Retailer Daily: Facebook Fans More Valuable Customers
Through a special arrangement, presented here for discussion is a summary
of an article from Retailer Daily, an online publication of Watershed
Publishing.
Whether recommending or using a product themselves, Facebook fans
of a brand provide significantly more value as customers than non-fans, according
to a study from digital consulting firm Syncapse Corp.
The average value a
Facebook fan provides a brand is $136.38, but it can swing to $270.77 on average
for “best” fans or go down to $0 in the “worst.” In
the case of Coca-Cola, the “best” case for fan value reaches $316.78,
the average was at $137.84, with some fans providing no value. This value is
based on Syncapse analysis of five factors per fan: product spending, brand
loyalty, propensity to recommend, brand affinity and earned media value.
“This degree of variability in the value of a fan must be a major
consideration in determining how brands address different types of fans in
efforts to move them up the value ladder. In short, the goal must be to reduce
fan variability while moving the average fan value to the active end of the
range,” wrote
Syncapse in its report.
The study analyzed the Facebook interactions of 20
brands: Nokia, BlackBerry, Motorola, Secret, Gillette, Axe, Dove, Victoria’s
Secret, Adidas, Nike, Coca-Cola, Oreo, Skittles, Nutella, Red Bull, Pringles,
Playstation, Xbox, Starbucks and McDonald’s.
Consumers on
average spend an additional $71.84 across the twenty brands examined for which
they are fans compared to those who are not fans. McDonald’s
saw the largest variability, with fans spending $310.98 versus $150.39 for
non-fans — a
difference $159.79. Oreo saw the lowest value with a difference of $28.52 between
the groups. Factors influencing these differences may include both product
price and purchase lifecycle, Syncapse said.
Other findings in the study:
- On average, Facebook fans are 28 percent more likely to continue using
a brand than are non-fan consumers. Adidas had the highest variance of loyalty
between fans and non-fans with 42.5 percent of fans indicating a heightened
likelihood of continued product usage. Secret saw the lowest difference in
loyalty, only 15.8 percent between the two groups.
- Overall, 68 percent (on average) of Facebook fans indicated that they are
very likely to recommend a product across the 20 brands. This is contrasted
by 28 percent for non-fans. Gaming brand Playstation led overall Likelihood
To Recommend with 81.4 percent followed by Victoria’s Secret with 79.4
percent.
- Thirty-eight percent of respondents reported that they would likely become
a fan of a brand if they saw a family member or close friend do so. This
influence is slightly reduced to 34 percent if it is a person known through
Facebook rather than a family member.
- Eighty one percent of fans said they feel “connection/empathy” with
the brand, compared to 39 percent of non-fans.
The quantitative research was conducted in conjunction with Hotspex Market Research
and consisted of a 25-minute survey using their online panel. Data was collected
from over 4,000 panelists across North America in June 2010.
Discussion Questions:
Do you think marketers are underestimating or overestimating the value of
Facebook ‘fans’ for a brand? What is the biggest benefit from a brand gaining
Facebook ‘fan’ status? What are the challenges of calculating ROI for Facebook
marketing?
The debate about the value of being “liked” on Facebook and “followed” on Twitter has been raging for months, and there is no consensus. It makes sense that if a consumer connects to a brand on Facebook and/or Twitter, that he will buy your products. The question is: Does he buy more of your products because of those social media connections? Facebook and Twitter would certainly like to have brands believe that this is true. I don’t think that there is enough consistent research to quantify the value. That being said, every consumer-facing company should have a social media strategy.
If the data had any relation to reality, this would be a landmark study. There is very little literature on the relationship between consumer engagement and actual purchasing. We all think there is a relationship, but there is no actual evidence.
The problem this study has is that it asks shoppers to estimate what they spend on the brands in question. While a shopper may know how often they buy a pair of Adidas and about what they cost, how much Coke they consume and what they spend at McDonald’s is unlikely to be even in the general ballpark of reality, based on past research.
So we don’t know if we are undervaluing the impact of social media from this study–but we fans of social media should be encouraged as it looks like a good thing, albeit only directionally rather than quantifiably (at this point).
Much of this study seems self-fulfilling. If a customer has gone to the effort of 1) becoming a fan and then 2) filling out a survey, is it surprising that they spend more, are more likely to recommend, and so on? In the dark ages before Facebook, we called these individuals “core customers.” The real question is whether Facebook and Twitter are driving incremental business and new customers. I don’t see those answers here.
There’s no easy answer here folks.
The only thing a company can do is document their social marketing tactics, record the “transactional pre-cursors”–things such as likes, followers, fans. And then line it up against their sales performance over a specific period of time. If there’s a correlation between increases in the transactional precursors and revenue then you win.
I think what you’ll find is that there may be less of a (fan/revenue) relationship for someone like Porsche than someone Mountain Dew. But all things being equal, increasing fans and positive sentiment over time, should amount to increased revenue.
As the editor of this article, I agree with other posters that the data is interesting but in some respects hard to quantify. Do consumers who go to the trouble of becoming a fan on Facebook already have a predisposition to spend more on a certain brand?
That said, social media is clearly going to become the interactive platform of the future, although whether it will look the same in 5 years as it does today (or if Facebook and Twitter will still be relevant) is anyone’s guess. Retailers need to have some faith that although hard ROI for social media efforts is almost impossible to currently obtain, social media is not an area they can afford to ignore.
If you can correlate customer transactional and behavior data to your Facebook followers as this study apparently did, then the results seem to speak for themselves. You can also be certain that Facebook followers are opted into email or mobile communications, or if not, would like to especially if it’s a step toward targeted, relevant offers. Unfortunately, many retailers organize social media apart from more direct-to-consumer marketing efforts like email and mobile. Cross channel marketing describes a business process retailers are certain to employ to get a handle on a 360 digital view of their customers to inform more effective marketing.
I think Max has hit on the key “chicken or egg” question. Are these “fans” fans because they like the brand and already spend more than the “average” consumer? Or do they spend more because they are fans?
Of course, Facebook wants everybody to think that they are the reason these “fans” buy more. I’m not buying. At best, it seems to me, Facebook enables marketers to identify and reach those consumers who are already loyal consumers of the brand.
Having a Facebook page and using it as a way to communicate with fans of course makes sense. But studies as this seem to be suggesting that there is a cause and effect — that somehow by becoming a fan a consumer is suddenly going to buy more of the product or service, buy more frequently, or give a greater share of purchases in the category to the brand. Hey, if they bother to “like” a brand on Facebook, it’s pretty likely that they are more connected to the brand and already buying more than the typical consumer.
In trying to calculate a value of a fan, we need to be careful. If the marketer uses the Facebook page to continually distribute coupons and make offers to loyal customers who would have purchased even without a special deal (remembering that we have always accepted that part of the definition of a “loyal customer” is that they are willing to pay a premium price to get their favorite brand), then they are reducing, not increasing, the value of those loyal customers.
At the same time, if the marketer is working the page strategically to cause their loyal fans to spread more positive word of mouth and bring more new customers to the brand with them, then certainly those fans have a much higher value to the brand.
I am in agreement with many of my fellow BrainTrust Advisors on this subject. I agree there is not enough data to substantiate a decision if one buys more because of Facebook. What does make good sense is Facebook wants us to think that is the case.
Marketers will continue to learn about the value of Facebook fans–and likely continue to be surprised. Hard to disagree with the support Facebook fans provide to a brand, their interest and engagement is clearly positive. But there has always been a disconnect between what consumers say and what they do. The difference between stated intent and actual purchase can vary by as much as 80%. From focus groups to online surveys, market researchers struggle with validating results through consumer interviews. Facebook and Twitter are a new opportunity to learn about brand fans that will continue to evolve.
I’d go further than others in evaluating this study. It is worthless. It tells me literally nothing, other than the completely obvious fact that “fans” are more engaged with the brand…which is why they become fans.
What companies really need to understand is incrementality. Without knowing what spend is incremental due to any marketing activity, there is no way to quantify ROI.
It is so obvious that someone who fans a page in Facebook would be more into the brand and therefore more valuable. The question is if the value of that consumer increases from what it otherwise would have been because they are engaged in social media interaction. I don’t see this study addressing that.
The survey results seem very limiting to me. And answering an online survey that took 25 minutes seems way beyond what most people would do.
However, there is an opportunity for retailers who have loyalty programs and spending data to do their own studies on “fans” vs “non-fans.” Those results would be much more meaningful.
The research described here indicates that Facebook fans are much more likely to fall in the categories of Best Customers as well as Advocates (those who are the most likely to recommend your brand to their friends and family). This group of customers is a valued asset to the organization and, as of this point, has not been sufficiently leveraged to bring insight to the company.
How can you use these loyal, committed fans? There are several ways that a company can grow their business through communicating with these customers, even though they may only represent a small percentage of the total customer base.
1. You can use those customers to provide insight on product performance, as well as highlight any potential issues that could be addressed proactively by customer service.
2. You can form those customers into a customer advisory panel, which you can move to a private network in order to gain some insight for product development and customer experience.
3. You can conduct referral events in order to acquire additional customers who resemble the best customers that you have on Facebook.
4. You can use the Facebook page as a way to communicate with best customers for such events as private sales and exclusive previews of products.
5. You can survey these customers to gain a better understanding of the most important issues in your customer experience.
In all these ways, and many more, Facebook fans have the ability to provide the company with insight and referrals, as well as to become a leading indicator for both success and potential hurdles. Few companies are leveraging Facebook to this extent at the moment. It will be interesting to see which choose to do so, and what happens to their place in the marketplace after they do.