Some brands have chosen an f-commerce strategy where their main focus is on enabling their regular e-commerce site with social graph Facebook plug-ins so that fans can see on the traditional e-commerce site what their Facebook friends and family like. The reason for including this option in the e-book is that it is an example of how peer-to-peer influence and word-of-mouth in social networks has changed business.
Before social media, a brand depended on advertising, marketing, and PR to get the attention of their customers. Back then the tools of the trade were creating a logo, key message points, and then repeating them in front of customers as many times as a brand could afford—in print, on radio, on billboards, and on TV . . . But as the old saying by Wannamaker goes, “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” F-commerce is helping companies learn where their dollars are paying off.
And it’s not that people didn’t influence each other before social media. In fact, studies by The Goodman Group, noted experts on customer relations, showed that people on average told 10–20 of their peers well before the Internet became popular. Even back then the calculations for word-of-mouth had huge affects on sales, revenue, and profits. The numbers are impressive:
- 71 percent of customers recall a positive experience—more than double the recall of a negative experience
- 42 percent will buy for the first time based on positive word of mouth
- 21 percent will buy more based on positive word of mouth.
With the advent of social media word of mouth has increased expontentially. In fact brands have lost some of the power to deliver their key messages to consumers. Before social media, the brand “controlled” the “media” about the brand. But with the new web 2.0-type technologies, customers now contribute to that “media” via social media. In social media, customers can say openly and to millions what they think of a brand and its products and services. This ability has removed some of the control of a brand’s equity from the company and put it into the hands of the consumer.
So today brands must still get in front of their customers and assure that some of the messaging sticks, but they must also engage the help of their social media brand ambassadors to deliver positive messages. They need to engage their fans and the social graph of those fans. Studies show that brands must deliver better products and service via their customer experience, especially now that social media has the incredible reach it does.
The Power of Trust
Edelman’s 2011 Trust Barometer®, the firm’s 11th annual survey, gauges attitudes about the state of trust in business, government, NGOs, and media across twenty-three countries. Edelman was one of the first to try to measure how much consumers trust brands. In years past, the Trust Barometer study showed that consumers trusted each other more than brands.
In 2010 the report showed that consumer’s trust in companies did go up, but that generally consumers thought that businesses will probably revert back to their old ways after the recession and not be able to be trusted. The United States was the only country in which trust of companies declined in all types of institutions.
In 2011, the study showed that “consumer trust” protects a brand’s reputation. When a company is not trusted, 51 percent of people will believe negative information after hearing it one to two times.
The Value of Social Currency
An article on brands’ social currency, Fast Company author Kevin Randall wrote about How to Measure Brand Value: Likes, Followers, Influencers, Views? No, Social Currency. This article not only pointed to how powerful word-of-mouth marketing is, but also provided a number of methods to determine a brand’s equity and to correlate a brand’s “equity” score with its bottom line, as follows:
- For a brand’s financial value use Interbrand, Millward Brown BrandZ, Credit Suisse Great Brands
- For a brand’s equity use Equitrend
- For brand word-of-mouth buzz/promoting use McKinsey’s method and Net Promoter Score
The Fast Company article added another method to this list, the work done by Erich Joachimsthaler, Founder and CEO of Vivaldi Partners, in their report on Brand Social Currency. Brand Social Currency, as defined in this study, is the extent to which people share the brand and/or information about the brand as part of their everyday social lives at work and/or at home. To measure a brand’s social currency, they use six key attributes:
- Conversation Advocacy
Erich was quoted in the Fast Company article saying, “Building Social Currency is probably the most important investment companies can make to create value for themselves.” As the author Randall states, perhaps Social Currency is the new, strategic dashboard to help corporate leaders diagnose, build, and monitor the long-term health and value of their “brand assets.”
The study showed a direct correlation between financial performance and the brand’s Social Currency scores. For example, Apple had a high social currency, which is reflected in the company’s financial results. Starbucks, for the fast-food category, also had a high social currency score and traces its 2009-2010 sales growth to a number of recent operational, brand, and social media initiatives.
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@DrNatalie L. Petouhoff
For more info on my work:
Ebook:Social Media ROI
Social Media ROI YouTube Videos:
Video 1: Building the Business Case for Social Media
Video 2: How to Measure the ROI of Social Media
Book on Monetizing Facebook: Like My Stuff: How To Monetize Your Facebook Fans