Sunday, December 9, 2012

When Fans "Like" a Brand on Facebook

From local businesses to multinational corporations, just about every marketer on the planet wants to boost the number of "likes" on its Facebook page. A like is rewarded by exclusive coupons (Domino's Pizza) or early announcements of new products (Graeter's ice cream) or a sneak peek at brand news (H&M). In other words, brand fans perceive they get something of value in exchange for clicking like.

But what, exactly, is a Facebook like worth to a brand? Booz & Co.'s new video, above, features Nick Hodson explaining how and why brands can use the "likes per million" metric for a social media perspective on brand value.

The LPM formula is:
Number of Facebook likes
Millions in $ Revenue

Instead of looking only at the actual number of likes--which can run into double-digit millions for brands like Coca-Cola--the LPM metric uses the context of revenue to evaluate the value of a like. This metric also allows competitive comparisons over time.

Another way to view likes is in the context of stock price. Arthur J. O'Connor conducted research while at Pace University to understand the relationship between likes and company share price. By tracking the number of likes and changes in share price, O'Connor found that "99.95 percent of the change could be explained by the change in fan counts," as he told NPR. Of course, likes don't cause the change in stock value...but they do indicate sentiment toward the company and its brands.

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