Social Requires Us To Redefine Customer Value


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Calculating customer value is a bit of a hobby horse of mine. Lately I have been mulling over how best to incorporate social media metrics in calculations of customer value. So it was with great interest that I embarked on a project with the Economist Intelligence Unit (EIU) to explore how organizations are adapting to the rise of social media, specifically whether they are rethinking how they determine customer value and how that affects customer engagement strategies.

The resulting report Redefining Customer Value left me disappointed that technology isn’t being leveraged more effectively across the enterprise to prioritize and share information.

On the positive side, we discovered that many organizations are questioning how they account for value. Instead of focusing on revenue or profit associated with an individual or households transactions, organizations are now starting to think about the value of social media “influence” and “collaboration”.

This is a good start but simply calculating influence based on how many people follow you on Twitter, like you on Facebook or re-tweet your message is only the beginning. What you’re really after is an understanding of how many people took action i.e., stopped doing business with you, or bought from you.

Understanding a person’s social reach (multiple orders out), combined with their propensity to share their thoughts is vital in determining customer value.

Technology can help. Social media analytics can identify connections that exist among online consumers and how much conversation flows between an individual and his/her network. When cross-referenced with web traffic or sales data, analytics can then identify if existing customers’ behaviors are influenced or impacted by the sudden velocity of online conversations, assigning average financial values for business won or lost when action was taken.

What is certain is that for some, their social influence will be many times (possibly a factor of over 1,000) the profit they generate through their own transactions – something worth knowing when prioritizing actions or engaging with them.

As for collaborative value, many forget the raving fans that help a company without anyone asking. They may be answering questions in a discussion forum or suggesting improvement ideas for free. Text analytics can identify the frequency/ volumes and then it becomes a relatively simple exercise (if you have good activity costs) to calculate how much it would cost you to employ someone to do the same. In other words, if you upset them and they stopped collaborating, how much would it cost to replicate the same activity?

The EIU research highlighted that marketing and public relations departments are the ones that “get it” when it comes to using social media, but are pretty myopic in that they are assessing for their own purposes rather than how they can use this information to maximize cross business impact … and they are doing so as an experiment – hiring people to follow, filter and engage with these channels and customers. In my opinion, that will be difficult to scale. Zappos talked about the importance of setting clear values and empowering staff to interact (emphasizing the human touch) – that will help, but there is too much data for a human to monitor consistently 24/7.

Unstructured data (text) whether from social media or internal transcripts, is growing at an unprecedented rate. Much of it is noise, particularly micro blogging services such as Twitter, but the ramifications of ignoring it can be dire as the Fedex story and countless others have highlighted.

What’s needed is the ability to automate and track everything (not a sample), filter out the noise, identify what’s important, then route to the most appropriate member of staff (wherever they are in the organization) – in real time.

Technology makes it easier … and it’s available today

Jonathan Hornby
Jonathan currently leads a team of marketers at SAS focused on Business Analytics, Customer Intelligence & Performance Management. He is fascinated with understanding the future and how behavior, culture and communication influence strategic outcomes. He is the author of "Radical Action for Radical Times: Expert Advice for Creating Business Opportunity in Good or Bad Economic Times".


  1. Thank you for such an insightful article. There has not been a definitive study on the “value” of a very influential social media activist that has allowed a service oriented industry to “rate” their audience. is one of the only sites I have found to help put a value on this new “currency” if you will. For me the jury is still out but I am actively seeking the same.
    Please continue your research and let us know if you find or build anything.
    Kind regards,

  2. John – you’re right … and the reason we asked the EIU to research. Klout is very interesting, but doesn’t allow you to map specific conversations to transactions – so it’s missing the value of action. Integrating the klout score with your own data is certainly a good input into the equation.

    Kind regards



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