12 Apr 2010

Determining the value of Facebook for your business– mistakes you’re probably making

4 Comments facebook marketing and advertising, search engine marketing

A Rice University study last week claims that Facebook is an effective marketing tool because of these stats, comparing the Facebook fans versus their general customer base:

  • Made 36 percent more visits to DG’s stores each month.
  • Spent 45 percent more of their eating-out dollars at DG.
  • Spent 33 percent more at DG’s stores.
  • Had 14 percent higher emotional attachment to the DG brand.
  • Had 41 percent greater psychological loyalty toward DG.

At first, this sounds great– these Facebook users are more loyal and spend more money with this restaurant chain.  But as you learn in first semester college statistics– correlation is not causation.  The folks who fanned your page are likely already your strongest supporters– it wasn’t because they fanned your page that they all of a sudden started spending more money at your restaurants.  

Consider the fact that the percentage of people who visit the emergency room and die is higher than the percentage of random people who don’t go to hospitals, yet still die.  Clearly, there is a correlation between going to the hospital and dying, but that doesn’t mean if you’re sick or injured that you should avoid the hospital.   People who go to the hospital are already sick, so it’s not fair to compare them against the normal healthy population.

In the same way, of course the first fans to your Facebook page are not representative of your general customer base.  It’s your friends, coworkers, and folks closer to you.  OF COURSE these fans are strong supporters, especially since this particular study had a tiny sample size.

Does that mean you shouldn’t do Facebook or that fans are of low value?  Quite the opposite.  It means that after your initial wave of fans (which are your most loyal supporters), then you begin to attract the mainstream fans of your product or service.  These are the people who may have heard of you, but aren’t raving fans yet.  And it’s the viral loop of friends telling friends who then tell other friends– all the while spreading via the wall and word of mouth– that you get MASSIVE ROI.

Facebook is great for demand creation– to help spread word about your brand through folks who already love you.  Demand collection is showing ads to people who are about to buy.  That’s where social media and search work well together.  The AIDA funnel (Awareness, Interest, Desire, Action) shows that social media owns the first 3 phases and that search owns the last.  You have to generate awareness of your brand and also be there when they are ready to finally buy via Google.  

Thus, your Facebook ads are not “better” than paid search, nor is your Facebook Fan Page a better opportunity than your regular website.  You might as well argue that the steering wheel in a car is more important than the gas pedal.  You need both– it’s not an either or situation where they work together.

Stay tuned tomorrow for when we quantify the value of  your Facebook presence, starting first with determining “The Gap”– the difference between your offline brand strength and your online presence.

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written by
Dennis Yu is the Chief Technology Officer of Portage. He is an internationally recognized lecturer in Facebook marketing, having been featured in The Wall Street Journal, New York Times, LA Times, National Public Radio, TechCrunch, Fox News, and CBS Evening News. He is also an author at InsideFacebook and AllFacebook. Dennis has held leadership positions at Yahoo! and American Airlines. He studied Finance and Economics from Southern Methodist University and London School of Economics. Besides being a Facebook data and ad geek, you can find him eating chicken wings or playing Ultimate Frisbee in a city near you. You can contact him at dennis@portage.co, his blog, or on Facebook.
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