March 24, 2009

The Rational of Irrational Social Media KPIs

Irrational economic decisions are made all the time in order to get something now, that will really cost us more in the long run than the value it gives us right away. Theories on irrational economic decisions are quite interesting when discussing social media KPIs as the basis of recommendation, word-of-mouth marketing, which is the basis of social media marketing, is really quite irrational in itself.

It is all about creating an artificial value that is placed on top of an actual value. I feel I need an example for this one.

The example of the Red ball
Imagine a red ball. It is spherical and red. Now imagine another red ball. It is spherical and red. Which ball is worth the most?

Ball #1

Ball #1

Ball #2

Ball #2

Well. You will probably reply that they are worth an equal amount, as they look the same.

Now imagine that your best friend tells you that ball number 2 is the most valuable one. Are you still as sure? Now, given that your friend haven’t got abilities that the rest of us lack such as x-ray vision or special ball expertise, there is no rational reason for you to start agreing with him. Only your belief and trust in your friend, change the otherwise irrational belief that ball number 2 is the most valuable one into a rational belief.

You have a history with your friends. Perhaps your friend has been right before and so he/she is probably right this time too.

The mindset of groups of people is irrational
It is considerations such as the above example that needs to be taken into account when talking about how to work with social media. Especially when you are talking about marketing through these channels. You have to gain trust in order to be able to give advice on choices between similar products and services. Hey, you actually have to start being good at what you do… DOH!!

Well… actually you don’t. You just need enough people saying that you do your job, or produce a magic product. It doesn’t hurt if you do, but it is not a necessity. What is important however is that you can make believe that you do. Just as in other situations with brands. If you’ve got a brand you can sell a product expensively that would otherwise be worth next to nothing. That is what a brand does. It is not based upon product quality but on self fullfillment and perceived utility.

Now, what does this have to do with KPIs for Social Media?
Well it has everything to do with Social Media and KPIs as your Key Performance Indicator is not the amount of sales you gain from direct social media traffic, but it is the influence you can exert on your followers, friends and diggers. With good hearted or malicious intentions, this is what you need ways to measure in order to know how you can make people buy the products and services you offer with the highest margins. Increased trust –> Increased influence –> increased perceived utility –> increased dollars in wallet.

So how do we put metrics on influence… well… that needs a post all by itself… and I am not quite done yet with that one all though the theory part of it is written… I need stats to back it up. 🙂

Now you might say; “Well Jesper, this is not a How-To post”… well in a way it is as it is important to understand the building blocks leading to my conclusion. My first part was about the time optimum. This post is about irrational decision making. Eventually it will boil down into both on site and off site metrics that can actually be measured as indicators on how you are performing with regards to your key goals.

//Jesper

2 Comments
  • Mika, March 25, 2009 Reply

    When measuring any sort of perceived value it is always better to use graphical tools to represent customer opinion. Use a common grid chart where each opinion starts at 0 going out to 5 (or whatever the max value is) insert the core values of the brand at each axis, have the customer rate each value between 0 (not true) and 5 (100% true), create an area between the selected points. The larger the area - the better the communication is working.

    /M

    At least that's how

  • Jesper Åström, March 25, 2009 Reply

    Yes. When working with surveys I completely agree with you and this should be a part of the constant evaluation when trying to improve brand position. However, what I am looking for is a way to find indicators of increase or decrease in brand value as a result of interaction through social media.

    Just as a buy is a way to say that the percieved utility of the buy was greater than the work effort to perform the buy, I am sure we can find similar success events outside and on the website that can indicate whether or not we are moving in the right direction.

    If we find such indicators, we will be able to adjust our communication so that it fits the respecitve audience, product or service.


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