Consumer Influence Has Grown: Measuring Its Meaning Has Not

Business gets that the web generally and social media in particular may be changing how consumers view the products and services they offer. In today's media-saturated universe everyone is an expert, each of whom receives some degree of recognition but all of whom have to fight for attention, whether they have credibility, fame or no.

The challenge is that there has been no agreement on how to measure influence and that even if such agreement were reached, what it would mean.Existing methodologies cull out data that are aggregated into statistical models that purport to reflect consumer impact or influence. The problem is that no two systems agree entirely on the components, the methods - or the meaning.

Even in a reviving economy, a sharper eye is being cast on expenses, if only because executive compensation is so frequently tied to either margins or stock price performance and are therefore based on aggressive cost management. Without the ability to conclusively demonstrate a causal relationship with outcomes like increased sales and profitability, operational and marketing managers are left wondering how to invest their dearly won and closely held resources.

Context is important, as the following article explains. This means that broad measures must capture easily understood impacts on outcomes that are common across companies, industries and global economic sectors. Such metrics must therefore reflect not only the nature of influence within the network or eco-system within which it is being calculated but must also be scalable so as to impart broader meaning as the pieces are aggregated up.

With all of its failings, modern accounting is @500 years old. It probably took @400 years to achieve some level of global agreement. One would assume that with all we know and with the power of the tools, technology and understanding at our fingertips, this latest iteration would not take quite that long. But then there is no gainsaying the desre of humans to seek advantage by whatever measure necessary. JL

Vijay Sundaram comments in Advertising Age:

The power of consumers to influence each other when making purchase decisions is touted as one of biggest benefits of social media in marketing strategies. Consumer reviews, recommendations, referrals and other advice are becoming de rigueur in social-marketing programs.

The conundrum is how to measure consumer influence and what to do with it.
This is where many approaches run off the rails.

Many companies, such as Klout and Kred, score individuals against size and participation in their social networks (typically on Facebook and Twitter), and then add esoteric ingredients like Wikipedia entries, comment frequency and other social criteria. The idea is to arrive at a magic number for each individual that captures her influence. But does it? We think not.

Metrics used to capture influence must be ones well understood and accepted by marketers -- such as product awareness, brand engagement, trial and purchase. But most social-influence metrics use inventions such as Likes that convey little. And, unlike digital programs that measure actions such as open-rates and click-rates, social influence metrics are rarely based on measurements of causal behavior.

Influence depends on context. A young mother may likely know other young mothers, hence may impact their decisions on baby products and schools, yet have no influence over their financial choices. A universal influence metric for such an individual doesn't capture this. Similarly, a high score doesn't translate to commercial impact. President Obama ranks among the top five Klout scores, but that doesn't translate into anything meaningful for any product, service, or brand.

Another weakness of current approaches is that they fail to find creative ways to identify, engage and integrate influencers into brand initiatives like promotions, advocacy, market/concept testing and retention programs. Influence and social information get wasted by not being integrated with other consumer databases that business already track and use.

What's the alternative?

One way is to integrate social referrals into marketing programs focused on customer acquisition and retention. The impact of social engagement can be precisely measured and attributed against relevant acquisition and conversion metrics. Some market examples:

•AT&T has institutionalized a referral program for all its product suites that awards promotion cards, so influencers can be identified and then targeted.

•Marriott ties referrals from customers into a rewards (loyalty) program, by automatically awarding bonus points and letting customers track it themselves.

•Large CPG companies like Sara Lee, Unilever and others use social referrals to amplify their promotions programs by getting consumers to share coupons -- driving additional awareness and conversion.

•ING Brokerage (now Capital One) tracks referrals for its customer acquisition program to study how customers are being influenced.

A big difference is that these approaches measure actual, rather than presumed consumer influence. They also present opportunities for innovation:

•Influence is measured against actual marketing metrics like impressions, clicks and conversions, rather than trumped-up social metrics.

•Impact is measured against specific program objectives: such as the number of new membership signups.

•Influence scores can be calculated to uncover the biggest advocates.

•Information on the social influence of consumers can be integrated with CRM data (already in brand databases), improving targeting and engagement for future programs.
Influence measured through direct observation of advocacy on behalf of a specific brand shows consumers' true commercial clout.