Further to the discussions on Companies trying to use social networks for CRM, and a series of product/brand related networks springing up on these networking sites, let me try my hand at figuring out the marketing value of a social network.
No. of members in the social network of that brand/product=A
We shall assume that 90 percent of the members on the network are ‘engaged brand customers’,(the remaining 10 percent probably joined the network to source information and may/may not convert).
Average spend of each member per day/month on the said product=B
The average spend on a product will vary on the product nature and purchase frequency and price.
Assuming no price fluctuations in a year,and further assuming C no. of purchases a year, total spend per member=B*C
Hence, total spend of the marketing network=.9A*B*C
Further, considering that each ‘engaged’ member of the network promotes the product to D number of new prospectives,per month,(new members are those who are either new to the product or have not tried the product yet.),the total no. of new prospectives ‘reached’ would be D*12. Further, considering a conversion rate of 25 percent, the total no. of new members who ‘convert’ to customers, would be .25(D*12). These new members would also now contribute to the marketing value of the network, which would hence be
(.9A*B*C) + (.25(D*12)*B*C)
Comments welcome to help me improve the calculation…