Monday, November 26, 2012

How Powerful Is Social Media Sentiment Really?

In the church of social media, there is no concept more sacrosanct than that of public consumer sentiment. In the social era, the gold of the realm is no longer the number of impressions made by your ads but the number of impressions created peer to peer. With brand praise and gripes broadcast to hundreds of friends and followers, public opinion has never been more public, so brands must bow before alter of social media sentiment.

That is the party line among social media professionals, but does it stand up to scrutiny? While it may seem heretical to say, I believe there is ample evidence social media sentiment does not matter equally in every industry to every company in every situation. By focusing attention and altering corporate behaviors where it matters, we might better change sentiment in ways that protect and enhance the bottom line.

Before you sharpen your knives, let's define what social media sentiment is and is not. In our highly networked world, we are exposed to more people saying more about brands than ever in the past, but do all those exposures influence purchase decisions as much as we seem to believe? Clearly individual sentiment matters--what you think about a brand affects your own decisions--but how much do the opinions of crowds impact your buying behaviors?

Look at Hostess Brands. The news of the impending death of  Twinkies, Ding Dongs and Ho Hos has been greeted with the sort of wailing and rending of garments usually reserved for the passing of a beloved public figure. But if we all love Hostess so much, how did it come to such an ignoble end? The positive sentiment the public has for Hostess is based on golden-hued memories of childhood, but in an age of "buy local," organic, health consciousness, these positive feelings drove insufficient sales in the harsh, fluorescent reality of the grocery store aisle. (Of course, while the public sentiment for Twinkies, Ding Dongs and Ho Hos will not save Hostess, it may drive the acquisition of the iconic brands.)

In 2010, Harris Interactive released a list of most and least respected companies. Given how networked we were in the intervening two years, it stands to reason that all the buzz shared about the most respected companies would be lifting those stocks while the anger and frustration directed at the least respected firms would be evident in depressed share prices. Of the ten most respected companies, seven are, in fact, on the list of the United States' 50 most profitable corporations, but so are five of the least respected. Moreover, in the last twelve months, the seven publicly traded companies on the 2010 "least respected" list have outperformed the DJIA by more than 200%. The fact so many people dislike these companies and share those feelings online does not seem to dent the financial success of these firms.

Scan the list of the most hated companies in America according to the American Customer Satisfaction Index and you will see that certain industry segments seem immune to the power of consumer sentiment.  Corporations in cable and internet service, banking, power and airlines, many of which are among the most profitable companies in the U.S., dominate that list. How can these industries be continuing to thrive in the social era despite the negative public sentiment? They share some commonalities that help to inoculate them from the dangers of negative sentiment--they are capital intensive, highly regulated industries with limited competition and have both great barriers to entry for new competitors and high switching costs for consumers.

Other factors may also be at play. For example, banks often make the lion share of their money off a small minority of their customers. Bank of America suffered what should have been a damaging blow to its business results due to the wave of negative sentiment associated with Bank Transfer Day, but BoA seemed to emerge not just unscathed but stronger for it. At least part of the reason the bank did so well is that the lowest-profit, highest-cost customers likely were the ones who abandoned BoA for credit unions. In other words, not all sentiment is equal in a vertical where customer contribution to the bottom line is wildly unequal.

Even within some industries, it can be impossible to see the impact of sentiment on business results. Look at the retail vertical, where the ACSI tells us Nordstrom, J.C. Penney and Kohl's enjoy customer satisfaction rates well above average while Walmart not only anchors the bottom of the list by a substantial margin but actually saw a decrease in satisfaction in the prior twelve months. Now look at the stock performance of these retailers in the past year--J.C. Penney is the worst performing stock of the bunch,  Kohl's is one of the few with a stock price down in the past year and Nordstrom's stock performance is in the middle of the pack. Despised Walmart? Its stock is up more in the past year than the three retailers with the strongest customer satisfaction ratings. Many hate shopping at Walmart, but apparently low prices trump sentiment, reputation and customer satisfaction.

Obviously, a year or two of stock performance and social media sentiment data is not a lengthy enough period to evaluate the interrelationship. Strong negative sentiment is not an explosion that tears apart the financial foundation of a company but is more like a river that wears it away over long periods. Nevertheless, some of the most hated companies have been hated for many years and remain solidly in the black--the consistent revenue and profitability of AT&T, Comcast, Walmart and others seem to mock our current obsession with public sentiment.

It is easy to understand why the adoption of social media caused us to worry more about the public sentiment around our brands, but step back and ask yourself what has really changed. People's perceptions of companies such as McDonald's, Walmart or Comcast did not change simply because Facebook was adopted by a billion people on the planet, nor were the attitudes of these brands shrouded in secrecy until Twitter ripped the blinders from our eyes. Did anyone really get on Twitter, see what people are saying and think, "Holy cow--I had no idea people find shopping at Walmart a bit unpleasant, that cable companies offer poor customer service or that McDonald's serves food of dubious health value"?

Let's move this out of the realm of the theoretical and into the real and personal:
Another way to explore this is to look at the companies who earned headlines in the early days of social media for leading the charge to listen and respond to social media sentiment. If public sentiment is as vital as we have been led to believe, it stands to reason the leaders in listening and managing consumer sentiment must be soaring, but instead many are struggling:
  • In December 2010, Dell created waves with a social media command center that would make NORAD blush--and since then the stock is down 33% and the company is now facing layoffs.
  • The first brand I recall launching its own command center to listen and respond to social media sentiment was Gatorade, but while the brand's marketing lifted sales for a while, it has continued to lose market share to Powerade.
  • Remember Twelpforce, Best Buy's all-hands-on-deck push to respond to public comments and questions on Twitter? It launched in mid 2009 to much praise and is still going strong on Twitter, yet since Twelpforce was deployed, Best Buy's stock is down two-thirds while the DJIA has climbed nearly 50%.

Social media sentiment has been elevated to God-like status when really it is more of a minor deity. In most situations, what others are saying does not trump our own personal experiences. Nor does it trump our laziness and the costs of switching (or even our own well-worn habits) in the vast majority of cases. In addition, while public sentiment may be a factor in our purchase decisions, we weigh it against many other important factors such as price, convenience, perception of quality, etc.

Let's face it, we all expect brands to disappoint us some of the time, so individual complaints we see on Twitter or Facebook become part of the fog of social media sentiment--none of us have the brain cells to receive, store, recall and evaluate every gripe we see on social media. Hell, I can barely recall my own gripes! I know I have tweeted complaints about airlines, but I couldn't tell you if I have shared more criticism about United, US Airways or Delta. Like most consumers, I continue to fly the same airlines (and gripe about them) because they have the routes and prices I need.

Even if public sentiment has been overvalued, there are situations where it matters a great deal. Moreover, the way we deal with these situations cannot be to conduct business as usual, wait passively for bad sentiment to bubble to the surface and then try to appease people with responsive tweets and comments. We need to recognize when social media sentiment matters most and alter not just our communications and service strategies but our business practices. For example:
If brands come to realize social media sentiment is not as strong a factor for success as we first thought, how should they react? First, they should not pull away from social, because it is becoming a channel of choice for many consumers. Whether or not public sentiment is as powerful as predicted, individual sentiment still matters, and you can no more ignore consumers tweeting your company as you can ignore their phone calls.

Secondly, as I have shared on this blog many times, social business and peer-to-peer models are changing products and services themselves. Today we are much too focused on how to tweet and post while ignoring how the social era demands changes in the way we conduct business. Brands that ignore the changing nature of the consumer/brand relationship in the social era may find themselves facing the same fate as those companies who ignored it in the web era. Ask Borders, Kodak, Blockbuster and others how that worked out for them.

I had difficulty writing this blog post, because it was hard for me as a social media professional to wrap my head around the idea that social media sentiment may be overvalued. In addition, I knew (and hoped) that this blog post would be subject to criticism among my peers. What do you think?  Am I missing key data points and concepts that tie social media sentiment to business results? Or are there additional instances when social media sentiment becomes more vital to brands?  Your input would be greatly appreciated.

Tuesday, November 20, 2012

Book Review: The Power Formula for LinkedIn Success

I recently was provided an evaluation copy of The Power Formula for LinkedIn Success by Wayne Breitbarth. I expected to find the book most helpful for those who are not yet fully engaged on LinkedIn, and that is, in fact, the case. That said, the book encouraged me--an experienced social media professional--to consider some LinkedIn features and applications more deeply and make a few tweaks to my own LinkedIn profile. I think most professionals will find something helpful to take away from this book.

One of the most interesting parts of the book is the way it explores who you should or should not connect with on LinkedIn. I do it wrong, according to Breitbarth. My strategy has been to connect with people on LinkedIn who I have met professionally either online or in real life; in this way, LinkedIn acts as my cloud-based address book.

"LinkedIn Success" posits that connecting with people you know weakly has a cost, diminishing the value of the network; instead, it recommends you connect only with the people you trust and would recommend. In this way, you can have confidence in your ability make trusted recommendations and introductions between any of your connections, and (of course) you hope the same is true for all of your connections' connections.

Breitbarth does allow for other use cases, such as recruiters who can benefit from amassing tens of thousands of professional connections. After reading "LinkedIn Success," my impression of my own connecting strategy did not change that much, because I believe different strategies can work for different people. Even though I am not altering my approach to LinkedIn, I appreciate that "LinkedIn Success" encouraged me to consider my goals and strategies, and I think others may get value from the book's thoughtful approach to this topic.

The book primarily focuses on the value of building out your professional profile as completely as possible. It contains many good ideas, such as taking the time to review the profiles of your competitors for good (and bad) ideas. "LinkedIn Success" also advises you to take full advantage of every available character in the summary section and offers guidance on the appropriate tone and format.

Breitbarth also encourages people to do something that many find difficult--ask for recommendations. He says, "If you are hesitant to go about getting recommendations, let me ask you this question: Aren't you any good?" If you are--and trust me, you are--then your LinkedIn profile should convey this through the testimonials of others.

After reading "LinkedIn Success," I was encouraged to make a few tweaks to my own profile. For example, I had neglected to add the "Events" application to my profile, which is a silly oversight that decreases opportunities to meet others at upcoming events and demonstrate my professional activities at past events. I also added the Box application to my LinkedIn profile as a way of conveying some interesting white papers and documents that I find worthwhile. In short, even though I was pretty darn sure I knew my way around LinkedIn, the book sparked some awareness and action on my part, which I guess says more about the book than any opinion I may convey.

"The Power Formula for LinkedIn Success" has one major shortfall: Despite the fact it is subtitled, "Kick-start Your Business, Brand and Job Search," it gives virtually no advice to brands on how to succeed on LinkedIn.  Page after page is dedicated to the personal profile, the search functions, how to participate in groups and individual preference settings, but very little conveyed in "The Power Formula for LinkedIn Success" will help brands understand how to create value on the platform.  This is a book that may help you polish your social resume, find a job or gain reputation, but it will do little to help your company navigate its way through LinkedIn.

If you are just getting started or have always suspected you are not getting what you should from your personal efforts on LinkedIn, I recommend Breitbarth's book. Heck, even if you feel you are a power user, you may find that "LinkedIn Success" provides you a few more tips to build out your LinkedIn presence.  You can purchase "The Power Formula for LinkedIn Success" for Kindle and paperback on Amazon. 

Monday, November 19, 2012

Book Review: The Social Commerce Handbook

What does a social and digital addict do when the power goes out for seven days (courtesy of Superstorm Sandy)? He goes old school and reads books about social and digital topics. The first of two books that I read during the powerless days following the hurricane was "The Social Commerce Handbook" by Paul Marsden and Paul Chaney. I found it interesting and worthwhile, but lacking in a couple vital ways. (Disclosure: I was provided a free evaluation copy of this book.)

First of all, let me say that I was prepared to hate "The Social Commerce Handbook." It's not that I do not think social media can be and is a platform for commerce; in fact, I've often written (such as here and here) about how social will continue to grow, mature and profoundly change products, services and business models.

My concern was that "The Social Commerce Handbook" would focus on short-term thinking that exploits fans for sales (Post discounts! Track conversions!) rather than on strategies to build value-driving awareness, affinity and advocacy. My worst fears were confirmed from the very first sentence. It is a quote from Gordon Gekko, the reviled, greedy and destructive character from the film, "Wall Street": "It's all about the money, the rest is just conversation." That is not a promising start for a book about commerce in an era of transparency, trust and reciprocity.

Happily, "The Social Commerce Handbook" overcame my bias and a rough start, and I was soon eagerly turning pages. It won me over in several ways, not the least of which is the recurrent mining of research and thought leadership from the past. As technology changes, it can be too easy to get caught up in the new and forget that human nature changes little and slowly. Marsden and Chaney recognize this and reference a wide range of historic research and ideas, including Molière's theories on social transactions, the 1924 Hawthorne Studies,  Robert Cialdini's 1966 "Big Billboard" experiment and how the Deadhead movement began with a subscription insert in the Grateful Dead's 1971 LP, "Skull and Roses."

The authors also make clear from the start that social commerce is not just about marketing to get fans to buy stuff. Marsden and Chaney hit the nail on the head in the introduction when they state, "The big secret to selling with social media is to offer social utility by deploying social technology that helps people solve problems socially and solve social problems." The book continues with this two-prong approach throughout every chapter, which include separate sections on "Commerce Mindset" and "Social Mindset."

Hallmark's "Tell Them"
app on Facebook
Perhaps the best reason to read this book is to spark ideas. Marsden and Chaney share many fine approaches to social media commerce, and while one may not suit you, the next may plant a seed for your brand. Whether it is Derrick Rose's tweets for Power Balance, Walmart's gift recommendation app, Hallmark's "Tell Them" app, event-based shopping clubs like Gilt Group and Rue La La, Widespread Panic's virtual concert, American Express loyalty rewards or the pop-up store for Pamper's diapers, there are plenty of concepts to draw upon in "The Social Commerce Handbook."

The book is not perfect. Ironically, one of my concerns by the end of the book was the exact opposite of the one I had upon beginning it; not only doesn't the book obsess over ROI, it offers very little by way of business metrics. It is exciting to hear that Nestle piloted a digital "Marketplatz" to sell 72 brands in Germany, but the case study does not conclude with how this project raised awareness and sales; instead, the authors note, "The Nestle Marketplatz--if managed well--will drive footfall and e-commerce traffic." Optimistic and incomplete case studies such as this are repeated time and again; Marsden and Chaney write about many brand programs that sound good, but lacking long-term brand metrics or short-term sales results, it is impossible to tell if these ideas are good.

Another concern I had with "The Social Commerce Handbook" is that my enthusiasm peaked halfway through and started diminishing with each subsequent chapter. The reason is that there is an awful lot of redundancy in the book's 168 pages. In one chapter, using Kim Kardashian to tweet about shoes is "arming yourself with authority," while in the next chapter a Chicago Bull posting for a brand is "Like and be loved." Group selling gets mention in virtually every other chapter--it is an example of "Interest pays," "Incentive Intelligently," "Shopping first, social second" and "Selling to niche markets." By the time I was two-thirds of the way through "The Social Commerce Handbook," I had the impression the book had already conveyed all the ideas it was going to offer (and I was largely correct.)

The last concern is that authors do not explore risks and risk mitigation in any depth. While Marsden and Chaney have much to say about motivating and compensating people to tell friends about brands and purchases, I saw no mention of FTC guidelines around disclosure of material relationships. And while the use of experts and celebrities are mentioned frequently, the authors omit any discussion of the potential risks of tapping the personal brands of the famous. After numerous missteps including Lance Armstrong's doping scandal and Gilbert Gottfried's sickening tweets, it is an oversight to omit any consideration of the dangers of celebrity endorsements and spokespeople. "The Social Commerce Handbook" could be a much more helpful read if the authors defined the potential risks of each concept and shared steps to reduce or eliminate these risks.

While "The Social Commerce Handbook" has some shortcomings, the book does offer a valuable perspective on the research, psychology and utility of social business to today's brands. It may not guide you the entire way from concept to execution to measurement, but I believe readers will find themselves jotting ideas and sparking dialog with peers while reading this book. I look forward to future books from Marsden and Chaney as the social commerce experience continues to grow and mature.

 You can purchase this book for Kindle and in paperback on Amazon.

Monday, November 5, 2012

The Complete Facebook Success Formula Every Marketer Should Know

At the f8 Developer Conference in April 2010, two Facebook engineers shared Facebook's EdgeRank formula, and since then most marketers have misinterpreted how to apply it to their own brand challenges. Simply put, this is Facebook's equation, not your brand's. This formula reveals how Facebook determines what will appear in users' newsfeeds, but it does not tell your brand what is needed to drive business success on Facebook.

What Facebook shared about EdgeRank is important for marketers to understand, but it is merely a portion of the Facebook brand success formula. It is a little like the owner's manual for your car, which is helpful for learning how to operate the vehicle but does not tell you how to successfully, safely and efficiently get from point A to point B. Marketers must recognize EdgeRank, both for what it is and what it is not.

What is EdgeRank? 

EdgeRank is Facebook's secret sauce. It is designed to make the site as useful, engaging and sticky as possible. Its purpose is not to enhance marketers' experiences but users' (which ultimately benefits Facebook itself with more traffic and ad revenue, of course.)

You are probably aware that when you sign on to Facebook, your newsfeed is not simply a stream of every friend's and brand's posts in reverse chronological order. Facebook knows that you would not find a raw stream of posts very interesting--you are fonder of some friends than others, and not everything your friends post is equally appealing-- and so Facebook filters your newsfeed. Based on your past interactions on the platform, Facebook knows who and what you find most relevant, and it applies this knowledge to make your newsfeed as interesting as possible. (For the record, I think Facebook's current EdgeRank formula does a good job, but it has a long way to go before its filtering feels as natural and accurate as it should for users.)

To understand how EdgeRank works, you first must realize that everything that occurs on Facebook is an "edge" in the parlance of Facebook. Which of your friends' edges you see in your newsfeed and which ones Facebook omits depend on three factors:

Ue: Affinity between user and edge creator: Facebook monitors how much you interact with friends and brands. Those people and brands that earn your engagement--liking, sharing, commenting and so on--are more likely to appear in your newsfeed. The people and brands you tend to ignore eventually disappear because Facebook (correctly) interprets that you simply do not find their content interesting.

Right off the bat, you can see the enormous challenge for brands: How can a brand possibly be as interesting to a user as his or her own friends? You can see this challenge demonstrated within your own personal newsfeed--you are presented with posts made by your friends much more often than from brands you have liked. In fact, many of the brands you have "liked" never appear in your newsfeed. This is not (just) Facebook's way to encourage brands to use paid sponsored posts to increase visibility; instead, it is the reality of your own Facebook habits. You find the people in your life more interesting than brands, and Facebook recognizes and reflects your authentic affinity.

We: Weight for this edge: Every one of us reacts with different types of content differently--you may love videos, I may enjoy photos and someone else may prefer text. This means each content type has a different "weight" for each user. In addition, as an "edge" gains comments and likes, it gains more "weight;" thus, as others interact with an edge, it increases the likelihood that edge will appear in other people's newsfeeds. The more your brand posts match topics and content type to users' interests, the greater the weight of your content and the higher the likelihood your content will appear in fans' newsfeeds.

De: Time decay factor for this edge: The last of Facebook’s EdgeRank attributes is a simple one: The more recent the post, the more likely you are to see it. You do not often launch Facebook and see something posted a week ago. Facebook knows that we are all real-time junkies--if a band is hot, a TV show is great, a meme is growing or our friends found a great party, we must know now!

Facebook's EdgeRank is not rocket science--the more affinity an individual has for your brand, the more interest he or she has for the types of content your brand posts, the more others find your content engaging and the more timely your posts, the greater your brand's chances of being included in a fan's newsfeed. While this all seems obvious, marketers must take note of several vital things about EdgeRank:

  • Facebook does not exist to give your brand the opportunity for free earned media. Its purpose is to give users a great social experience, which may include the brands that authentically earn their attention.
  • The same rules apply to people as to brands. If your brand posts interesting content that gets people engaging, the content is seen in more users' newsfeeds. If not...
  • A brand that fails to engage fans can disappear from fans' newsfeeds. If this happens...
  • Your brand can become invisible on Facebook. Consumers rarely visit brand pages; in fact, Facebook reports that fans are 40 to 150 times more likely to interact with brands on their newsfeeds than going to a brand page. If you disappear from consumers' newsfeeds, you disappear from Facebook.
  • EdgeRank is Facebook's formula for keeping users' newsfeeds as interesting and relevant as possible, but this is far from the entire equation for brand success on Facebook. Two key components for Facebook marketing success are missing, and far too many marketers overlook these.

Missing Facebook Attribute #1: Fans that matter

What is missing? Well the first thing should be evident:  Fans, but not just any fans, the right fans.

Not all fans are created equal, although you would not know this given some of the relatively desperate methods brands use to accumulate "fans." EdgeRank tells us that brands must collect signals of affinity as quickly as possible, so the primary goal in your brand's fan accumulation strategy should not be raw numbers of fans but collecting the right fans--ones that arrive with some level of affinity or immediate potential for affinity.

An interested customer is likely to interact with your brand, which tells Facebook he or she wants to see more from your brand. On the other hand, a disinterested fan fails to interact, resulting in the expulsion of the your brand from the fan's newsfeed.

I have never understood why brands turn to general-interest sweepstakes and contests to earn "likes," for this seems to offer no path to Facebook success.  The theory is that a fan acquired through these means will move up the value ladder--he or she may start as a disinterested prospect, but soon this person will become so enamored with the brand's wonderful content that the individual will rise to prospect, then customer and finally loyal advocate. This is the traditional advertising funnel view of the brand journey, and applying it to Facebook is, in the words of the immortal Joe Biden, "Malarkey!"

Facebook's EdgeRank prevents disinterested prospects from gaining value. A new fan who was seduced by a contest or sweepstakes will see a few posts from your brand, and if they ignore these posts (and they will), your brand is gone. When this happens, your marketing investment will have incremented a number at the top of your fan page but delivered nothing else, least of all a prospect with an opportunity to see your brand's content within his or her newsfeed.

Brands are treating Facebook "likes" as if they are email subscription requests, but EdgeRank tells us this is not an effective strategy. Instead, you must find fans with affinity and keep that affinity to remain part of fans' Facebook experience. The path to greater brand awareness is not to collect disinterested fans and hope your content reaches them, because it won't; instead, brands achieve awareness on Facebook by collecting fans with existing or immediately available affinity and giving them content and interactions they will share with others (either purposely or inadvertently through Facebook's platform.)

In my Facebook success equation, I call this "Fans to the power of Affinity." Affinity does not grow your brand's Facebook success mathematically but exponentially. A fan with zero affinity stands almost no chance of seeing your content; a fan with modest affinity may or may not interact sufficiently to keep your brand present within his or her newsfeed; but a fan with strong existing affinity or the opportunity to gain it immediately can be a regular receiver, engager and sharer of your content.

To affinity and beyond! (Sorry, the Disney fan in me came out there.)

Missing Facebook Attribute #2: Brand Vector

The second component that we must add to Facebook's EdgeRank equation is brand vector. This means that your content and interactions must move people closer to the brand.

Engagement for engagement's sake may get your brand on fans' newsfeeds, but your brand must drive marketing value and not merely be seen. It is not enough to capture attention; you have to capture hearts and minds. If you collect "eyeballs" but fail to change perception or behavior around your brand, you've failed, no matter what your fan count or "talking about this" number says.

Brands have long fallen into the trap of settling for mere likeability and engagement. One of my favorite pre-social-era examples of this is Taco Bell's Chihuahua. For years, Taco Bell ran ads with the popular pup telling people “Yo Quiero Taco Bell.” The dog abruptly disappeared from airwaves because the Chihuahua was more effective at selling T-shirts and plush animals than he was at selling tacos. In the language of the social era, Taco Bell settled for engagement but lacked brand vector.

For a more recent example, look at Progressive's recent social media PR event. Angry customers flooded into Progressive's fan page to protest the company's handling of a claim. Progressive has the most popular fan page in insurance, at least as measured in simple metrics--4.7 million likes and 30,000 people talking about the brand--but despite those amazing numbers, Progressive saw little to no advocacy in the midst of the company's negative PR event. It is easy to see why: Flo posts lots of fun and games, but where is the discussion about risk, protecting families, the value of insurance or why Progressive is worth consideration? There is little brand vector evident in the engagement Flo creates, so Flo is just another popular character. That's great if Progressive produces sitcoms but is of dubious value if Progressive wishes to change awareness, consideration and intent around its financial products.

Here, in its complete form, is the entire Facebook success equation for marketers. Not just Facebook's EdgeRank formula, but also the inclusion of the right fans and the right messaging. What do you think? Have I missed anything? Your comments are welcome and appreciated.