fbpx

The power of like: how to win Facebook friends—and influence people’s purchase behaviour

Many believe the US$108 billion valuation of Facebook, which started
off at US$38 a share and has fallen back to around US$31 a share, was
based on “option value”; on the future money-making potential of what Wired writer Steven Johnson feels is becoming a monopoly.
The social networking behemoth has certainly been under the pump in the
media since the IPO, but research released yesterday about the powerful
effect both earned and paid messages have on purchase behaviour offered
some welcome good news. 

According to this article, Google’s
revenue is ten times bigger than Facebook’s and Google has more cash
flow than Facebook has revenue. Despite that, the market still valued
Facebook at half that of Google. But the findings of the two studies go
some way to vindicating the price the company fetched.

The first
piece of research was carried out by comScore in collaboration with
Facebook (as some reports have pointed out, Facebook is a comScore
client) and was presented at the Advertising Research Foundation
conference in New York. As it says on the comScore blog,
“Facebook represents a massive marketing platform with unique
characteristics, including the ability to combine the effects of paid
and earned media, but much of its value is still being unearthed”.

For too long, brands’ focus on fan acquisition as a primary indicator of
success has ignored the ways in which social marketing actually works
to achieve marketing objectives, like reach, brand resonance, and
ultimately sales. By understanding the core elements of maximising reach
on Facebook, like fan reach, engagement and amplification, brands can
benchmark their performance against other brands and devise strategies
to improve on these dimensions and deliver measurable social marketing
ROI.

Strangely, the Facebook folk and their Australia-based PR agency N2N weren’t too keen to talk about the recent Hack for a Cause event in Auckland,
but they were happy to set up an interview with US-based Elisabeth
Diana, advertising communications manager at Facebook, to talk about the
findings.

She says the first Power of Like report that was put
out a year ago showed there was a correlation between being a fan of a
brand or a fan’s friend and buying from that brand. But the second
iteration—The Power of Like 2: How Social Marketing Works—has been
able to prove that being a fan or a fan’s friend of a brand actually
causes them to buy more from that brand in-store and online. And Diana
says that’s the bit that hasn’t been done before.

To conduct the study, which involved Target, Starbucks and a major
un-named US-based retailer, two groups were studied. One group, made up
of fans of the brands and their friends, saw ‘earned messages’ about the
brand that ran in news feeds and the like (according to the report,
most brand exposures on Facebook occur through users’ news feeds or
earned media, rather than visits to dedicated brand pages on Facebook).

The
second group was made up of Facebook users who weren’t fans and saw no
messages. Both groups had identical purchase behavior prior to the study
and purchase data came from loyalty clubs, credit card companies and
third-party collectors, with the permission of the study participants.

n the case of Target, in the four weeks after seeing Target messages
on Facebook, fans and their friends overall bought there 21 percent more
frequently than the control group. And as for Starbucks, fans of the
brand and their friends overall bought there 38 percent more frequently
than the group that didn’t see the messages.

As it says on the comScore blog:

Why are these findings so significant? First, they provide quantifiable
evidence that earned media exposure can be valuable in influencing
consumer behavior—and specifically the sort of behaviors that brands
most want to induce, such as purchase. Secondly, they demonstrate that
there is a latent branding effect that continues to drive increasing
lift in purchase behaviour weeks following exposure. Both of these
conclusions provide more evidence that Facebook can be very valuable as a
branding medium.

While GM recently pulled its approximately $10 million budget out of Facebook advertising after
deciding the ads had little impact on car purchases (it has continued
to use the ‘free’ pages) and a Reuters/Ipsos poll showed four out of five Facebook users haven’t bought a product or service as a result of advertising or comments on Facebook,
the study also showed that fans of the mysterious major retailer and
their friends overall bought 16 percent more frequently in the four
weeks after seeing a paid ad on Facebook and they bought 56 percent more
frequently online.

Diana says much of this was known intuitively at Facebook HQ and,
much like the mix of organic and paid for search, it has long told
advertisers that it’s important to use earned media to build loyalty and
paid media to add to the overall effect and drive sales increases. But
it’s nice to have some proof of a causal link, she says.

While
these studies deal with major US companies, she says the same policy
applies to smaller businesses. GrabOne, for example, has shown some
impressive results through the channel, with Facebook Connect users
purchasing 19.7 percent more deals,Facebook generating
93 percent of all sales driven from social media channels, and deals
that are shared/recommended having a 52 percent increase in conversion
rate.

“We
know that friends recommending something to friends can be more
powerful than a brand talking to people about a product or service,”
says Cambpell Brown, GrabOne’s marketing director. “With sponsored
stories, GrabOne was able to easily display to people on Facebook that
their friends had liked our page, building credibility for the brand
among large networks of friends as we launched in New Zealand.”

Being
a listed company means Facebook needs to be more transparent and,
perhaps as an indication of that, it has for the first time also made
public some of its own research into ROI at the behest of what Diana
calls a “client council”. And it would seem the timing of its release
just after the IPO isn’t entirely coincidental.

Over 60 campaigns
using a variety of third party methodologies like panels and mix media
models were studied and it showed that in all the studies that have been
run on ROI to date (Diana says the campaigns weren’t cherrypicked, it
was across the board), 70 percent of the campaigns showed a return on ad
spend of three times or better and 49 percent of campaigns showed a
return on ad spend of five times or better.

No doubt GM will be getting that memo.

About Author

Comments are closed.