Measuring Your Consumers’ Worth

The Economist Intelligence Unit recently released a report about how the value of customers is being measured. There are some important implications for businesses, and you can download the full report if you want to dig a bit deeper.

One of my favorite quotes from the report was the following:

…measures of customer value that focus solely on transaction activity capture only a fraction of an individual’s behaviour and potential value.

It’s so true. While we always need to tie metrics and measures of social media back to our business goals (and often the bottom line), there is so much more value to the new social customer than the $29.99 they just spent on your website.

Georgia State University’s Centre for Excellence in Brand and Customer Management (phew, that’s a mouthful), suggests there are four key areas of consumer value:

  1. Monetary value
  2. Referral value
  3. Influence value
  4. Knowledge value

Of these, the most valuable to your organization in the long run may be knowledge value. Your consumers can engage on your behalf or refer their friends for discounts, but isn’t it more valuable to learn how to improve your product offerings?

Perhaps I’ve not been around long enough, but I would suspect that learning how to create products that are more what your consumers want would be more valuable than giving anyone who refers a friend 10% off their next purchase.

Similarly, influence value is not only a hot topic these days, but it’s also increasingly valuable. If you can find those consumers who love your brand and can influence their communities on your behalf, you’ve struck gold!

Again, finding influencers who are willing to be your partner (ideally for free) are much more valuable due to their authenticity as well as due to their connections. I’d take an honest-to-goodness review over a referral offer any day of the week.

Of course, the two values that are the most useful and inherently valuable (for lack of a better term) are the most difficult to measure and quantify accurately.

Do you show knowledge value based on specific ideas or inspirations? How to compare one idea to another? If I give you 10 mediocre ideas, is that the same as one dynamite idea?

Many others have given better explanations of the issues with measuring influence. It’s so subjective and contextual. How do you compare your consumers’ influence value to one another?

And how do you tie all of this back to your business objectives and your bottom line?

I wish I had the answer, but for now unfortunately I think I just have more questions. The Economist study is a good thought-starter, and I’d love to hear where your thoughts are heading.

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  • This is certainly an interesting study and your take on it is, as usual, something that’s gotten me thinking. I like the idea that the most valuable to your organization may be the knowledge value of a consumer, but does that take into account the consumer’s engagement with the organization and its products or services? What would that yield? 

    All of the questions you raised are great and I don’t have the answers to any of them, either. I wish I did… but, like you, I just keep coming up with more questions. But, I suppose that’s the cycle, isn’t it? More answers lead to more questions…

    • I’m glad you enjoyed it, and I’m always glad to give you tricky questions to think about. It’s what happens in my head all day!

      There was a lack of engagement in this study, and I do wonder how we can start to tie that back to bottom-line numbers. If a company will talk to me online, shouldn’t I be more likely to purchase? How do we show that, and how do we tie it together? (See, more questions!)

  • Rebecca, good post thanks for sharing this study with us.  Knowledge value certainly is a very formidable metric to develop and nurture with your customers.  It seems like companies nowadays are identifying and clutching on to their evangelists, further capitalizing on the exponential power of these people to spread the word virally and directly with their peers.  That’s a good thing.

    One thing I wonder is — will the continued mixed reports we are receiving about the economy (some doom, some gloom – but mostly gloom!) cause companies to forgo some of the long term benefits that evangelists can offer as well as their potential ROI for future sales just to concentrate on making profits in the short term?  In other words, as we continue to see our economy underperforming and businesses looking for more ways to bring in revenue, will we see these businesses allocating more time to tried and true methods of revenue generation (sales, more ads, etc.) than new methods that are anecdotally great strategies but still haven’t been around long enough to have a track record that promotes peace of mind for their use?

    • Glad you enjoyed the study. It was a good read. Made me think. 🙂

      That’s a really, really good question, and I wish I had the answer to that one, too! It is possible that companies will be too focused on the short-term ROI metrics and forget about the benefits of long-term engagement and learning. I wouldn’t be surprised to see some budgets rebound to focus more on ads and less on social. But time will tell…