New customers can be hard to come by at any time (let alone right now), so it’s good practice in any business to make the most of the customers you already have.
Selling one more item to a shopper who is already in your store or on your website can make an immediate difference to your business, and encouraging customers to move up the ‘loyalty ladder’ can show even greater returns over the long term.
Loyalty marketing in action can be as basic as a coffee club card, or as sophisticated as a program like Woolworths Everyday Rewards, where huge amounts of data can be put to use to finely target a specific customer with a highly relevant offer. Increasingly though, loyalty is being leveraged digitally, in particular via Facebook. Retailers are racing to set up Facebook pages and attract “likes”. But the niggling question in the back of many a marketing manager’s mind has been: What is the Return On Investment on a Facebook fan?
Glad you asked.
Recently I came across a study called ‘The Value of a Facebook Fan: An Empirical Review’, by an organisation in the US called Syncapse. The research was conducted across 4000 panelists in North America midway through last year. (Admittedly, in digital terms, a year ago is an eon, but I think the principles in the research hold true.)
Syncapse took 20 of the top brands on Facebook in the US at the time of the study, and contrasted fans and non-fans on six variables; product spending, loyalty, propensity to recommend, brand affinity, media value, and acquisition cost. The brands studied were skewed towards manufacturers, but did include Victoria’s Secret, Starbucks and McDonald’s. What Syncapse found was that fans are quantifiably more valuable to businesses across all variables (and here I quote):
- On average, fans spend an additional US$71.84 per year on products compared to those who are not fans (In the case of McDonald’s, fans reported spending US$159.79 more per year).
- Fans are 28 per cent more likely than non-fans to continue using the brand.
- Fans are 41 per cent more likely than non-fans to recommend a ‘liked’ brand to their friends.
The relative value of a fan can vary widely (depending on overall brand engagement), but on average each fan is worth US$136.38 a year. An active fan may interact with a brand 30 times a year and make 10 recommendations.
In the pre-digital days, positive word of mouth was an indicator of loyalty and a key driver of brand success. It still is – it’s just that social media now vastly amplifies the effect.
And this study shows that it’s worth working Facebook, Twitter and the like hard to build your brand fan base.
Jon Bird is CEO of specialist retail marketing agency IdeaWorks (www.ideaworks.com.au) and Chairman of Octomedia, publisher of Inside Retail. Email jon.bird@ideaworks.com.au. For more retail insights and inspiration, visit www.newretailblog.com
