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MANAGEMENT

The fickle value of friendship


By Tim Bradshaw Published: March 30 2011 19:48 | Last updated: March 30 2011 19:48

Mission control: PepsiCos glass-walled office, where staff monitor social media activity on Gatorade, its sports drink

In a glass box in the middle of a PepsiCo marketing department, five people are staring at a huge bank of screens showing a constantly updated river of tweets, likes, praise and damnation from consumers of Gatorade, the companys sports drink. Doing it in a glass room means every single person in the marketing organisation is seeing the insights brought to life in real time. It reminds them how important it is to know the heartbeat of the consumer, says Bonin Bough, global director of digital and social media at PepsiCo. I really feel like it is the future of marketing. A similar scenario is playing out in marketing departments around the world. A survey of members of the World Federation of Advertisers, a grouping of multinational brands, by Millward Brown found that 96 per cent were spending more of their budgets managing Facebook pages, Twitter accounts and other social media, racing to accrue fans, retweets and that elusive but ubiquitous quality: engagement. However, the research also found that few knew why they were doing it half were unsure of the returns they were getting from their efforts, while more than a quarter found the payback was just average or poor. It is only one indication that advertisers attitudes towards social media might be shifting. Brands are still flocking to Facebook and its share of display advertising spending is rising fast but finance directors are questioning the value of accruing thousands of fans and followers. Unlike search-engine advertising, where calculating the net gain or loss from each click is relatively straightforward, demonstrating the return on investment of many social media campaigns is proving a challenge. The hype vessel is at full throttle, and largely without a rudder, says Michael Maoz, an analyst at Gartner, the research company. Social media is like the surgeons scalpel a valuable tool in the right hands but potentially dangerous.

Social media gained ground rapidly in the past few years due in part to the shift in consumer behaviour social networking is now the most popular online activity in the UK, ahead of search or entertainment, while Facebook overtook Google to be the most popular site in the US last year. It has also captured the imagination of marketers because it has been seen as cheap. Now that marketing budgets are rising again advertising spending in the UK, for example, rose 6.9 per cent in 2010, according to the Advertising Association more money is being poured in. It is not hard to find examples of social media having a positive impact on a brand. Starbucks, the coffee chain, says it boosted UK sales of Christmas drinks by 15 per cent last year by inviting its Facebook fans to choose seasonal flavours. But the Starbucks example also reveals that it is not having lots of Facebook friends that counts it is what companies do with them and how they engage them that can translate into increased sales. To be completely up front about it: there is no ROI for any social media programme, says James Whatley, marketing director at 1000heads, the social media agency. However, there is definitely provable ROI for social media programmes that are set up to do something. Its all about setting a clear objective.
Facebook becomes the new company website Many brands are shifting their online presence to Facebook fan pages, in spite of lingering uncertainty around how best to make money from them and the consequent decline in traffic to their own corporate websites. A study by Webtrends, an online analytics company, found that 68 of the Fortune 100 companies saw a year-on-year drop in November 2010. On average, the companies saw a 23 per cent drop in traffic, with those that did not offer online purchasing or transactions seeing the biggest drop. For some, the drop was extreme: 59 per cent for General Motors, 57 per cent for Johnson & Johnson, 33 per cent for General Electric and 28 per cent for Procter & Gamble, according to Compete.com, which tracks online traffic. For some, the slack is more than made up for by Facebook: Coca-Cola records at least 10 times as much traffic to its Facebook page compared with its own website. This shift is likely to be beneficial for the likes of a beverage group, in that it is better able to remind fans of their favourite drink through a social network than through search engines. But for online retailers, travel companies and other transactional sites, search remains more effective than social networks. Figures from Experian Hitwise in the UK show that social networks sent only 16 per cent of their traffic to such sites, while search engines sent 33 per cent of their users to online shops.

Attempts to pin a dollar value on a Facebook fan have largely been abandoned because it varies depending on whether the brands page is trying to sell coffee, cars or simply create a community to monitor for complaints and feedback. Estimates suggest 10-15 per cent of Facebook posts are seen by their intended recipients and clickthrough rates are little better than for traditional banner advertisements fractions of a percentage point. Mr Bough talks about social media being useful for driving experiences for consumers, such as getting fans of Mountain Dew, the soft drink, to suggest new flavours and packaging design. Its about the experience you are creating that reaches the passion of your consumers, he says. Digital is todays language. Now more than ever, this provides the opportunity to create deeper relationships with consumers than we were ever able to before ... Its not experimentation for experimentation sake or digital for digitals sake. He points to the Gatorade Mission Control room. Each of its five operatives represents a different part of the company, such as branding, PR and customer service, which means relevant comments are fed back to the right part of the company. This is the largest unaided focus group you could ever ask for, he says. Other companies, meanwhile, are yielding results with less effort. A recent ranking of social brands by Yomego, a social media agency, put Apple which makes no effort to maintain a presence on Facebook or Twitter in second place, finding it had the highest satisfaction score on the list.

The real value of social media comes not when it is run in isolation by a crack team of supergeeks but when it forms part of a larger strategy, with broader goals than just fans and consumer engagement. According to Ankur Shah, co-founder of Techlightenment, a social media agency and technology provider, companies that run search engine advertising in parallel with social media campaigns are more cost-effective than social media on its own. His company is developing a tool to track how a newsfeed item propagates through Facebook by telling an advertiser when a friend of a friend buys something based on its advertising. Mr Shah admits it is still early days for such technology. At the moment, putting that figure what exactly is the value of a [Facebook] fan is tricky, its vague and its fluffy, he says. If a brand tries to rationalise it, they will get in trouble because those attribution models are not developed yet. Brendan Tansey, UK chief executive of Wunderman, a direct marketing agency, believes the wide range of uses for social media exempts it from the usual online measures of marketing success. Traditional online ROI has always been focused on the click to conversion as this is what online advertising and [pay per click] can achieve, he says. However, social media offer a much broader mix of online consumer interaction. Social media ROI, specifically the return, should therefore not be focused on the conversion alone. Other advertising experts are not sure that is enough. You are looking for the big e word engagement and what that does, but also purchasing or signing up to be part of a loyalty scheme or whatever it happens to be, says David Kershaw, chief executive of M&C Saatchi, the advertising agency. One wants a bit of marriage rather than just engagement.
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