Home > Communications 2.0, Marketing 2.0, PR 2.0 > What is the ROI of a conversation?

What is the ROI of a conversation?

October 16, 2010

I hope you all don’t mind if I play in the sand box a bit with a bunch of various thoughts.  How do you measure the value of a conversation or multiple ongoing conversations as citizen engagement?  Do you liken it to the cost per minute …of say a cell phone call?  Or by some other standard? Complicated at best.

Physically engaging, talking online or offline, and then any resulting future actions are all different forms of engagement. Right? Defining various levels of engagement might be a first step.

Although there’s no standard formula quite yet for measuring the ROI of word-of-mouth (WOM) or social marketing, there are some factors to consider.

The seeds have been firmly planted through press coverage, trend reports and media analysis; buzz builders are among us; government, businesses and marketers are all drinking the word-of-mouth Diet Mt. Dew version. In particular, word-of-mouth or citizen engagement has proven to be a valuable way to reach the over-stimulated, ever-changing, often elusive, yet the ready-and-able-to-spend 13 to 25-year-old audience. Media buyers and marketers alike are scrambling to get an aggregated WOM engagement measurement program while it’s hot, but are constantly dealing with one small hiccup.

Nobody is quite sure how much it is valued or what it costs, in resources and time, etc. etc. etc.

“What is the value of a conversation?” is a common and fair question. We do this in the communications industry for example, a discipline marked by numbers and formulas developed to justify media spends so many dollars per column inch.

As 360-degree marketing and communications straddles aggregation of analytics and social behavior, the keepers of the budgetary keys are trying to figure out what to pencil into the value of the elusive word of mouth (WOM) engagement line.

Essentially, online social media listening and offline word of mouth tracking have essentially been two parallel universes.

Similarly, media buying agencies know how to calculate the value of a banner ads, pint column inches, broadcast radio and TV…which in part takes into account the number of eyeballs or ears seeing the ad, whose eyeballs they are, what/where the content is placed.

Is there a standard formula for word-of-mouth? Not yet, but I think we are getting closer in the communications industry.

Methodologies were previously being developed to try to figure out the value of conversations on a CPM basis.  I don’t think that will worked so well. Why? Well how do you measure some of the following components of engaged people based conversations?

Authenticity

Whose word is more valuable — Britney Spears’ or your best friend’s? If one of my colleagues tells me she loved ‘Spanglish,’ but the New York Times tells me it’s more vapid than ‘Daredevil,’ who am I more apt to believe? Depends on your personal frame of reference. The first way to value a word-of-mouth interaction is by considering its relevance to the individual. The more honest, pure and trusted the conversation is, the stronger the impact.  All of these interactions may be valuable, but their interactions are valued differently.

Connectivity

According to research conducted by the Consumer Electronics Association in December 2004, 72 percent of teens wanted what their friends have ( I don’t think that behavior has changed to much over time) So, it’s worth a lot to inspire a conversation between two people who have a lot of friends, isn’t it?

Media buyers ask themselves, if Nike can reach the quarterback of the football team right before practice with a message about a new high-performance cleat, how many banner ads does this equal? Within the word-of-mouth industry, marketers have a range of methods for identifying the most connected, most active, most influential individuals in a group. As an industry, we’re striving to articulate our methods clearly so they can indeed contribute to the valuation of the conversation.

Context

In order for a conversation to make sense, it must be contextually relevant. Think about it, if you’re a teenager hanging out on gaming sites all day long, you’re much more apt to talk to your friends about a new artist with a track in your favorite game than a new sandwich at Burger King. As marketing and communications professional we are trying to place a value on a conversation, it’s vital to consider where, how and for how long the conversation is taking place. The conversation over time. Are people mentioning the product in passing or raving about it in their blogs? Are they in an environment where a purchasing decision is top-of-mind? Is the content consistent with the context?  How long does the context of a message last?

Medium

If the communicator is the same, are conversations in person still considered more valuable than conversations taking place over the phone, on blogs, via print, on a social network such as this?  Are people generally more engaging face-to-face than they are on the phone?The same could be said of phone conversations vs. online chats. Email endorsements are great, but are they less of an impact and therefore, less valuable than verbal conversations? Online conversations?

Or, are we just getting mired down in too much blah, blah, blah by trying to figure out the $$$ value of an engaging conversation?

The industry seems to not have developed a formula to value conversations, until maybe just recently.

I can’t tell you to take three parts authenticity, one part connectivity and 1.5 parts content and multiply it by a $30 CPM to figure out your ROI, but at least we’re closer, as an industry, to figuring out what the formula’s ingredients are. As a whole in the communications industry, we need to pay close attention to: authenticity — who is talking to whom and for what reasons, connectivity — how many conversations actually occur, context — why is a given community talking about your product, and lastly, medium — where are these conversations happening?
As a test, right here …right now what I would like to propose to you all to do  is apply some ROI to this entire debate, and the extended word of mouth conversation? How might you do so?

Try to quantify the bottom-line value of each conversation with some new out of the “box” thinking.

Value of time, the number of people engaged and the unique referrals or action over time across all social media channels.

For example if you take a persons “life experience value” with some number across the outreach time-frame with some kind of diminishing generations of time and denote it by a depreciated value over time (Generation 0, Gen 1, Gen 2, Gen 3, Gen 4 value). this takes into consideration one person’s  LTV across a time continuum of some sort…

The inputs potentially would be generated by some rate value (i.e the number of people told from Generation 0 to Generation 1, Generation 1 to Generation 2, etc.), which is a measure of reach, as well as generational “value”/purchase/ad rate (the percentage of people who report engaging, doing, or acting, or purchasing the product or service at each generation). In theory, I could add to those topics an informational link to materials for the public and watch my buzz metric meter to see if people engage and how many over time,, and track the actual link from Bit.ly as well

The value of each conversation, or “conversation value” could calculated by combining the life time value ( in the chatter box examples, over 3 days, 7 days or 30 days…or longer monthly, semi annually, annually) and WOM referrals value and dividing this by the number of conversations with the unique number of people who engaged.

The “net present conversation value” would be then computed by subtracting what ever the costs for the marketing/HR/Outreach initiative  were to develop by both direct labor cost and indirect labor costs from the conversation value figure.

You end up with a dollar amount, like $1.20, for example, and this number means that each time a person had a conversation with a new person as part of a marketing/communication or outreach initiative (whether it’s an advocacy or influencer WOM program, or a more traditional event marketing or sampling program) the company made or got an ROI of  $1.20.

The value could be a negative number as well which means the initiative failed to generate a positive ROI. Companies can track this number over time and work to optimize their initiatives in order to increase their engagement or conversation value.

I am thinking out loud with all of this…and I have loosely followed this subject with some interest since about 2005 or 2006.

And, indeed there are aggregation social media tools now and what is needed is concept is some algorithm or app to do it.

I do believe there are finally a couple of firms out there who are doing just that, which I recently came across.

Even with the growing proliferation of online social media and the “mobile” conversations, an estimated 80 percent of word of mouth still occurs offline….but there does also appear to be a relatively new mobile-enabled media tracking solution that allows real-time measurement of consumer exposure to any type of brand touch-point, including word-of-mouth and traditional media.

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  1. November 1, 2010 at 1:49 am

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