Our objective as marketers is to get a real return on our marketing spend. We want to get people to buy more, for more, for longer and to tell their friends about our company. This translates to positive ROI.
Sadly our marketing spend doesn’t always generate a positive return, and often the social media gurus are the worst culprits.
Lets look at the concept of Facebook Likes/Fans. What’s the value of a Facebook Like?
The Customer Economics of Facebook Likes
What is the ROI on each of your Facebook Likes? All you need to do is work out the cost of every Like you’ve generated and divide that by the return you receive on every Like. Great! There’s one catch though. Don’t assume that you’ll get a return on every Like! Why?
A Like is not a Love.
Lets look at this for a moment. How did you attract your Fans? Normally, I would hazard a guess, through one or more of the following means:
- you asked them to Like your advert
- you offered them the chance to WIN something in your competition
- you gave them access to a promotional offer IF they Liked your page
So the reality is that the Fans on your Facebook page will be a mixture of people that are either loyal to your brand, or neutral, or disloyal and only wanting the specials and/or freebies you’re offering.
Should you not be finding out more about your Fans’ loyalty to your company?
How To Turn Like into Love
The Net Promoter classifies your customers into three categories. These categories are defined by asking your customer the question: “Would you recommend product or brand to your friends or colleagues”.
Using this question the Net Promoter classifies your customers as:
- Promoters - loyal enthusiasts who will keep buying and refer others, fuelling growth
- Passives - satisfied but unenthusiastic people who are vulnerable to competitive offerings
- Detractors - unhappy customers who impede your growth and damage your brand through negative word of mouth and other means
The Net Promoter Score is calculated by subtracting the percentage of detractors from the percentage of promoters. Using this formula, it is very easy to have a negative or only marginally positive score. Highly effective, referrable companies have scores of 60-80%. What’s your score? Does it matter? Lets take a look.
Promoters are valuable and will fuel your growth
The 5 main benefits of customers who are promoters of your company:
- Retention rate: detractor customers have higher defection rates, so their period of loyalty is much shorter than that of supporters. And we know that it’s more costly to acquire customers than it is to retain them.
- Margins: Supporters spend more money with your company and are less price-sensitive because they feel they’re getting good value. By contrast, detractors are more price-sensitive and yield lower margins.
- Annual spend: Promoters quickly increase their spend as they consolidate their expenditure on suppliers they support and favour. Your share of wallet increases as promoters upgrade to higher priced products and respond to cross-selling promotions.
- Cost-efficiencies: Your detractors complain more often, consuming more customer support resources. Customer acquisition costs are also lower for supporters due to the longer duration of tenure and higher referrals. Promoters also tend to support others by getting involved, answering questions etc, resulting in lower support costs
- Word of mouth: Consider the number of customers that became customers because they were referred to your company by a referrer. Think of the customer acquisition costs you saved by acquiring these customers by not having to advertise to them.
Detractors impede your growth, through:
- negative word of mouth
- cost to service
- defection to competitors
So, back to the question:
What’s your Referral Score? It matters.
The Net Promoter is very popular in the US, with many of the Fortune 500 companies on it, including Nokia, eBay, Hertz, Lego, Charles Schwab, Nike, Google, Apple, Adobe, Verizon, Dell and American Express and many others.
It’s popular because there is a proven strong correlation between the customer referability and the growth experienced by the company.
At Brandsocial we’ve developed the Referral Number, which is effectively a ‘social’ Referral Score. Consumers (your customers) are engaged through the Rate Your Brand Facebook app to give their opinion on different brands. We’ve measured the Referral Number of 400+ major brands in South Africa.
Summary – Gear for Growth
Don’t assume your Likes are Loves. Measure their loyalty to your company. Find out if they’re Promoters, Passives, or Detractors. From that point you can more accurately calculate the ROI on your investment in your Facebook page.
More importantly, you can experience massive growth through measurement of your company’s referrability (measured by tracking your Referral Number). Increase this metric consistently and you will experience massive growth and power past your competitors.
About Michael Cowen