The Art and Science of Social Media Program Measurement

Written ByVanessa DiMauro and Lily CuaLeader Networks

Table of Contents

FOREWORD..............................................................................................................................................................3

INTRODUCTION......................................................................................................................................................4

WHAT IS SOCIAL MEDIA?.........................................................................................................................................4Figure 1: Twitter Growth Curve.................................................................................................................4

WEB 2.0 WANTS YOU!............................................................................................................................................5Table 1: Web 2.0 Usage Between IT and Non-IT Employees:........................................................8

BUSINESS PLANNING AND STRATEGY......................................................................................................................9

FINANCIAL METRICS.........................................................................................................................................10

LEARNING AND GROWTH METRICS..........................................................................................................11

THERE IS NO SUCH THING AS A STABLE COMPETITIVE ADVANTAGE.................................................................11PEOPLE CAN LEARN, MACHINES CANNOT............................................................................................................12BE PRO-ACTIVE, NOT RE-ACTIVE..........................................................................................................................12IT’S ALL RELATIVE...................................................................................................................................................14PRACTICE MAKES PERFECT....................................................................................................................................15

Table 2: First Movers versus Market Leaders....................................................................................15NOT ALL GROWTH CAN BE MEASURED...............................................................................................................16

MARKETING METRICS......................................................................................................................................18

THE SOCIAL MEDIA UPRISING................................................................................................................................19Table 3: Allocating Online Marketing Budgets..................................................................................19Figure 2: Social Media Marketing Spend..............................................................................................20

SOCIAL MEDIA MARKETING IS STILL MARKETING................................................................................................21IS ONLINE MARKETING A RECESSION-PROOF REMEDY?.....................................................................................22HOW TO HARNESS SOCIAL MEDIA CYBERSPACE AND QUANTIFY MARKETING SUCCESS.................................23

ENGAGEMENT METRICS..................................................................................................................................25

FIND OUT WHAT CUSTOMERS WANT AND THEN GIVE IT TO THEM..................................................................26Figure 3: Customer Engagement as a Benefit from Using Social Media Marketing...........29

CUSTOMER METRICS........................................................................................................................................30

PEOPLE TALK, CUSTOMERS TALK..........................................................................................................................30ARE YOUR CUSTOMERS HAPPY?............................................................................................................................32ALL CUSTOMERS SHOULD NOT RECEIVE EQUAL TREATMENT............................................................................33IT’S NOT ALL BLACK AND WHITE..........................................................................................................................34

OPERATIONS METRICS....................................................................................................................................36

FOCUS ON THE DAY-TO-DAY.................................................................................................................................36IT’S WHAT YOU DO WITH WHAT YOU HAVE......................................................................................................37

SOCIAL MEDIA STRATEGY REQUIRES NEW BUSINESS PROCESSES......................................39

THE SUM OF THE PARTS........................................................................................................................................40

2

Foreword

Social media has changed the way we communicate in both the personal

and the business arena. Every individual now has the ability to create

community powerful interactions about a product or a social or political

cause. We are all now potential reporters and publishers, critics and

reviewers. Our opinion matters and influences how people worldwide invest

their time and money.

This revolution has also changed the way we market. Marketing budgets are

shifting away from print and television ads that reach the masses to

programs that listen to customer sentiment, engage them in social

communities, and share value by way of corporate and personal blogs,

microblogging, and vlogs, just to name a few.  

While there is no question that corporations are making the shift to these

new channels, they will not put their marketing dollars into these new areas

blindly. Costs of such programs can be significantly lower than traditional

media buys, but companies need to know that social media programs are

not only less expensive but effective. The two immediate questions are:

How does a company effectively listen to their customer?

What actions, if any, do they take?

The key factor is that they do listen, and use what they learn to improve the

customer experiences.  If designed with measurement in mind, social media

programs are significantly more measurable than traditional print ads of the

past. In addition, social media has the potential to provide more than brand

recognition. Companies can gain insights that no previous marketing

vehicle could have provided. Specifically, the ability to create an open forum

for customers to be heard, and companies to better serve them.

In the next 40 pages, Vanessa DiMauro and Lilly Cua provide an excellent

discussion of how to approach social media metrics. The Art and Science of

Social Media Program Measurement makes a clear case for why an effective

strategy is crucial to achieving business goals.  Then, as they say, the devil

is in the details.

3

Written byCatherine WeberPresident, Weber Media Partnerswww.impressionsthroughmedia.com

4

Introduction

“Web 2.0 evangelists…argue that social software can be used to

boost productivity. They say it can facilitate an open-ended

corporate culture that values transparency, collaboration and

innovation. Most important, it can be an effective way to build a

customer-centric organization that not only communicates

authentically but also listens to customers and learns from that

interaction” (Dutta and Fraser, 2009).

www.forbes.com/2009/03/11/social-networking-executives-leadership-managing-facebook.html

What is Social Media?

We hear about it and talk about it daily, throwing around terms such as

“blogosphere” and “mini-feeds” and talking about sites like Digg and

Twitter. However, what exactly is social media? This term is difficult to

define for two reasons. First, the scope of this term is very broad and,

therefore, hard to define succinctly. Second, social media is constantly

changing as technology continues to evolve. For example, just one year ago,

almost no one had heard of Twitter and now millions of people are tweeting

worldwide.

5

Figure 1: Twitter Growth Curve

Source: http://mashable.com/2009/01/09/twitter-growth-2008/

Social media is a broad term that collectively refers to the various activities

that use online technologies to publish any form of information and then

broadcast it to the entire World Wide Web where anyone with an internet

connection can view it and respond. Because of its nature, this content is

easily accessible and highly scalable and any online user can generate it,

which is why social media is also known as user-generated content (UGC) or

consumer-generated media (CGM).

While current emphasis is on the tools that support the behaviors of

connecting, social media is really about a business process redesign.

Businesses use the internet as a facilitation platform to connect and enable

collaboration between different people using a set of tools or triggers. It is

largely responsible for the monumental shift in how people search for and

find information as well as how people communicate in their personal and

professional lives.

Web 2.0 Wants You!

Web 2.0 is no longer just for teenagers. CEOs and top executives cannot

ignore this fact. Research has shown that executives make strategic

6

business decisions based upon peer information, much like their teenage

counterparts who make choices with input from peers. However, there are

relatively few opportunities for executives to connect with each other

online, other than via email. They often need to wait for a conference or in-

person event to learn who is doing what with whom in business. Conversely,

throughout the web, teenagers, the 20 something cohort, and a growing

number of people in other age groups have a myriad of forums where they

are talking about themselves and their experiences. They are sharing

information and collaborating with each other in powerful ways.

Armed with their peers’ perspectives, they are using new tools to make

decisions about what they buy, where they go, and what they do. In

essence, they are changing the global economy through their online

collaborative behaviors.

The potential for this opportunity exists for executives as well, as this

constituent is very driven by leveraging peer referral and experiences to

shape future decisions. Therefore, youthful users discuss which music to

download or party to attend, while executives need a means to discuss

industry changes and trends, management issues. They need to know which

product or service their company should buy and how to best leverage their

organization.

Accordingly, social media programs are becoming the new strategic

business mandate – for both B2B and B2C organizations. Effective customer

relationships are the core to any successful company and the strength of

any organization is largely dependent upon the company’s ability to deliver

the right products and services to its customers in a timely way. Knowing

what the customer wants and understanding their current and future needs

is paramount to increasing revenue and exceeding customer expectations.

Social media programs provide a prime opportunity for companies to get to

know their customers more intimately and keep the finger on the pulse of

their needs and behaviors.

The time is now for companies to embrace communities to help them serve

their clients better, faster, and in more cost-efficient ways. Using social

media, companies now have an opportunity to forge a dialogue with their

7

customers actively, not just at the point of sale, but also throughout the

lifecycle to learn what they like and don’t like about a product or service.

There is nothing more dangerous to an organization’s lifeblood than a group

of dissatisfied customers. Yet, an organization may often not be aware of

clients’ issues until they have incurred reputation damage or a trending loss

in revenue. By cultivating meaningful relationships online, product

development leaders can work with clients to share roadmaps and plans.

This helps to get early input from the people who could be buyers at a later

stage. Marketing can learn what messages are most effective with their

constituents and have greater opportunities to educate and inform the

customer, not just with shiny whitepapers and marketing newsletters, but

also by bringing them into the discussion and process of product and

content co-creation. Social media engagement programs also offer

opportunities to make heroes out of users, enabling them to share best

practice stories and to connect with other clients.

Social media sites have also become huge players in the political, sports,

music, and entertainment realms. Big name proponents of this web platform

include President Barack Obama, Shaquille O’Neal, Arnold

Schwartzenegger, and Sarah Palin.1 What is surprising is the indifference of

many high profile business leaders. However, an increasing number of

executives at smaller firms see the value they can generate through social

media outlets and are adopting various channels into their business

strategies. In a recent study conducted by ENGAGEMENTdb of the world’s

100 most valuable brands2, figures showed a direct correlation between

strong financial performance and deep social media engagement. More

specifically, the research shows that, on average, in the past year, the

companies most involved with social media enjoyed an 18% growth in

revenues whereas the least engaged companies suffered a 6% decline. The

values for gross margin and net profit paralleled these values (Altimeter,

2009).3

1 Reference list of business leaders and executives on twitter: www.twexec.com/executives-on-twitter/2 As measured by BusinessWeek/Interbrand “Best Global Brands 2008”3 Reference: www.engagementdb.com/downloads/ENGAGEMENTdb_Report_2009.pdf

8

With such a clear relationship established between financial indicators and

social media involvement, it is perplexing to observe companies that

continue to resistance to this new genre of communication and technology.

The following are some surprising statistics released in a report compiled

by UberCEO.com this June regarding the CEOs of Fortune magazine’s top

100 companies:

Only two have Twitter accounts

Only 13 have LinkedIn profiles, and four of them only have one

connection

81% do not have personal Facebook pages

Only two have more than ten friends on Facebook

None have a blog4

Some attribute these figures to the fact that it is difficult to know the

investment’s potential value or related risks and restrictions imposed by

regulations such as Sarbanes-Oxley and Reg-FD. Other CEOs dismiss social

media “as a time-wasting distraction or regard it as a risk management

problem…focus[ing] on potential risks like security breaches and data

privacy” (Dutta and Fraser, 2009). Whatever the reasons, CEOs that do not

engage in social media are “giving the impression that they’re

disconnected, disengaged, and disinterested.” They are “missing a fabulous

opportunity to connect with their target audience and positively affect their

company’s perception” (Sharon Barclay, an UberCEO.com editor.

See: www.computerworld.com/action/article.do?

command=viewArticleBasic&articleId=9134860)

Moreover, these business leaders need to see the urgency of managing their

online reputation before someone else does. This assertion is supported by

findings from a study conducted by Forbes Insights, which indicates that

the Internet has become the chief source of business information (2009).

However, the term “Internet” now includes much more than Google

searches. Its scope spans from global news sites to personal blogs. The

executives that use all forms of Internet input as business information,

whether it be from a competitor’s website or a consumer’s Facebook page,

will ultimately be the most knowledgeable and therefore, most successful.

4 Source: www.slideshare.net/shazza/fortune-100-ceos-and-social-media?type=presentation

9

Currently, most of these executives are younger than 40 years old. The

Forbes study found that 56% of executives under 40 maintain a work-

related blog daily (35%) or several times a week (21%). This figure drops to

35% and 1% for those that are 40-49 and 50-plus years old, respectively

(2009)5. We find a similar pattern for Twitter usage, with members in the

oldest category claiming that they “don’t see the business value in it”

(Forbes, 2009).

This same study also discovered a similar divide between IT and non-IT

professionals. Forbes found that “CIOs and other IT leaders are the most

likely executives to conduct Web searches, use online communities to

gather information and recommendations, seek out blogs and other Web 2.0

tools, or use online video over text” (2009). The table below illustrates the

stark differences in Web 2.0 usage between IT and non-IT employees:

Table 1: Web 2.0 Usage Between IT and Non-IT Employees

IT Employees Non-IT Employees

Daily Several

Times/W

k

Tota

l

Daily Several

Times/W

k

Tota

l

Contribute or read micro-

feeds via Twitter or similar

application

29% 33% 62% 9% 5% 14%

View work-related video

content via YouTube

33% 29% 62% 9% 9% 18%

Network professionally in an

online community (LinkedIn,

Facebook, online industry

forum)

36% 36% 72% 12% 19% 21%

Source: Forbes 2009 Study: The Rise of the Digital C-Suite: How Executives Locate and

Filter Business Information

5 Source: Forbes 2009 Study: The Rise of the Digital C-Suite: How Executives Locate and Filter Business Information

10

Whether or not a company’s executives have implemented social media

action plans, they cannot deny social media’s obvious presence. As the

personal computer generation rises into leadership positions, social media

will become more entrenched in daily business operations. We strongly

suggest that social media is not a passing fad. Although more and more

companies are setting up blogs, Facebook profiles, and Twitter accounts, it

appears that in many cases companies are taking these actions only

because everyone else is doing it. As a result, these companies are not able

to reap the full benefits of such tools. In this eBook, we hope to give

organizations a clear picture of what this success entails and discuss

metrics that you can track to help achieve success. We have categorized the

research into sections that provide an analysis of key areas of social media

metrics, detailing what they are, how they are measured, and what value

and insight they can provide.

Business Planning and Strategy

Does your company have a real social strategy?

We are talking about a real social enterprise strategy - one that you drive

and measure by business performance. We are not referring to the garden-

variety social media marketing campaign that focuses on tools such as

creating a twitter account to "get" followers or a Facebook corporate

account to put up marketing information.

We are referring to a social strategy that is well grounded in the business

goals and objectives your company needs to achieve, one that permeates

the organization's operations from customer care to competitive

intelligence, to driving new products and features and, is integrated in the

sales cycle. Have you prepared for the cultural impact and change

management process that a social strategy can have on an organization?

11

Have you created a social framework for the enterprise to do business

differently?

In order to move from the fanciful experimentation with social media tools

to putting a social strategy at the forefront of the business operations one

must focus on the following key areas:

1) Develop an integrated approach to a social enterprise strategy:

Social strategy does not just impact marketing nor should marketing

be the only influencer on social strategy within the enterprise.

Instead, a balance of voices and vision should drive the process and

include key operational areas within the business. Everyone should

strive to meet social strategy objectives and help achieve goals across

the organization.

2) Seek external metrics:

Do not spend too much time navel-gazing, looking only at your social

returns but look to competitors for best practice, success indicators

and outcomes. Outside research and benchmarking is often rich with

data to inform your organization about what is possible with social

strategy and showing you where you may be lagging.

3) Define frameworks and measures:

Social strategy is no different from any other kind of business

strategy. You need to establish milestones, measures, and metrics to

assess critically the efficiencies and outcomes gained with the same

rigor you would apply to any other line of business activity. Yes, social

business is a new order. Nevertheless, hold it to the same

performance standards and measures as any other business strategy.

Social strategy needs to return stakeholder value.

Financial Metrics

“Financial metrics…are necessary to measure if any investment is

worth keeping or it any process change will significantly impact the

company’s finances negatively or positively…The very goal of

12

measuring finances is to cut on costs or improve how money is spent

all throughout the organization.”

http://ezinearticles.com/?The-Key-Components-of-Financial-Metrics&id=1240926

All established businesses have some set of financial metrics that they

measure. CEOs, CFOs, and stakeholders often look to these numbers first

and prioritize them above other metrics that do not appear to directly

impact the business’ bottom line. This is because a business’ main purpose

is to generate value. As a result, all components of a business—marketing,

operations, growth and development, human resources, strategy, and

management—incorporate some form of financial measures. It is difficult to

sift out financial metrics into an exclusive category because they underpin

all other figures that businesses track.

Moreover, many departments translate the values they monitor into

financial data because ultimately they want to see the direct connection

between their operations and the returns. For example, the marketing

department may track its monthly customer churn rate and from this data

calculate how the company’s sales levels dropped as a result. Because of

this common practice, this paper will take an integrated approach to

financial metrics in which each of the following sections will include the

associated financial values and resist the temptation to create a specialized

category for financial metrics as they cannot (nor should they) be taken out

of context of the larger business objectives.

13

Learning and Growth Metrics

“The dogmas of the quiet past are inadequate to the stormy present.

The occasion is piled high with difficulty, and we must rise with the

occasion. As our case is new, so we must think anew and act anew.”

(Lincoln)

Most traditional metrics capture values from the past in order to forecast

the future. While these measurements can give a firm a general idea of its

upcoming performance, often the past is no longer relevant, the data has

become obsolete, or it just does not directly correspond to current and

future operations. Learning and growth metrics are unique in that they

quantify how a business plans on evolving. Unlike most metrics, learning

and growth metrics directly appraise potential changes rather than

manipulate old numbers to churn out ballpark forecasts. These metrics are

therefore valuable because they help to gauge a firm’s future performance.

There is No Such Thing as a Stable Competitive Advantage

For companies to grow and succeed, they need to have a unique competitive

advantage that differentiates them from their counterparts. Unfortunately,

the pace of today’s business world forces companies to continuously

enhance their competitive advantage because the odds are that your

competitors will quickly imitate and improve upon the profit-generating

formula you created. However, there is one thing they cannot easily

replicate or standardize - employee experience. Organizations now have

the technology to reproduce easily, operating systems, computer software,

and other equipment business operations depend on.

However, what employees know and have learned during their experience

working at a company cannot be perfectly transcribed and reproduced. As

Russell Coff, an associate professor at Emory of Organization and

14

Management, argues, “human assets are a key source of sustainable

advantage because…casual ambiguity and systematic information mak[e]

them inimitable” (1994). In this regard, a company’s true competitive

advantage should come from its human capital. If the company wants to

remain competitive its employees must constantly be learning and adapting

to changing industry standards.

To leverage social media successfully long-term companies must offer a

unique point of view and be able to contribute to the growing body of

shared thought leadership in the social sphere. Too often, companies

launch empty social media campaigns - campaigns void of a purpose or that

fail to make a salient contribution to the world’s information exchange.

While at times these campaigns are successful in the short-term due to their

sex appeal of well-crafted messages, if there is no meat behind the effort to

engage, or complete processes to support the spoils of the engagement,

they often fail long-term. Therefore, defining and sustaining success with

social media frequently begins within the organization.

People Can Learn, Machines Cannot

Most executives will agree that their employees are their most valuable

assets. Although advanced technology has some human-like capacities, one

of the most important features that distinguish humankind from computers

is our ability to learn, catalog, integrate our experiences into our knowledge

base, and innovate. Computer systems can have frequent updates to

incorporate new organizational developments, but people have to design

these new systems. All technology is dependent on some form of human

involvement, whether it is designing the structure, inputting or

manipulating the data, further analyzing the output, or updating the system.

David Carr of the New York Times reaffirms this position, stating that “In

the digital age, the critical difference between success and failure is human

capital - those heartbeats and fast hands that can make a good business

great” (2008). Because employees are the component of the organization

that enable it to evolve, the following section on learning and growth

metrics largely deals with a company’s human assets.

15

Be Pro-active, Not Re-active

Growth and learning metrics are “not just behavioral and statistical but

‘developmental’ in the sense of development of adult mental growth over

the life span.”

(See: www.balancedscorecard.org/Portals/0/PDF/Laske4.pdf page 1).

In other words, growth and learning metrics do not solely measure and

analyze old behaviors. Rather, they aim to capture those values that most

directly correspond to future organizational growth. Traditional metrics

provide information about a firm’s past performance, but are not always the

best figures for predicting future performance or implementing and

controlling a firm’s strategic plan. This method may have been effective

when businesses were not forced to evolve at a whirlwind speed. Now,

businesses cannot depend on old data to make accurate predictions. They

need to be pro-active and anticipate what values will be most relevant to

their organization in the future and modify them as dictated by market

forces. By integrating this forward-looking perspective, businesses will be

able to “better translate the[ir] organization’s strategy into actionable

objectives and better measure how well the strategic plan is executing”

(Kaplan and Norton, 1992).

Robert Kaplan and David Norton, authors of The Balanced Scorecard, also

recognize the importance of tracking a company’s learning and growth.

They designed a management system in which one of the four perspectives

they integrate is learning and growth. In their words, “learning and growth

metrics address the question of how much the firm must learn, improve, and

innovate in order to meet its objectives” (Kaplan and Norton, 1992). From

the perspective of their management system, most of these metrics relate

directly to or are driven by employees.

As the pace of today’s technological era continues to accelerate, continuous

learning and growth becomes increasingly imperative for a company’s

success. Therefore, these metrics need to be collected and analyzed

frequently and modified as needed. When numbers are gathered slowly,

information will become outdated and useless. As a result, these metrics

will drain money and time rather than guide managers on how to capitalize

on their investments to realize the most growth possible.

16

The following is a list of learning and growth metrics:

1. New ideas generated to improve the company (e.g., new product ideas

and suggestions, operational adjustments, etc.)

a. New ideas can be put forth by customers via posts and blogs, or

by employees (company newsletter, company blog, etc.)

2. Savings on market and consumer research spending (faster and more

knowledgeable employees will result in more efficient practices and

lower costs)

a. Time to market is accelerated through using social channels to

vet new product ideas and reality test new concepts before they

reach full-scale product development lifecycle.

3. Average length employees work at company (the longer they stay, the

greater the potential for learning and increased efficiency, which will

help the company grow quickly, even in tight economic times. In a

recession, companies are reluctant to fire experienced employees

because they are the firm’s most valuable repository of knowledge)

a. Experienced, knowledgeable employees can make excellent

social media representatives for the organization.

4. The strategic technology advances the firm plans on implementing

and how this will improve operations and/or reduce the number of

employees (labor costs, OH costs etc).

17

It’s All Relative

None of these values is incredibly useful in isolation. In order for these

types of metrics to be helpful, companies need to gather data regarding

their competitors’ firms in addition to their own organization. It does not

really matter how fast your company is learning and growing unless you are

doing it faster and better than your industry counterparts are doing it. Of

course, you want to be as operationally efficient as possible to minimize

costs and widen profit margins, but as long as you have an edge up on your

competition, you will generate business.

The 2008 Summer Olympics are a good example. In the track and field

competition, Usain Bolt blew by his competition in the 100-meter dash with

a time of 9.69 seconds with the second place runner coming in a full two

tenths of a second later. Breaking the world record he had already set,

Bolt’s feat generated a lot of buzz and brought in a great deal of revenue

from his sponsors, namely Puma, Gatorade, and Digicel. Michael Phelps was

also at the center of most discussions at these same Olympic Games,

coming away with eight gold medals and millions of dollars in sponsorships

(granted, this was before some compromising pictures were released).

Although all of his eight performances were incredible, the one that

produced the most hype was the 100-meter butterfly in which he won by a

mere one-hundredth of a second. My point, however, is that while Bolt made

his race look like a stroll in the park and Phelps’ race was a nail-biter to the

end, both athletes ended up with the same prizes, gold medals, fame, and

money.

The position above (i.e., what is most important is that you can outperform

your competition) can also be applied to business situations. For example,

consider time to market (TTM), which measures the amount of time

between when a company conceives the product idea and when the physical

product is available for sale. This metric is particularly important in

industries where products quickly become outmoded, which is becoming

more commonplace as the attention spans of consumers shortens and

expectations rise.

18

If two businesses come up with similar product ideas, the company that can

create a prototype and send it to its manufacturers first will immediately

get a huge boost in market share, which will consequently erect a barrier to

entry for competitors. It does not matter if the company released the

product one year or one month before its competitors. The fact that it came

out with the product first (given that quality and price levels are

comparable to those of competitors’) guarantees a substantial amount of

business.

Practice Makes Perfect

On the flip side, many companies have made their millions by waiting for

industry innovators to “test the waters”. They adopt previously tested ideas,

learn from failed attempts, and make refinements where necessary. In other

words, these companies are waiting for others to educate the market. This

approach allows them to use the additional time and experience to perfect

the product or service and enter the market with a superior product.

Michael Shrivathsan, an expert in product management and marketing,

explored the misconception that having the first-mover advantage is the be

all and end all. In Table 2 below he highlights how market leaders are not

always the first movers ( 2006):

Table 2: First Movers versus Market Leaders

First Mover Market Leader

Personal Computer Altair (1975) Dell

Word Processing

Software

WordStar (1979) Microsoft Word

Web Browser Mosaic (1992) Microsoft Internet

Explorer

Internet Search Engine Excite (1993) Google

19

In many instances, most people have not heard of first mover companies.

This substantiates the counterpoint to the previous argument. Companies

with a “head start” do not necessarily reap the long-lasting benefits. As

Shrivathsan states, “to gain the advantage, first movers must capitalize on

the opportunities that come with being a pioneer while at the same time

manage the threats that arise. The bottom line: Being first in a market is

only an advantage when you do something with it” (2006).

This applies directly to businesses using social media tools and online

communities. Companies should not just focus on creating and using them

first, because they run the risk of focusing on immediacy rather than

quality. Twitter is a good example. The average Twitter user has 549

followers, although this number is skewed by large corporate sites that have

15,000 followers on average.

What proportion of these followers actually cares about your personal life or

your company’s products? If you look at your own Twitter page, it’s likely

you will see a post made by someone you do not know or at least by

someone who you don’t really care to know about. If you examine your

followers, it’s likely you will be surprised how many of them you have never

heard of. Even the people you follow religiously tweet insignificant details

about their lives that you could more than live without.

The Twittersphere inundates us with thousands of tweets that are 140

characters of nothingness. So how do companies find a balance between

tweeting noise and effective marketing and customer relations? As is the

case with most social media instruments, being the first and loudest does

not necessarily make you the most successful. Strategic metrics are

therefore paramount. Measuring quantity will not guarantee returns. The

trick is measuring quality and efficiency. Engaged companies are often the

most successful companies, and that requires a business strategy with clear

goals and objectives by which to measure the outcomes of social efforts. If

companies can develop social media strategies that effectively satisfy their

customers’ needs and before their competitors, then they will have built an

insurmountable barrier to market entry, making them the only game in

town.

20

Companies that do not have an integrated social media strategy should look

at what other companies are doing to see which strategies are succeeding

and which are just budget drainers. They should first and foremost “focus

on customers, understand their needs deeply, and create products and

services that meet those needs much better (in ways that matter to

customers) than any of [their] competitors” (Shrivathsan, 2009). This is a

best practice approach to how a company can use a late adopter status to

its advantage. Otherwise, they will not only have a slow start, but they will

be stuck at the starting line while competitors continue to push forward.

Not All Growth Can Be Quantified

As with most categories of business metrics, there are values that you need

to track, but cannot be fully quantified. Specific aspects of learning and

growth include corporate cultural attitude, mentorship opportunities, and

recruited talent all of which have a qualitative aspect. While some

quantitative metrics may apply, the qualitative measures must be included

to gain a full understanding.

Corporate culture refers to a firm’s core values, beliefs, and behaviors. One

can define corporate cultural attitudes as a function of how employees

interpret and act upon these shared values, beliefs, and behaviors. Are

employees encouraged to experiment with and suggest new ideas? Are they

comfortable enough to voice their opinions and complaints? Are they

empowered to make decisions and take on responsibility? It is difficult to

assign numeric values to the answers of these questions, but that does not

discount the value that you can distill from the answers to these questions.

The “mentorship opportunities” category is relatively self-explanatory but is

similarly difficult to monitor and quantify. Mentor-mentee relationships are

some of the most valuable bonds in a company, not to mention, cost-

efficient. Mentors are often the most experienced employees and can

therefore teach recently hired employees about the ins and outs of a

company from firsthand experiences. New employees will likely respond

more to advice given to them by coworkers rather than by bosses who have

control of their employment status. Mentor-mentee relationships build on

and sustain themselves through a sense of camaraderie, which translates

21

into a happier and more self-sufficient work force. This ultimately results in

lower costs and greater profit margins for the company.

Reverse Mentoring

A particularly valuable mentor-mentee relationship would be pairing up a

“Millennial” employees who is technologically savvy with a group of

executives that are not as well-versed in the emerging Web 2.0 culture, or

as David Weinberger calls them, “digital immigrants”. A company should

maximize the value it can get out of its human resources and these reverse

mentoring programs help established businesses break into the changing

business scheme at essentially no additional cost.

One of the most common findings we encounter is that a lack of digital

leadership sends the wrong signals to staff - when executives do not use

social media strategically or simply do not use it at all, the organization

learns by example that social leadership is not a priority. This is an

unintentional outcome. While leaders are saying social leadership is

important, when they do not act accordingly, the message is diffused and

therefore rarely embraced.

The most common reason for lack of social leadership is unfamiliarity with

the tools and best practice of social media. This is a problem (somewhat)

easily solved. On a number of occasions, we have put in place "reverse

Mentoring" programs to pair leaders with Millennial to help educate and or

support change. Once senior leaders become familiar, skilled, and

"acculturated" into social media usage, they are then able to speak the

language of social media - and lead - by example.

Recruiting Talent

Putting the unique role a Millennial employee can play within an

organization aside; recruited talent is probably the most important learning

and growth value in which a company can invest. The talent brought into a

company determines the growth potential for the organization. Human

resources departments and any other individuals involved in the recruiting

process need to be incredibly particular as to the employees they are hiring.

22

They need to look at personality traits, compatibility with the firm,

intellectual depth, acquired skills, and willingness to learn and work hard.

Because new employees will likely replace older employees in the future,

recruiters need to think in terms of the company’s vision for future growth

and development.

Bill Gates and Steve Jobs, two of the most distinguished technology

founders in history, practice this kind of rigorous hiring process believing

that ‘A players hire A players, and B players hire C players,’ this can

translate functionally into a negative slope. Lowering the hiring standards a

small amount will eventually lead to a very significant drop in the quality of

employees. Companies should hire only those individuals that have the skills

and knowledge to realize the firm’s growth potential and should closely

monitor the learning curves of recently hired employees. This will ensure

that the recruited talent can handle the tasks as well as be able to

contribute to future company developments. Recruiters need to realize that

the people they hire will ultimately become the new and (hopefully)

improved backbone of the company.

23

Marketing Metrics

“Good marketing is any effort by a company…to DIRECTLY satisfy

the wants and needs of its customer” (Collier 2007).

(http://moblogsmoproblems.blogspot.com/2007/01/what-is-good-marketing.html)

Marketing metrics aim to quantify the performance of a business’ marketing

efforts. Given the unprecedented and rapidly growing impact technology

has had on the business world, the following discussion will focus on online

marketing. It is important for a business to track the effectiveness of each of

its marketing campaigns to minimize gratuitous costs and optimize the

value added directly and indirectly to its bottom line. To use marketing

metrics effectively, one must first understand what a company is striving to

accomplish with its marketing campaigns.

Effective marketing will accomplish four things:

1. Spread consumer awareness, thereby expanding the pool of

prospective customers

2. Increase word of mouth (WOM) and other forms of consumer-

generated advertising, also augmenting the number of potential

customers

3. Pique interest so consumers become customers and begin to

explore and purchase the business’ products or services

4. Affirm the quality of the business’ products or services to existing

customers, resulting in greater customer loyalty and retention

rates

How does a business quantify whether or not its marketing efforts do these

four things? This task is difficult for any marketing campaign and more

difficult to accomplish for those campaigns served on online communities

because of their novelty. Popular online communities such as Twitter,

Facebook, and Digg have only been around for a few years, created in 2006,

24

2004, and 2004, respectively. However, companies that are not integrating

these social networking sites into their grand marketing plan are already

falling behind those that are in better synchronization with this new wave of

technology. Unfortunately, many of the businesses trying to incorporate

social networking into their strategy planning are completely oblivious to

whether their efforts and resources are generating optimal results; a state

of affairs that could hurt them in the future.

The Social Media Uprising

As tweets, posts, and blogs permeate the daily headlines and news reports,

it is obvious that the number of “social media ‘spectators’” is escalating at a

rapid pace. Not only are there more eyes on social media sites, there is a

growing level of attention and capturing audience attention is the new

currency in the online marketing environment.. People are beginning to

realize that these sites can be used for more than trivial communication and

connections. For example, Twitter in its earliest stages was perceived as a

detached method of broadcasting petty details about one’s personal life.

Now, it has become one of the most important tools of the Iranian

Revolution, American political campaigns, and in wide use in many

companies’ marketing and CRM strategies.

25

Table 3: Allocating Online Marketing Budgets

Source: http://mashable.com/2009/01/12/social-networking-online-marketing/

Twitter is one of the fastest growing social media sites, boasting 1,382%

growth in February (McGiboney, 2009). In March, the number of global

visitors to Twitter’s website alone skyrocketed to over nineteen million

(Schonfeld, 2009). Consistent with these statistics, social networking has

and continues to be the top growth area in online marketing. The table

above shows how companies plan to allocate their online marketing

budgets. As you can see from this table, a quarter of the companies surveyed plan to increase

their spending on social networking and a third plan to maintain their level of social networking

funds. Forrester Research reports similar findings from the results of their research study.

Figure 2: Social Media Marketing Spend

26

Source: www.web-strategist.com/blog/2009/03/16/report-social-media-marketing-up-during-

recession/

These figures may not seem impressive, but given that the current recession

typically demands reduced budgets, especially marketing budgets, a 95%

bullish market for social media is remarkable. These increases in social

networking spending, however, are not unfounded. Social media marketing

is relatively inexpensive and provides a great opportunity to generate cost-

efficient word of mouth promotions. Most importantly, it engages

customers.

Social Media Marketing Is Still Marketing

Let us not get ahead of ourselves. Online marketing is still a subset of

overall marketing. According to CPA, Michael Gray, there are three

components required for a successful marketing campaign: a market, a

message, and timing (2002). When designing a marketing plan, the first

three questions and underlying issues you need to address about the market

are:

27

1. To whom, are you trying to target?

2. How many people are in your target population?

3. Is your market large enough to support your operations?

Marketing departments must always consider their target market when

designing and adjusting their strategies because ultimately, marketing is

only successful if it appeals to the target market.

An engaging message is the second key element of a thriving marketing

campaign. The message must catch the attention of and resonate with the

target market. In order to create such a message; marketers need to

understand their customers. They need to know the wants, needs, fears,

and problems of their customers and emphasize how their value proposition

will satisfy them. This requires frequent and open dialogue between the

company and the public.

However, releasing your message and directing it at selected consumers

will not guarantee a prosperous marketing campaign. The final factor

marketers need to consider is timing. The difference between a failed

attempt and a successful campaign could be determined by several factors

including:

o Consumer trends

o Economic conditions

o The competitive environment

Although these are uncontrollable factors, marketers can still use them to

their advantage if they anticipate them and respond aptly. A glaring

example is the current recession. Andrew Kohut, president of the Pew

Research Center, reports that consumer satisfaction with the economy has

reached a 15-year low, which explains the drastic reduction in consumer

spending.

High-end businesses such as Tiffany’s and Coach are feeling this squeeze

most acutely and have been forced to alter their marketing strategies to

maintain reasonable sales levels. While stores on the opposite end of the

28

price spectrum, such as Target and Wal-Mart, are also suffering from the

economic downturn, they have been using the market conditions to their

advantage. They have altered their marketing campaigns to highlight their

low-price offerings and attract the growing pool of cost-conscious

customers.

Is Online Marketing a Recession-Proof Remedy?

According to a study conducted by Forrester Research (2009), “merchants

believe online business is better suited to withstand an economic downturn

than physical stores or catalogs.” This assumption may explain the retail

industry’s shift in marketing tactics from billboards and television

advertisements to Facebook and Twitter banners and buttons. Given that

the number of people who read or watch social media has increased from

48% last year to 69% this year, this strategy should continue to spread

(Forrester, 2009). Many companies such as General Mills and Blue Cross

recognize the benefits of blogs, podcasts, and other forms of social media

and have already integrated them heavily into their marketing strategies.

Bloggers such as Seth Godin also realize how “traditional ways of

interrupting consumers (TV ads, trade show booths, junk mail) are losing

their cost-effectiveness. At the same time, new ways of spreading ideas

(e.g., blogs, permission-based RSS information, and consumer fan clubs) are

quickly proving how well they work.”

(http://sethgodin.typepad.com/seths_blog/2005/05/what_every_good.html).

Not only are the costs associated with social media marketing significantly

lower than those of conventional advertising many studies suggest that

WOM is more effective than any other kind of marketing, and social media

is essentially online WOM. Jim Tobin further explores this idea in his book,

“Social Media Is a Cocktail Party.” He likens social media practices to the

expected code of conduct at a cocktail party. For example: when you arrive

at a cocktail party, “the first order of business is to observe the room, listen

for conversations of interest and find an appropriate opportunity to enter

the conversation” (Tobin, 2008). Similarly, “observing and tracking the

29

conversation is a vital first step in developing an effective social media

program. By first listening to the conversation, you will find what’s being

said, who is saying it and who is listening” (Tobin, 2008). If businesses can

understand and apply the aforementioned concepts and tactics, they should

be able to launch a social media marketing campaign successfully.

How to Harness Social Media Cyberspace and Quantify Marketing Success

“People are talking about you and your brand and your issues (whether you

like it or not). The only question is whether you want to have an influence

on it” (Ranii, 2008). This statement is even more germane now with the

introduction and widespread success of social media websites. Online

communities provide a forum for open dialogue in which consumers and

businesses alike can express their opinions, share their experiences, and

spread information. Given the Internet’s massive audience, consumers and

businesses now include essentially everyone. As a result, the scope of a

marketer’s job has expanded immensely. A company’s target market not

only includes those customers directly exposed to its advertisements, but it

includes everyone connected to those customers regardless of how distant

the connection is.

In summary, marketing efforts have the potential to impact any and all

consumers. Therefore, metrics that intend to quantify the success of a

marketing campaign become increasingly essential to a company’s success.

The following is a list of marketing metrics that businesses should consider

when launching a social media marketing campaign:

1. Number of inquires on search engines (to measure spreading

awareness)

a. Average number of impressions

2. Number of new customers

3. Customer acquisition cost

4. Ratio of cost to website exposure

a. Measured as cost per thousand page impressions (CPM)

b. Cost per lead (CPL or cost per acquisition)

5. Growth in market share

30

However, as the scope of social media marketing expands (which it

inevitably will given the growth of online networking tools) it becomes more

difficult to quantify the success rate of particular marketing efforts. There

are many aspects of marketing that marketing departments should monitor

even if numbers cannot be assigned to these values. This includes the

amount and quality of customer-generated marketing initiated by a

company’s original marketing operations. Ask yourself these questions:

1. What are people are saying about your advertisements?

2. What are they saying about your competitors’ advertisements?

3. What degree of hype are you able to build up?

Specifically, a company needs to understand what is said about their

product, who is talking about the products, and how frequently are the

discussions taking place.

In today’s technological era, this encompasses tracking blogs, podcasts,

tweets, and other forms of WOM both online and offline. Additionally, Web

2.0 connoisseur, Joshua-Michéle Ross, suggests stories should also be a

success metric because “great stories are inherently viral and can have a

profound impact on decision making in an organization” (2008). The fact

that we cannot translate everything people are saying about a company’s

products and services into numerical values does not take away from the

importance of listening what people are saying. What people are saying is

extremely important and directly correlated to a business’ success.

31

Engagement Metrics

“An organization’s best customers…are not just “satisfied” or

“loyal,” they are emotionally attached to the organization’s brands or

services. They are engaged” (Gallup, Inc., 2009).

www.gallup.com/consulting/49/customer-engagement.aspx

A disengaged customer is not really a customer, or at least not a good

customer. Unfortunately, few companies have implemented effective

systems to gauge the level of their customers’ engagement. Understanding

engagement metrics is important because they can give a company a more

accurate and complete picture of their customers.

For example, there are millions of daily web surfers. Most surfers breeze

through websites and articles, maybe spending a few seconds on any given

page. These brief visits will increase a company’s number of visitors and

impressions, but it does not give the company an accurate accounting of

how many of visitors are interested in their ideas, products, or services.

This is why engagement metrics are an important part of the mix.

Engagement metrics aim to quantify how interested and committed

customers are to a business. Although it is good for businesses to get as

much exposure to their sites as possible, it is better yet to focus on getting

the attention of customers whose visits will most likely translate into

business.

Engaged customers generate the most business because they are more

likely to generate higher conversion rates, be more loyal, and have higher

retention rates. Another benefit of having engaged customers is increased

customer satisfaction.

Some key metrics for focusing on engagement include

1. Increased revenue

2. Increased customer loyalty

32

3. Improved customer experience

4. Increased customer referrals

5. Increased customer life-time value

6. Improved sales processes

If consumers are indifferent to a company’s offerings, they are unlikely to

become paying customers, especially not loyal, repeat customers.

Therefore, knowing the level of engagement of your target market is

important. The following is a list of engagement metrics:

1. Ratio of the number of visitors to number of repeat visitors (to

measure how successfully the site captures viewers)

2. Ratio of the number of registered users to the number of active users

3. Click-through rate (CTR = Number of users who clicked on an ad, i.e.,

number of impressions)

4. Frequency of posting

5. Average duration of visit (to measure the interest level in the site)

6. Average number of posts over a period of time per visitor

Find Out What Customers Want and Then Give It to Them

Recently a study of 1300 American and multinational companies conducted

by e-Consultancy found that less than half of the respondents had

implemented a clearly developed customer engagement strategy. However,

the study showed a high level of awareness of the need for such a strategy

(http://live2support.com/newsletter/2009-01/customer_engagement.php).

Executives are beginning to appreciate the importance of engaging

customers online and to invest heavily in methods to capture the customers’

attention and retain consumers’ interest. However, one common misstep in

the process is that companies often (too often) believe they know what the

customer wants from them. They then often skip a critical step in the

33

planning process – namely to ask the customers or clients what their needs

and expectations are from the company. A formal inquiry process should

start with understanding where the prospective user base’s current process

or experience gaps are – what keeps them up at night or causes issues,

problems or inconvenience.

A driving goal of any social media program should be to use the digital

channel to accelerate a business (or consumer) process and make it easier

or more streamlined for the customers to interact with your company.

Therefore, the key is to explore, through semi-structured interviews or

through a quantitative study, the points of customer discomfort and/or

need, and not focus initially on the social media tools you might use to

mitigate the pain.

Too often, we have all been the recipient of a satisfaction questionnaire that

asks a question such as whether we prefer to read a blog or get a RSS feed!

Where this fails is that it doesn’t answer the questions “to do what?” or “to

achieve what?” Your answer is likely to vary widely depending on the

context of the engagement. Too much tool talk, while it might be

entertaining, can significantly derail the process of learning about customer

needs. The goal is to identify issues and use the information, when

appropriate, to a social-media-driven intervention.

34

Case StudyAmazon.com is widely acclaimed for its customer-tailored approach to its online services. Recently,

I purchased a book from Amazon online after receiving an email promoting a sale they were

having. A hyperlink was in the email allowing me to go straight to the website. A personalized web

page opened and had information and featured titles that matched my interests. I had no plan to make a purchase, but one of the books suggested was one I had heard good things about and it was conveniently on sale. Because I am a registered customer with Amazon.com, I did not have to re-enter my shipping and billing information. That information simply appeared to further facilitate

and expedite my transaction.I bought the book!

Sharon Mertz, a research director at Gartner Research, explains that during

a recession businesses have to put in the extra effort in the Amazon

example to get consumers’ business. She states, “When the economy slows

down and consumers don’t spend as much, businesses need to fight harder

for every dollar of consumer spending. Customer experience will only help

with that” (as cited in Beal, 2008). Companies have responded to this

anticipated pattern of behavior by investing heavily in two areas, CRM

software and social media marketing.

Despite overall budget cuts, many businesses are spending more to enhance

their CRM systems. Gartner Research projected that in 2008, the revenue

generated by CRM sales would increase 14.2% from the previous year and

that this level of growth would continue through 2012 (Beal, 2008).

Although implementing a CRM system entails time and resources, the

benefits typically more than offset the costs.

CRM software enhances a company’s relationships with its existing

customers, which has the potential to result in:

1. Increased sales through better timing from anticipating needs based

on historic trends

2. Identifying needs more effectively by understanding specific customer

requirements

3. Cross-selling of other products by highlighting and suggesting

alternatives or enhancements

4. Identifying which of your customers are profitable and which are not

5. More effective targeted marketing communications aimed at

particular customers based on their needs and preferences6

The use of CRM software provides a firm with the opportunity to develop a

more personal approach to its interactions with customers. This can lead to

enhanced customer satisfaction and retention. If a firm keeps its customers

happy, they reward the company with return business and possibly referrals 6 [Online] Available: www.businesslink.gov.uk/bdotg/action/detail?type=RESOURCES&itemId=1075422939. Date of Accession: July 5, 2009.

35

to the firm. This will generate more value from existing customers and

reduce costs associated with supporting and servicing them and the cost of

finding new customers. CRM software also identifies those customers that

will be most profitable. In sum, CRM software enables businesses to be

more cost-efficient by engaging the most beneficial customers, which will

maximize profit margins.

The recent spending pattern for social media marketing parallels that of

CRM systems. According to a report published by PQ Media in 2006, “the

total marketing spending on social media is forecast to grow at a compound

annual rate of 106.1% from 2005 to 2010, reaching $757.0 million in 2010”

(Rubel, 2006). These figures cover blog, podcast, and RSS advertising. This

level of spending is not surprising given the latest updates on minutes spent

on social networking sites. Nielsen Online, a company that measures web

traffic, reported that in the past year the number of minutes on social

networks rose 83% in the United States (2009).

Top ranking social media sites like Facebook and Twitter increasingly

permeate the public’s lifestyle. Overtime they become more valuable as

advertising real estate on which businesses can broadcast and endorse their

products and opinions. These sites also are valuable forums in which

businesses can build up their reputation in the community by listening and

addressing complaints publicly and in a timely manner. When companies

tap into these online communities effectively, they expand their market

potential significantly and cultivate open relationships with customers,

which may result in enhanced customer engagement.

As you can see in the graph below, 85.4% of the executives polled cited

customer engagement as a benefit of using social media marketing.

36

Figure 3: Customer Engagement as a Benefit from Using Social Media Marketing.

Surprisingly, this same

study

conducted by

Marketing

Executives

Networking Group

(MENG) found

that only 21.2% of

those surveyed

thought that ‘lead

generation source’

was a benefit of social

media

marketing. This

suggests that although executives see social media as a valuable tool to

engage customers, they may not see the direct correlation between social

media and their firm’s bottom line (as cited in Forrester, 2008). Regardless,

no one is likely to argue against the position that social media is going to

play a huge role in the upcoming future, both in our personal and

professional lives. Thus, businesses will increasingly need to understand

social media in order to understand and engage their customers.

37

Customer Metrics

“Customers are the lifeblood of any organization. Without

customers, a firm has no revenues, no profits, and therefore no

market value” (Gupta & Zeithaml, 2005, p. 3).

As markets continue to shrink, businesses are shifting their focus to the

individual customer, as they should be, and are scrambling to keep their

customers satisfied. If businesses want to succeed, they have to exceed

their customers’ expectations because without customers, there is no

business. This development is reflected in a worldwide survey conducted by

The Economist in 2002 which reported that of the 681 senior executives

interviewed, 65% claimed customers to be their main focus over the

following three years (as cited in Gupta & Zeithaml, 2005, p. 3). Many other

studies, involving both American and global firms reveal the trend of

businesses becoming more customer-driven. This finding is not surprising.

After all, the customer ultimately drives a company’s bottom line. Therefore,

there is likely to be a direct correlation between customer satisfaction

ratings and company equity.

People Talk, Customers Talk

Some studies suggest there is a slightly exponential positive relationship

between a firm’s market value and its customer satisfaction level. To

explore this idea, put yourself in the shoes of a new customer at a new

restaurant. You go to the grand opening and have an all-around great

experience:

o Hostess was pleasant

o Bartender was friendly while you waited for your table

o Your waiter got all of your orders correct

o Food came out quickly, was hot, and delicious

38

What are some of the likely outcomes from your experience?

o Talking about this restaurant with your colleagues at work the next

day

o Recommending the restaurant to your friends or anyone looking for a

place to eat in that area

o Going back to this restaurant

Now think about the opposite scenario. You go to the grand opening and

have the following experience:

o Hostess is flustered with requests

o Bar is crowded with loud fans and the bartender is watching the game

o Your waiter was inattentive

o The food arrives cold and is of questionable freshness

Would you complain to your coworkers and friends the next morning about

how awful your dining experience was? The answer to this question is

reasonably obvious.

As you can easily see, companies need to satisfy each customer because

each one is a walking and talking advertisement that has the potential to

spread great reviews or harsh criticisms.

Kevin Cacioppo, examined this issue in his article “Measuring and

Monitoring Customer Satisfaction” he found that a “very satisfied customer

is nearly six times more likely to be loyal and to repurchase and/or

recommend your product than a customer who is just satisfied.” In addition,

customers with a problem will eventually tell on average nine other people

about their negative experience (2000). This kind of WOM advertising can

only be control through your direct interactions with customers. All

businesses can do is strive to please their customers in hopes of maximizing

good publicity and minimizing bad publicity. Furthermore, having satisfied

customers will not only guarantee repeat customers and continued

39

business, it will also generate more business, which gives a company

potential for securing additional loyal customers.

The points above are part of loyalty expert, Fred Reichheld’s, Net Promoter

Score (NPS) concept. A company’s NPS is calculated by subtracting the

percentage of customers who are “detractors” from the percentage who are

“promoters”.

P – D = NPS

Reichheld defines detractors as “unhappy customers trapped in a bad

relationship” and promoters as “loyal enthusiasts who keep buying from a

company and urge their friends to do the same” (2006). Customers who

neither endorse nor denounce the company fall into a third category

referred to as “passives”. Research shows that NPS leaders outperform

their competitors by an average of 2.5 times in most industries (Reichheld,

2006). In another of Reichheld’s noted texts, The Loyalty Effect: The

Hidden Force Behind Growth, Profits and Lasting Value, he reiterates

the importance of customer loyalty, finding that it results in as much as 95%

higher profitability by reducing customer defections by as little as 5% (as

cited in Customer Engagement Strategies, 2009).

Surprisingly only 4% of dissatisfied customers will submit a formal

complaint to the company (Cacioppo, 2000). This disconnect in the

customer feedback loop reinforces the importance of having clear-cut

metrics. All companies have unhappy customers, but because so few

complaints surface, companies do not know where their problems exist.

Worse yet, companies may think they do not have problems, or at least no

problems significant enough for people to complain. Because companies

cannot force disgruntled customers to file complaints, companies need to

have customer metrics they measure and analyze regularly. Although

numbers cannot paint a complete picture a of firm’s problems, they will at

least raise red flags altering the appropriate personnel to further

investigate these areas if necessary.

40

Are Your Customers Happy?

Given the importance of achieving customer satisfaction it is no shock that

customer metrics span over a wide range of topics. Customer metrics

include product and service satisfaction, loyalty, and retention metrics.

Although businesspeople casually throw around these terms, they should

not use them interchangeably. Granted, there is some overlap in the

concepts related to these terms, but it is the nuances of each that give a

company insight into their customers’ opinions and thoughts.

o Satisfaction is a customer’s appraisal of their entire experience with a

company.

o Loyalty, as defined by Richard Oliver, author of Satisfaction: A

Behavioral Perspective on the Consumer, is “a deeply held

commitment to re-buy or re-patronize a preferred product or service

consistently in the future, thereby causing repetitive same-brand or

same brand-set purchasing, despite situational influences and

marketing efforts having the potential to cause switching behavior”

(1997, p. 392).

o Retention refers to a company’s ability to keep its current customers

and maintain a steady inflow of cash from these customers.

In other words, customer metrics collectively aim to answer the question:

are customers happy enough to continue purchasing your product? For

businesses, having connected customers translates into steady demand and

growth potential. It is for this reason that tracking customer metrics is not

only smart, it is essential for business’ survival.

The following is a partial list of measurable customer metrics:

1. Net Promoter Score (NPS)

2. Retention rate

3. Quality perception

4. Customer churn rate which can be devised by taking the total number

of customers who discontinue a service divided by Average total

customers for that period

41

5. ASCI score (http://customermetrics411.com/customer-

satisfaction.html)

The above list is far from comprehensive; and continued research needs to

be conducted in this field. However, it is important for businesses to have

benchmarks that they can measure and use to determine their degree of

effectiveness in servicing their customers.

All Customers Should Not Receive Equal Treatment

Businesses are well advised to consider another aspect of customer metrics.

While businesses want to attract as many consumers as possible, they want

to focus their efforts on those customers that generate the most value for

the company and drop those that cost more than they contribute. Therefore,

businesses should calculate each customer’s lifetime value (CLV) and

customer equity (CE). These values represent “the present value of all

future profits obtained from a customer over his/her life of a relationship

with a firm” (Gutpa & Zeithaml, 2005, p. 13). From these calculations,

companies can make educated decisions about who they should direct their

marketing campaigns to and who they should not waste their money on.

It is particularly important to satisfy valuable customers because attracting

new customers, on average, costs five to eight times more than retaining old

ones (Cacioppo, 2000). Many executives are familiar with this, which was

revealed by a survey conducted by Forrester Research Inc. that showed the

number of companies focusing on customer retention has nearly doubled in

the past year. Furthermore, studies have found that greater customer

satisfaction leads to significant increases in a firm’s market value. For

example, Anderson, Fornell, and Mazvancheryl (2004) conducted research

with N=200 of the Fortune 500 companies across 40 industries and

discovered that a 1% improvement in satisfaction resulted in a $275 million

increase in the firm’s value (as cited in Gutpa & Zeithaml, 2005, p. 16).

Anderson and Mittal (2000) conducted a similar study with an N=125

Swedish firms and the Swedish Customer Satisfaction Barometer (SCSB),

which is comparable to the American Customer Satisfaction Index (ACSI).

42

They found that a 1% increase in customer satisfaction resulted in a 2.37%

increase in ROI (as cited in Gutpa & Zeithaml, 2005, p. 16). Clearly, there is

a direct correlation between customer satisfaction and financial outcomes.

For this reason, it is important understand customer metrics and integrate

them into strategy planning.

It’s Not All Black and White

There are some customer “watch points” that cannot be easily quantified,

but should be monitored by companies to get a broad understanding of their

customer base. As defined by the Word of Mouth Marketing Association

(WOMMA), WOM marketing is “giving people a reason to talk about your

products and services, and making it easier for that conversation to take

place. It is the art and science of building active, mutually-beneficial

consumer-to-consumer, and consumer-to-marketer communications.”

(2007).

One example is WOM marketing, which includes other phenomena such as:

going viral, product buzz, community building, and cause marketing. The

nature of this kind of marketing makes it difficult to monitor. Yes, there are

tools available for social media monitoring such as Techridgy, Tweetbeep

and a host of free and for pay social media monitoring services, however,

none are comprehensive. Therefore, many organizations use a variety of

tools and manual processes for tracking social media buzz.

Although WOM marketing dates back to the birth of business, marketers

are now beginning to see the benefits of harnessing and exploiting it within

the social media arena. As popular social media outlets continue to spread,

the scope of this job is broadening. WOM now not only includes audible

conversation, but emails, blogs, tweets, SMS messages, podcasts and other

venues. However, companies can use advanced technology to track what

people are saying. The bigger problem is managing the outcomes of the

WOM and developing systems to use the information strategically within the

organization to inform innovation, increase customer satisfaction, identify

brand evangelists, and manage sales.

43

Organizations can take a variety of steps to use the information they receive

via social media monitoring for the benefit of the bottom line. This entails

four basic tasks7:

1. Educating consumers about the firm’s products and services

2. Identifying like-minded consumers and providing an accessible

medium for them to openly communicate and share information

3. Observing and analyzing how, where, and when information and

opinions are being shared

4. Listening to supporters, detractors, and neutrals and responding

promptly and appropriately

In summation, businesses need to monitor their brand. They should track

upswings and downturns in customer behavior and explore how consumers

perceive their brand both before and after the launch of marketing

campaigns. Companies need to identify the most powerful influences on

their market. This all relates to the concept of satisfying your customers.

Before you can please your customers, you have to know who your

customers are and what they are saying. With more people plugging into

the 21st century and more online communities emerging, the input into

companies’ customer base is exponentially increasing. If monitored

effectively, this input can become a company’s most valuable source of

customer feedback. In addition, if used appropriately, a company can satisfy

more customers and prosper from the increased business.

7 [Online] Available: http://womma.org/. Date of Accession: June 30, 2009.

44

Operations Metrics

“Operational Efficiency is what occurs when the right combination of

people, processes, and technology come together to enhance the

productivity and value of any business operation, while driving down

the cost of routine operations to a desired level. The end result is

that resources previously needed to manage operational tasks can be

redirected to new, high value initiatives that bring additional

capabilities to the organization.”

www.ensynch.com/sp_operational_efficiency.aspx

Operations metrics are measures of the effectiveness and efficiency of a

business’ processes. In other words, how fast does a business accomplish its

objectives, how much human and equity capital was required to accomplish

these tasks, and how successful was the business in producing the intended

results?

Focus on the Day-to-Day

A business’ operations are the daily activities it must accomplish to achieve

broader tactical and strategic plans. It is important to track operations

because it is through operations that firms generate value. Monitoring

operations is a three-step process. It involves tracking the resources needed

for each operation, the output of each operation, and the operation itself. As

a result, there should be three distinct categories of operations metrics:

Input, Output, and Processing.

Businesses should strive to minimize input, maximize output, and expedite

processing. In order to accomplish this, firms first need data that show them

how they are currently operating. Then they should create reasonable

benchmarks. When operational adjustments are made in the hope of

45

reaching these target values, firms should track the appropriate metrics on

a continuous basis.

These practices apply to all businesses, regardless of whether their

operations are conducted in a brick-and-mortar setting or online as an

ecommerce firm.

The following is a partial list of operational metrics:

Input

1. Cost of resources (includes human capital)

2. Resource availability

3. Resource optimization

4. Market and consumer research spending

Processing

1. Time duration of process

2. Number of people required for the process

3. Operating margin (operating income/total revenue)

Output

1. What kind of attention is your product generating (#tweets, posts,

blogs, digs, etc?)

2. (for physical products) sales volume produced in set period

It’s What You Do With What You Have

Operations have always been and will continue to be an organization’s focus

in its business strategies and benchmarking. This is because the purpose of

any business is to generate value for consumers, and value is not produced

by people or machines alone, but by the actions of employees and the

operations of machines.

46

Significant advances in the field of operations over several decades have

been made regarding speed and efficiency. Firms still need people and

machines to operate, but fewer people are taking less time and fewer

resources to accomplish the same tasks.

The introduction of social media communities has enabled consumers to

become a businesses’ most valuable marketing tools. Many companies have

integrated some form of “generation-c” marketing into their grand strategy

because it requires minimal funding and it gets potential customers

involved with their company. In terms of operational efficiency, customers

are helping marketing departments accomplish their goals of: increased

exposure, generating awareness, piquing interest, and affirming the

company’s reputation; all with smaller budgets and fewer employees. Online

marketing spreads like wildfires with the potential for unlimited growth of

the marketing message’s exposure and influence.

All a marketing department needs to do is light the match and let the rest

spread naturally (maybe adding some lighter fluid to rekindle the flame).

This “match” could be creating a blog or social community site, blasting a

tweet, or posting a creative podcast or video.

A popular example of the aforementioned viral marketing technique is

Blendtec’s “Will It Blend?” campaign. In the show, Tom Dickson, the

founder of Blendtec, attempts to blend an assortment of items to accentuate

the power of his blenders. His first attempt included a box of matches, and

since then he has worked with golf balls, cell phones, hockey pucks, Barbie

dolls, iPods, and many other items. Before the series of infomercials was

launched in 2006, Blendtec was an unknown company in an oversaturated

industry. For most people, all blenders are the same. The trick for Blentec

was getting consumers to distinguish its blenders so that consumers would

care enough to buy its blenders as opposed to the hundreds of other

available blenders in stores.

What is remarkable about Blendtec’s success story is that its marketing

budget was about fifty dollars. Interestingly, the most expensive part of

each episode was often the product to be blended. Given these limited

resources, George Wright, the marketing manager of Blendtec, epitomizes

operational efficiency. Rather than spend money the company did not have

47

on commercials that would get lost in television’s advertising clutter, he

bought WillItBlend.com and produced innovative movies he thought (and

hoped) people would want to talk about.

Not only has the online marketing campaign increased sales 700%, it

inspired the creation of “Will It Blend?” merchandising approach. The

additional merchandise (e.g., shirts and gadgets) produce revenue, but

more importantly, they further promote the company and its products.

Moreover, with 65 million views on YouTube and 120 million views on

WillItBlend.com, Blendtec has gotten a lot of media coverage and buzz both

nationally and internationally.

Examining the three lists above Blendtec would excel in all operational

metric categories.

Cost of resources: $50 and staff time

Resource availability: can blend whatever is easily attainable

Market and consumer research spending: follow the market trend

and let people talk about your product

Attention generated: international buzz, 65 million views on

YouTube, media coverage (Today Show, Food Network, History

Channel, Discovery Channel, Tonight Show), print magazine (Wired),

mentioned in Congress, Blogs posted (Forbes, NYTimes,

BusinessWeek)

What is most impressive, as stated by Wright in his keynote address in

2008, is that all of the operational advantages were generated “on a shoe

string budget.” Using the most basic operational efficiency metric, output

divided by input (all of the above metrics can be summarized into these two

categories), we see that the numerator is significantly larger than the

denominator. In other words, Blendtec has found a winning formula for

accomplishing its marketing objectives quickly, with minimal resources, and

with a high rate of success.

48

Social Media Strategy Requires New Business ProcessesStrapping new tools onto old processes is a common problem when

enterprises start using and measuring social media. Enterprise Social

Media often requires a process integration effort to harvest online

community and collaboration because the introduction of social media is

likely to change the way a company does business.

Take for example a client-focused online community, a private area for say

10,000 of your key clients and prospects. You create a community and

launch content, user generated content opportunities, forums, polls, etc. all

the usual suspects. You spend 6 months focused on this beautiful thing, it

launches, clients and prospects love it everyone is thrilled. This is a good

thing.

Now, the typical enterprise is not stupid. They rose to be a sizable

organization for a good reason! Yet, somehow, because new media is, well

new, companies often don't know what to do with the assets created by the

social media. Of course, they are celebrated, touted as valuable, and maybe

a few good case studies are written about how social media was able to help

support a conference business by bringing in additional enterprise

attendees. Maybe it saved a critical client relationship, but often the

integration-point between social media initiatives and business process are

not well crafted in support of each other. They should be since it is likely

the reason the social media project was launched in the first place was to

support operational outcomes, correct?

Examine where the business process gaps are within sales, marketing, and

product development. Also examine your social media efforts with a critical

eye. Link the two processes, and create repeated and repeatable measures

so they can support each other. Find ways to make maximum use of the

data from and outcomes of social media throughout your organization. It's

just a matter of time before "new media" loses it "new" luster and you will

be ahead of the curve if you build in business process alignment now.

49

The Sum of the Parts

There is an art and a science to measuring social media programs efficacy,

and in the end, you become what you measure. While virtually anything is

measurable, the art is really in creating an effective strategy to accomplish

the business goals you endeavor to achieve.

Without an effective plan that clearly outlines key goals, the operations for

achievement, staffing needs, and a clear risk and mitigation strategy, it

doesn’t really matter what you measure because the process to get their

will likely be random and based on serendipity. Thus, we encourage you to

think carefully about what you hope to achieve through social media

programs, choose judiciously from the buffet of goals laid out from the

various stakeholders within the organization, and focus clearly on the

tactical operations to get there.

The devil, as with most programs, is in the details and too often social

media efforts become like peewee soccer games where all players run at the

ball without any mind to their strategic role on the team. With clear goals

and efficient execution, the measurement of social media campaigns is

exciting and the fruits of a well thought out social media program are your

labors coming to life!

50