The ROI of Recommendation via WoM and Social Media

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1 What s the ROI of Social Media?

2 The ROI of Recommendation via WoM and Social Media

3 A recommendation from a friend is the most trusted source of information when it comes to making a purchase decision David McCallum, Global Managing Director

4 Word of Mouth is 9X effective as advertising in converting unfavorable or neutral dispositions into positive attitudes. David McCallum, Global Managing Director

5 Recommendation flows through relationships

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7 78% Likely to buy based on recommendation from a friend

8 Brand Advocacy Key driver for business growth

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16 The most recommended company in its category grows 2.5x category average NPS is a registered trademark of Bain & Company, Satmetrix, Inc & Fred Reichheld

17 How to measure advocacy?

18 NET PROMOTER SCORE Research shows that there is a strong correlation between a company s growth rate and the percentage of its customers who are extremely likely to recommend the company to a friend or colleague. NPS is a registered trademark of Bain & Company, Satmetrix, Inc & Fred Reichheld

19 Net Promoter Score How likely are you to recommend us to your friends and family? Net Promoter Score = % Promoters - % Detractors

20 But who uses Net Promoter Score as a metric?

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22 Advocacy equates to success

23 A 12% increase in NPS correlates to a doubling in growth NPS is a registered trademark of Bain & Company, Satmetrix, Inc & Fred Reichheld

24 The Economics of Advocacy

25 Proving the model: a telco case study

26 Proving the model: a telco case study Source: Satmetrix Net Promoter Benchmark B2C Telecommunications: Wireless Industry Segment Number of Companies: 7 ( respondent N = 1,445)

27 Proving the model: a telco case study Objectives: Quantify the impact of loyalty on buyer economics Calculate the economic value of WOM behaviors

28 Wireless Providers: Net Promoter Performance 2007 B2C: Wireless Providers NPS = 14% 5 Year Trend B2C: Telecom: Wireless Promoter 41% Passive 32% B2C: Telecom Detractor 27%

29 NPS and Total Customer Worth TOTAL CUSTOMER WORTH Referral Economics Buyer Economics PROMOTER DETRACTOR NET PROMOTOR Likelihood to Recommend ( 0 to 10 Points ) Customer Experience

30 NPS and Total Customer Worth TOTAL CUSTOMER WORTH Referral Economics Buyer Economics PROMOTER DETRACTOR NET PROMOTOR Likelihood to Recommend ( 0 to 10 Points ) Customer Experience

31 NPS and Total Customer Worth TOTAL CUSTOMER WORTH Referral Economics Buyer Economics PROMOTER DETRACTOR NET PROMOTOR Likelihood to Recommend ( 0 to 10 Points ) Customer Experience

32 Buyer Economics for Wireless Providers Relative Spend for Promoters and Detractors for Wireless Providers

33 Customer Retention for Wireless Providers Tenure for Promoters and Detractors for Wireless Promoters Takeaway: NPS Question can predict churn at an individual level

34 NPS and Total Customer Worth TOTAL CUSTOMER WORTH Referral Economics Buyer Economics PROMOTER DETRACTOR NET PROMOTOR Likelihood to Recommend ( 0 to 10 Points ) Customer Experience

35 NPS and Total Customer Worth TOTAL CUSTOMER WORTH Referral Economics Buyer Economics PROMOTER DETRACTOR NET PROMOTOR Likelihood to Recommend ( 0 to 10 Points ) Customer Experience

36 NPS and Total Customer Worth TOTAL CUSTOMER WORTH Referral Economics Buyer Economics PROMOTER DETRACTOR NET PROMOTOR Likelihood to Recommend ( 0 to 10 Points ) Customer Experience

37 Calculating Total Customer Worth

38 Calculating the value of Positive Recommendation Positively Referred Number Referred Conversion Rate Referral Impact Made a positive referral in the past 12 months ( yes/no )? # positive referrals in the past 12 months? % customers acquired through referrals # customers acquired ( per Promoter) 75% %.559 Referral Impact x Average Overall Spend = Additional Revenue Generated from Promoter Referrals x $1,144 = $639

39 Calculating the value of Negative Recommendation Negatively Referred Number Referred Conversion Rate Referral Impact Made a negative referral in the past 12 months ( yes/no )? # negative referrals in the past 12 months? % customers lost through referrals # customers lost ( per Detractor) 32% % Referral Impact x Average Overall Spend = Additional Revenue Generated from Promoter Referrals x $1,144 = $1,459

40 Referral economics for B2C Wireless Providers Economic Impact of Promoter and Detractor WOM for B2C Wireless Providers Each Promoter s PWOM behaviour brings in an additional in $639 In revenue +$639 Promoter Detractor -$1459 Each Detractor s NWOM behaviour is responsible for $1,459 In lost revenue.

41 Calculating Total Customer Worth for Promoters and Detractors Total Customer Worth for Promoters and Detractors for B2C Wireless Promoters $639 $1145 $1144 $1155 $1784 $2,052 -$1459 -$304

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43 Is ALL Profit Good?

44 Good Profit Bad Profit

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47 Good Profit Earned while also earning positive advocacy

48 Bad Profit Earned while also earning negative advocacy

49 What are they saying about your brand

50 Return On Customer

51 Structuring a Social Media Strategy ADVOCACY AMPLIFICATION ADVOCACY MANAGEMENT ADVOCACY MEASUREMENT

52 U nique S ales P roposition

53 U nique S haring P roposition

54 The Importance of Being Liked

55 The Importance of Being Liked

56 The Importance of Being Liked

57 The Importance of Being Liked

58 1 Billion Buttons

59 Summary

60 Advocacy is King Advocacy is Measurable Good Profits vs Bad Profits Be Shared / Liked

61 Thank You Ian McKee CEO - Vocanic imckee@vocanic.com Blog: Twitter: Facebook: