit resonance. You can increase reach by optimizing posts, whether paid or organic, through social media optimization (SMO). If engagement drives reach, then design content to not just be consumable, but also shareable. Likes, comments, shares, tags, et al, spark a social effect and extend the life and volume of your updates. Simply publishing or paying for each without considering shareability or SMO is done so in vain.

This is true for any social network.

Whether you pay to play or you invest in organic engagement, the intention behind each strategy must be the same. Be relevant. Make it count. By striving for relevance, you will increase probability for resonance, which will over time contribute to your EdgeRank significance (R-R-S).

[Source: Brian Solis]

The Imminent Evolution from Social to Digital Engagement

How do you define engagement? Engagement symbolizes the touches that occur in various moments of truth. Touch points open and close whether a customer stands on the stage of awareness, consideration, purchase, or post purchase. It is in those moments that engagement, regardless of source or shape, affects the next steps and impressions of customers.

These moments of truth are not limited to any one channel. Whether customers are navigating social, mobile, Web or in real life (IRL), they approach each stage of the journey with different needs, in varying stages of decision making, and with one of several frames of mind depending on the context of engagement and also the screen (smartphone, PC, tablet, TV, etc.) they’re using in each moment. It’s becoming increasingly complex, but then again, so is the path of consumer decision-making.

The image above represents a detailed customer journey map that outlines the important steps your connected customers take during and following decision-making. The map also introduces the diverse elements that factor in to each step. Perhaps even more important are the channels and screens individuals use to make their way along the journey. Mobile, social, Web, IRL:  they each contribute to a customer experience that either helps or prevents them from moving along in your favor.

In my research, I’ve found that more often than not, each stage of the customer journey, along with the mixed channels that they use, are defined or programmed by different groups within the organization. The social experience is developed independently of the mobile experience which is disconnected from the Web experience. The point is that customers only see one brand or business and, therefore, each channel should complement one another to deliver against a desired experience and journey optimized for the moments of truth and for the context of each screen.

The expansion from social to digital engagement

One of the ways I’ve defined “engagement” over the years was quite simple: it’s when a business and consumer interact within their channel of relevance during various moments of truth. Engagement, though, is then measured by the actions, sentiment, and outcomes that result from each interaction. To optimize results, experiences, click paths, outcomes, and sentiment must be defined and enlivened through each channel in each moment. To do so takes vision, articulation of that vision, and collaboration with all stakeholder groups to cast a unified approach. Yes. It’s the age-old argument of bringing down silos and opening doors between departments and groups that just don’t talk to each other right now. But, that’s just what needs to happen, and the more progressive companies are already taking note.

One such company is a business that may be part of your everyday routine.. Starbucks recently appointed Adam Brotman, former senior vice president of Starbucks Digital Ventures, to an entirely new executive role as chief digital officer. The CDO role assumes all of Starbuck’s digital projects, including Web, mobile, social media, digital marketing, Starbucks Card and loyalty, e-commerce, Wi-Fi, Starbucks Digital Network, and emerging in-store technologies.

Sephora is another forward-thinking company that is uniting disparate channel strategies and various customer journeys in the name of holistic experiences. Sephora recently underwent a makeover to define the ideal customer experience and how it would play out in digital and real world channels, including in-store engagement, while complementing and optimizing one another.

The digital lifestyle is a way of life now, and businesses that don’t think beyond social or traditional will miss the greater opportunity to lead desirable customer journeys, experiences, and outcomes. Take one more look at the Dynamic Customer Journey. As you plan for 2013 social, mobile, digital, and other channel strategies, consider how each can converge into a reciprocal and congruous ecosystem. The future of customer experiences lies in experience design and, more importantly, customer journey mapping…across the screens and in real life.

Welcome to a new world of customer journey management (CJM) and the ability to bring people together around a common vision for improving customer experiences, sentiment and relationships.

[Source: AT&T Networking Exchange Blog]

Calculate the ROI of Social Media

 

What is the secret of bars? Why do we happily pay four times as much for beer in a bar as in a store? We pay this brand premium to be with friends. The secret of bars is that they convert our quality time into cash. Like bars, social media are places where friends meet. The best social media programs also convert the consumer’s social time into a brand premium, reaching a return on investment (ROI) up to four times as high as the ROI of a TV commercial.

The time with friends and relatives is worth a lot to us. It’s worth our paycheck. A close look at the average bar tab or restaurant check—even the costs of a family holiday or yacht—reveals that we spend what we earn per working hour for an hour of time with friends. Pew Research data confirms this remarkable fact: an extra hour per week with friends makes consumers just as happy as an extra hour’s worth of salary. It makes sense: if we valued a working hour more than an hour with our buddies, we wouldn’t go to happy hour but stay at the office. Branded blogs, Facebook fan pages, YouTube channels,

Twitter accounts, and Pinterest boards serve as online bars, where:

Staff speaks to visitors.
Marketers promote the brand, just like waiters in a bar do. Some of the fans and followers listen but rarely pass the commercial messages along. As a result, the stream of service messages and sales promotions on sites like the JetBlue Twitter account offers the airline’s 1.7 million followers hardly any quality time.

Strangers introduce themselves.
Bloggers, tweeters, and vloggers use branded content to make a good impression on the strangers and acquaintances that come to their online venue. Some of the readers start a dialogue, and when it clicks, the blogger and engaged reader will often agree to meet face-to-face, according to a study by
 Technorati.

Friends converse with each other.
Consumers pick up branded content and “like” and share it with friends. Some comment and chat, often with close friends. TOMS Shoes, for one, feeds these dialogues on its Facebook page. The shoe brand gives one pair of shoes to children in third-world countries for every pair it sells. With daily footage of delighted children and articles about poverty, the brand gives fans food for thought and conversation.

http://img.skitch.com/20121008-1k8n9csxk9xf6ngh9xefj89cr5.png

A consumer, let’s call her Lucy, walks into a bar wearing her TOMS. The label on her shoes tells everyone what she stands for. She sits down with a friend, sharing the story of the brand’s benevolence. The TOMS label is a social signal in the offline bar. In online bars, fans and followers give the same social signals when they “like,” comment, share, retweet, and repin a brand. “Likes” are the new logos. When Lucy clicks on “Like” and comments “I love my new toms” on the brand’s fan page, she is telling her friends, neighbors, and colleagues who she is, what she stands for, and where she belongs.

Lucy’s contacts see her online signals. An acquaintance will take note, a friend may click on “Like” herself, and a close friend or relative may add a comment: “They look so good on you, Luz ” Lucy’s signals and the responses are directed at consumers, not at TOMS Shoes. But TOMS benefits big time from these peer interactions. A sociological study by the Rotterdam School of Management shows that after seeing Lucy’s signal, 7% of her acquaintances will consider the brand, and 42% of her close friends will want to own a pair too. Compare that to the mere 5% of consumers who get interested after they see a TV commercial: due to social interactions, consumers make an 840% leap of faith into the brand!

Each time Lucy and a friend share a brand experience, they invest time and trust. Each touchpoint between consumers represents value to the brand. That value is positive or negative, depending on the sentiment the two consumers exchange: a friend bashing the brand cancels out two “likes” by other friends. Either way, that value means money, because time is money for both consumers. Just like in offline bars, that value represents the brand premium both consumers are willing to pay. Add up the value of the thousands or millions of touchpoints between friends, acquaintances, and strangers in a social media program and you get the total brand premium that consumers are collectively willing to pay. By definition, this collective premium is the rise in brand equity: the return on investment of the social media program.

http://img.skitch.com/20121008-txcwecennkyxt5k6ftkg5rnhix.png

At the end of a successful evening, a bar owner keeps track of his ROI with hundreds of bar tabs. You as social marketer can do the same. To calculate the financial success of your social media program, you simply need to keep tab on the five factors that define the program’s ROI:

Number of touchpoints.
Count every time a branded YouTube video was downloaded, every “Like”, and every view of the company blog, every visit to the discussion forum. You don’t know how many fans saw your Facebook post or tweet? Thanks to research by people like Dan Zarella, marketers can make a pretty sound assessment of how many friends and followers digest their content and pass it along by tracking the likes-per-fan and retweet ratios.

Time.
Every tweet, retweet, post, comment, online video, pin, and repin takes a few seconds both to produce and digest. Deciding to click on “Like” takes the average consumer for instance seven seconds. In Facebook, an average eight close friends and twenty-six other friends will subsequently take five seconds to digest that “Like.”

Trust.
Look at the intensity of the online interactions between consumers to assess how close they are. A good metric for intimacy is the comment-to-like ratios of Facebook fan posts: the higher these ratios, the more close friends shared the brand experience. On Twitter, the retweet-to-tweet ratio is a solid indicator.

Sentiment.
Measure the shared sentiment between consumers by sifting through the comments and retweets. Companies like Radian6 offer natural language processing tools that automate this analysis for marketers. The word graph produced during such an analysis also serves to double-check the trust factor. Friends use words like “fun” in their exchanges, while close friends may use words like “moving” and “emotional.”

Income.
Social marketers know the demographics of their fans and followers, including the net income of senders and receivers of their content.

In social media, the time and trust between consumers boosts the effect on brands. Compare that to a consumer watching a Super Bowl ad: he receives a 30-second message from a marketer with a trust factor of 1. According to Nielsen, 33% of the 100-million odd viewers like the average Super Bowl commercial. Their average net income is $35,500 per year, or $0.21 per minute. All these viewers collectively invest:

http://img.skitch.com/20121008-p52np62j28ak64qm2b87g1dbq3.png

The $3.5M return on investment isn’t a bad deal, since the going Super Bowl rate is $3.3M. The Small Circle has turned this formula into a ROI model that brands can use for any social media campaign or program. To test its validity, we applied the model to more than 50 well-documented social media campaigns and programs. A selection of the test results is shown below. Benchmarking the ROI of social media with the returns of a Super Bowl ad shows that:

http://img.skitch.com/20121008-kdigiqaj1wdrm387d81kpkutg4.png

1. The ROI of social media is up to four times as high as TV commercials. Consumers pass the branded content along and add trust every time they do.

2. Both large and small campaigns and programs can achieve high returns. The closer the senders and receivers of branded content are, the higher the impact on the brand.

3. In the most successful campaigns, consumers do the talking. Marketers don’t have the time to chat with every fan and consumers prefer to talk with each other anyway.

You are more than welcome to use this tried-and-tested interactive model to verify the ROI of your brand’s fan page, Twitter account, email campaign, Pinterest Board, or other social media activities. Download the model and find out how much money your social media campaign or program is making your company.

Bar owners collect their ROI from the till every night. Social marketers have a harder time converting consumer conversations into sales. Analyst Susan Etlinger from Altimeter Group shows that 70% of them don’t know how social media connects to revenues. To find out, she advices marketers to measure the route consumers take from social media to purchase with:

Tags and links.
How many followers clicked on the Bit.ly link in the tweet? How many readers followed the hotlink in the company blog post?

Platform apps and services.
Did the user of our mobile app scan our product in the store? How many non-fans read our post according to Facebook analytics?

Correlation analysis and A/B testing.
Do peaks in sales follow surges of “likes”? Do fans and followers behave differently than other customers?

Without answers to these questions, the ROI of social media is just a number. With the answers, that number becomes a valuable benchmark to measure your performance against the best-in-class campaigns. You uncover which investments will bring social marketing to the next level. You connect the dots and deliver the number.

[Source: Brian Solis]